(Here's the promised diary from Demos in tandem with my previous diary - promoted by Paul Rosenberg)
By Caleb Gibson
In remarks made at a summit in Trinidad and Tobago this past weekend, National Economic Council director Larry Summers teed up what has turned out to be a very active week in the credit card reform arena. Summers told NBC’s David Gregory that President Obama would be "very focused in the very near term on a whole set of issues having to do with credit card abuses."
He wasn't kidding.
Thursday, Obama, Summers, Treasury Secretary Timothy Geithner and White House senior advisor Valerie Jarrett held a "pow-wow" with over a dozen executives from the major credit card issuers and networks to discuss lending practices that have roiled consumers and lawmakers.
(Some have compared this meeting to being called to the principal's office or taken out to the woodshed. One Republican credit card lobbyist told POLITICO, "the companies will get the s*** beat out of them by the President and Summers." We consumer advocates would love to get that much attention from the White House.)
But before the White House got their chance to let the credit card companies have it, the industry came under fire from at least three other federal entities.
In early April I wrote a diary, "The Power Of Finance Is Killing America-It Needs To Be Stopped", in which I showed the enormous growth of the finance sector in terms of profitability as a share of the US economy, and its growth of political influence via campaign contributions. I did this primarily in comparison with the transportation sector and the automotive industry, as a way of explaining the vast difference between how Wall Street and Detroit were being treated when it came to bailouts.
Fortunately, though, despite the persistent inadequacy of Obama's response to the financial crisis, that hasn't translated into uniformly bad and subservient policy. A story at Huffington Post yesterday, "Obama To Nelson: We're Going Around You", reported that Obama had struck a deal to use the budget reconciliation process to reform student loans, saving students tens of billions of dollars. (See my mid-March diary "Student Loan Debt--A Symptom of the Conservative Welfare State Shift".) And a diary here at Open Left coming up in a couple of hours from Caleb Gibson of Demos will report on the growing momentum for credit card reform.
In tandem with that diary, I want to draw on two earlier reports from Demos to provide some context for the reform efforts currently taking shape, and to relate them to the larger structure of problems which the financial industry is implicated in, particularly with respect to economic inequality and its racial and gender dimensions. These reports are "Borrowing to Make Ends Meet: The Rapid Growth of Credit Card Debt in America" (pdf) by José A. García and "Who Pays? The Winners and Losers of Credit Card Deregulation" (pdf) by Jennifer Wheary and Tamara Drautand. This chart--from the "Borrowing" report--gives some sense of the growth and magnitude of the problem:
This represents a 315% growth in credit card debt from $211 billion in 1989 to $876 billion in 2006 (2006 dollars). If incomes were growing at a healthy rate, and this debt growth merely reflected voluntary money-management choices, that would still be a matter of concern, given the high rates associated with credit card debt. But what's actually happening is much more dire. More on the flip.
While the national economy struggles under the weight of a massive bank bailout effort, the banking lobby's ability to influence public policy is more problematic than ever. The too-big-to-fail bankers may be dependent on U.S. taxpayers for their survival, but corporate lobbyists still have members of Congress, the Treasury Department and the Federal Reserve asking the banks' permission to bring the Big Finance behemoths under control. The relationship between Wall Street and the government is so out of whack that it's difficult to distinguish the political players from the panhandlers.
STATE BLOGS
