Despite Larry Summers or even Geithner leading this discussion, it's a positive development by the Obama administration. Banks have had too much leeway with credit card lending for years and naturally the GOP Congress nor the Bush administration had any interest in asking questions. As long as the money rolled in and the banks had protections against those pesky folks who went belly up, everything was fine. With the general economy in a bad state and banks at the forefront of the recession, a grown up is asking questions and looking ahead.
It would be hard to imagine credit card not *not* becoming an even larger problem in this recession and as this CNBC post suggests, even for the positive quarterly earnings report from JPMorgan Chase, the credit card losses are mounting. More from CNBC:
The problem with the credit card debt issue is that it is fast looking like the tail that is wagging the dog, the dog being the U.S. economy. The banks – not just JPMorgan Chase , but all of those that are in the credit card business – are now, after 15 years of mismanagement of that business, trying to fix it fast and faster. The mismanagement came in the form of mindlessly and endlessly extending credit to uncreditworthy consumers. It was fiduciarily irresponsible. But it was hugely profitable - until the proverbial crud hit the fan.
Today the disastrously managed credit card business threatens to be a major impediment in the economic recovery because the only way the banks can extricate themselves from the mess they have created is literally to shut down the industry. They may not view it that way, but their customers do. When you punish your best customers, the ones who pay on time and pay far over the monthly minimum, by (1) forcing them to pay higher interest rates, despite the lowest interest rates in the country in over fifty years, (2) increasing their monthly payments (3) shortening the payment terms and (4) reducing or even cancelling their credit lines, you are saying you don’t want to be in the business.
