The Book of Proverbs (22:7) tells us, "The rich rule over the poor, and the borrower is the slave of the lender." Nowhere is the power of the moneylender as master of the poor and the harasser of the middle class greater than in today's high-tech, AI-driven credit card banking world. No need to break legs in some dark alley to cut out that pound of flesh. The government has well-paid politicians like Joe Biden, the former "Senator from MBNA," to keep the peons in line and the usurers well fed.
As a Delaware senator, he was the key sponsor of the "Bankruptcy Abuse Prevention and Consumer Protection Act of 2005." In Washington-speak, where every bill's name tells you exactly what it won't do, this law made it harder for people to get out of from under credit card debt through bankruptcy. It also protected banks from student loan bankruptcy. Now Biden wants to transfer that same bad student loan debt from the banks to the taxpayers.
The 1920 Depression song lyric was, "The rich get richer, and the poor get children." Today, the rich will even pay to abort those children. Washington and Wall Street's American Dream is to keep people working away to pay the interest for shiny consumer trinkets instead. It's no surprise that many people see their lot as working more and more to have less and less of lasting value than their grandparents.
Right now, Americans are swimming in unprecedented amounts of credit card debt. Should there be any dip in employment or a further rise in inflation-driven interest rates, many Americans will drown in that debt. The credit card loan sharks are charging approximately 23% interest on that growing debt bubble.
President Trump has a ready-made issue at hand if only he would pick it up and wield the sword of righteous populism on behalf of consumers. If there is one issue that could unite the Right and Left, it is to declare war on the banking and credit card vultures picking clean the bones of the American consumer.
There used to be usury laws in the United States that had teeth. When the country was founded, states typically set the usury rate at around 6%. Today the rate in Illinois is 36%. The inflation of our currency and the mania for deregulation have pushed usury laws aside to the detriment of the consumer. Paying credit card interest rates can add up to a 10% spending tax on the income of the poor. And while credit debt is about $1 trillion, available credit on those cards is about $4 trillion. This is a siren call of untapped spending power luring many to financial doom.
Shakespeare's line, "neither a borrower nor a lender be," has fallen on deaf ears in both Washington and in households across the country. The worst form of debt is credit card debt. It is easier to put the plastic down than fork over the green. The power of compound interest on that debt is ignored.
If you ask the average American if you would like to have $1 million today or a penny that doubles for the next 31 days, most would take the million dollars. But the doubling of the penny would yield them about $10,737,418.24. This power of compound interest, even at 23% or 36%, is the power to destroy the financial future of the middle class and the poor.
Consider two pieces of legislation in an odd confluence of political motives and principles. One is from the Left and one from the Right. Several years ago, Sen. Bernie Sanders (I-Vt.) and Rep. Alexandria Ocasio-Cortez (D-N.Y.) proposed capping interest rates at 15%. Sen. Josh Hawley (R-Mo.) currently has a bill to cap interest rates at 18%.
President Trump, why not split the difference at 16.5% and close the deal with the American people? Yes, this rate is still too high, but it would be a big improvement for consumers. It is time to stop feeding millions of Americans in the big bank woodchipper.
President Trump, this measure could bring you the needed votes to expand your base. It is also a fitting response to President Biden's lame attempt to address this issue by capping late fees. The poor are paying 10% of their income to credit card companies, and Biden wants to give them a break on late fees!
There is more to be said on this issue. But consider that in some European countries, where there is a consensus to protect the poor and middle class from predatory lending, they still have usury laws on the books. And while writers at Bloomberg might whine that French banks are not as profitable as those in other countries because of usury laws, the real question here is: are the American people as profitable as their credit card companies?
Related: Credit Card Delinquencies Hit All-Time High, So Biden Caps Late Fees
Would the world end if credit card rates were set according to France's usury law, which "is calculated on the basis of the 'average effective rates charged by lending institutions plus one-third'"? Yes, they turn down more consumer loans than in the United States. But aren't we all paying for easy credit? Taxpayers are paying in welfare costs to provide a safety net for those forking over large parts of their income to credit card companies. Consumers are paying higher interest rates to make up for credit card companies giving money to people they know can never pay it back.
When President Trump was elected in 2016, a small debate took place with a historian at the University of Texas. He was no Trump supporter, but he saw him politically as Andrew Jackson's heir. The other take was that Trump could prove to be more of an heir to three-time anti-establishment candidate William Jennings Bryan.
Bryan's famous campaign speech summed up the financial troubles of his supporters, "You shall not press down upon the brow of labor this crown of thorns; you shall not crucify mankind upon a cross of gold." Maybe we can split the difference between the Jackson and Bryan camps here. President Trump is the only candidate with the stature to bring all sides together on national consumer interest rate legislation that could lift the cross of debt from millions of Americans.
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