America's revolution to a socialist, government-planned society complete with reserve currency helicopter money also known as "MMT", may or may not be successful but it certainly will be attempted, and every moment will be not only televised but also tweeted.
On Thursday morning, Visa and MasterCard tumbled after the democratic party's "progressive" socialist wing consisting of Bernie Sanders and Alexandria Ocasio-Cortez, announced they would introduce legislation on Thursday to cap credit card interest rates at 15%, a sharp drop from current levels. The proposal follows not long after AOC also proposed the "Green New Deal" - which among its various policy proposals urged to give a generous and recurring cash handout to any and every American, regardless if they work or not, and which according to analysts would cost the US as much as $100 trillion over the next several years.
In addition to a 15% federal cap on interest rates, states could establish their own lower limits, under the legislation.
Sanders, the socialist Vermont senator running for the Democratic nomination for president, told the WaPo in an interview that a decade after taxpayers bailed out big banks, the industry is taking advantage of the public by charging exorbitant rates. “Wall Street today makes tens of billions from people at outrageous interest rates,” he said.
Ocasio-Cortez, the socialist New York representative who is expected to run for the Democratic nomination for president as soon as she is eligible, will introduce the House version of the bill.
According to some, the proposal is quite timely, and comes just as credit card rates recently hit an all time high despite artificially low interest rates, according to Creditcards.com, which has been tracking the data since 2007 and compiles data from 100 popular cards. The median interest rate was 21.36% last week compared with 20.24% about a year ago and 12.62% about a decade ago, according to the website.
Rates have been rising fastest for those with the lowest credit scores, said Ted Rossman, an industry analyst for Creditcards.com. “Issuers are taking an opportunity to charge people with lesser credit a bit more,” he said.
For borrowers with high credit scores the average rate was 17.73 percent last week compared with 16.71 percent a year ago. For those with poor credit scores, the average is now about 24.99 percent compared with 23.77 percent a year ago. The difference in the increase is about 20 basis points higher for customers with a low credit score. A basis point is a common way to measure changes in percentages.
“It may not sound like that much, but that is just in one year,” Rossman said. And even small increases in rates can be crippling to a cash strapped borrower, he said. “It is the ultimate slap in the face when you’re already down.”
That may well be, but we wonder what Sanders and AOC will do when the bulk of their supporters, those with the lowest credit rating and by implication paying the highest interest rates - are de-carded as credit card companies tighten standards "just enough" to eliminate all those who would be in the 15%+ interest universe anyway. Will they then force credit card companies to issue cheap (or free) debt to anyone? Inquiring minds want to know...
Meanwhile, considering that in a time of inverted yield curves banks are scrambling for every dollar in interest income, the proposal is expected to meet stern resistance from the banking industry, which brought in $113 billion in interest and fees from credit cards last year, up 35 percent since 2012, according to S&P Global Market Intelligence. It also has zero chance of passing the Senate for at least the next two years, where Republicans hold the majority.
“I am sure it will be criticized,” Sanders said of the legislation. “I have a radical idea: Maybe Congress should stand up for ordinary people.”
Quoted by the WaPo, the 15 percent cap would be the same as the one Congress imposed on credit unions in 1980, Sanders said. (The National Credit Union Administration, the industry’s regulator, raised that cap to 18 percent in 1987 and has repeatedly renewed it at that higher level.)
The full proposal is below