ABA Argues That Black Is White and Must Stay That Way

By James Kwak

I wasn’t sure if I was going to write about the Whitehouse Amendment, which would allow states to regulate the interest rates charged to their residents. According to a 1978 Supreme Court decision, financial institutions are governed by the law of the state that they reside in, not the laws of the states they do business in; the result was the current situation, where the big credit card issuers are based in South Dakota, because Citibank basically wrote South Dakota’s consumer credit laws. In its essence, the amendment says this: “The interest applicable to any consumer credit transaction [not a mortgage], including any fees, points, or time-price differential associated with such a transaction, may not exceed the maximum permitted by any law of the State in which the consumer resides.”

Obviously I’m in favor of it, as the current system just allows the worst kind of regulatory arbitrage. (Note that administration officials like to oppose strict legislative measures, like a hard leverage cap, on the grounds that these things need to be negotiated internationally so that banks won’t just set up shop in the most lightly-regulated jurisdiction — yet that’s exactly what happens with credit cards.) But I wasn’t sure what there was to add, since Mike Konczal and Bob Lawless have already weighed in.

Then I read the ABA’s argument against the amendment, that gave me all the motivation I needed.

Here is one of its arguments, broken up into four paragraphs:

“The state rate cap may be based on an all-inclusive APR that is different from the Truth in Lending Act (Regulation Z) definition of APR.  For example, the interest rate calculation under the bill could include application fees, late payment fees, and annual or periodic fees.  This means the rate calculated under a state rate cap could be higher than the Regulation Z APR, making it more likely a lender will reach the state rate cap, particularly for small dollar loans with short terms.”

Um . . . that’s the point. Right now banks are allowed to pretend that application fees, late payment fees, annual fees, and periodic fees are not part of the cost of credit. That’s a bad thing. And if the federal agencies aren’t going to fix it, then states should be allowed to. “Making it more likely a lender will reach the state cap” is a good thing if what makes it more likely is the elimination of a misleading loophole.

“Determining the state rate cap for open-end credit and overdrafts would be particularly problematic, as it would have to be determined retroactively (the ‘historic’ APR) in order to take into account fees such as periodic fees and late payment fees.  Banks would have to either significantly limit or eliminate all such fees so that the APR would be under the state rate cap, or simply not offer those products.”

Again, that’s a feature, not a bug. If the only way banks can offer a product is by hiding its true cost outside the APR, then the product shouldn’t exist. State legislatures should have the power to determine what the maximum cost of credit should be. Here the ABA’s complaint is that banks won’t be able to evade that limit through dodgy accounting.

“Overdrafts are ‘credit’ according to bank regulators, but currently the fees are not considered ‘finance charges,’ and therefore exempt from Regulation Z.  State laws would be permitted to limit the ‘interest’ on overdrafts by treating them as open-end loans subject to a retroactive ‘effective’ or ‘historic’ APR calculation and limiting the amount that may be charged.”

If overdrafts are credit, then the cost of credit should be disclosed and regulated, one way or another. Reading the first sentence above, the only reasonable inference to be drawn is that the fees should not be exempt from Regulation Z.

“Affordable small dollar loans such as those intended as alternatives to payday loans, (such as the 36 percent loans suggested under FDIC’s affordable loan pilot) may not be permitted under state laws. By definition, loans that are small dollar amounts, have fixed costs that are part of the finance charges and reflected in the APR, and have short terms will have higher APRs likely to exceed any state interest rate cap.”

I like this positioning of “affordable small dollar loans such as those intended as alternatives to payday loans.” If those things would be banned by state law, so would payday loans. The Truth in Lending Act already applies to non-bank lenders, even if the Greenspan Federal Reserve neglected to enforce it.

The ABA’s argument boils down to this: Right now, federal regulations allow us to hide the true cost of credit. State laws might not let us hide it anymore. We can’t let that happen.

The other main argument that I see against this amendment is that it increases the cost of regulatory compliance for banks. Again, that’s a good thing, relative to where we are now. Sure, the optimal outcome would be a single federal regulatory system that was good and well enforced. But we’ve just lived through an episode that has proven that you can’t count on the federal regulatory agencies to do their job.

Besides, the costs will be lower than industry advocates claim. First, the vast majority of banks only operate in one state, or at most a couple (since the vast majority of banks are very small). Second, the insurance industry has dealt with this issue since forever, and while the insurance industry has it problems, it generally works. (And many of those insurance regulations are process regulations, such as the amount of time you have to respond to a notification, which are considerably harder to comply with than rate regulations.) Third, the programming to ensure that you aren’t violating a state interest rate regulation based on the customer’s state is trivial (although, given most large enterprise IT environments, it could take months), especially compared to the programming the banks do to decide which mailing to send you.

Of course I think there is a role for the federal government when it comes to regulation. Imagine what the country would be like if we didn’t have the federal government to set a minimum floor when it comes to civil rights, or clean water, or guns. (Um, strike that last example.) But just as in the civil rights arena, I think Washington should set a minimum floor of constraints (for example, no employment discrimination on the basis of race or gender) that states can go beyond if they so choose (no discrimination on the basis of sexual orientation).

As always, it will be interesting to see if the nominally pro-states’ rights Republican Party will go along with an amendment that is all about states’ rights.

Update: If there was any doubt, that’s the American Bankers Association, not the American Bar Association.

59 thoughts on “ABA Argues That Black Is White and Must Stay That Way

  1. Well, “Industry shills shill for industry” is not exactly an earth-shattering headline.

    This one is a no-brainer. Out of curiosity, what was the basic rationale behind the 1978 Court decision? That states should have the power to protect their citizenry seems self-evident.

  2. Wanna know why “Baselinescenario” is my favorite financial blog??? Why I visit often more than once a day, why I bought the new hardcover book “13 Bankers” (when I am one of the cheapest people walking the planet and 99% buy paperbacks sitting on the shelves for months), why I post here neurotically??? For sentences and phrases such as the following:

    “the result was the current situation, where the big credit card issuers are based in South Dakota, because Citibank basically wrote South Dakota’s consumer credit laws”

    “The Truth in Lending Act already applies to non-bank lenders, even if the Greenspan Federal Reserve neglected to enforce it.”
    (my words here: The ABA probably thinks the guy with the minimum wage job cashing his checks at Wal-Mart at $3 per check should write Sam Walton’s family a personal thank note each time. Or maybe the ABA is just envious they didn’t think of it first)

    “As always, it will be interesting to see if the nominally pro-states’ rights Republican Party will go along with an amendment that is all about states’ rights.”

    Beautiful, beautiful, beautiful. None of the above sentences/phrases will you ever read in Rupert Murdoch’s Wall Street Journal, or Forbes magazine. But who, other than Republican Dick Shelby, Republican Bob Corker, and Republican Mitch McConnell, will argue with it???

  3. I’ve always liked ABBA.

    Many voters believed Obama when he pleaded with us to “Take A Chance On Me,” but I guess he has proven that he is not “One Of Us.”

    “The Name Of The Game” is profits above all else, aka “Money, Money, Money.”

    “S.O.S.” is what many people who have lost jobs and/or houses are screaming.

    The banks own this country — “The Winner Takes It All” — regardless of those of us who would like to see them meet their “Waterloo.”

  4. All Federal Credit Unions in the United States operate with a lending usury cap. Their regulator cannot approve any rate over 21%, 18% is the target maximum that most all operate under, and their federal Agency NCUA has a Congressional mandate to return the rate down to 15% when practical.

    The most problematic issue with Whitehouse SA is not setting a rate ceiling, but the potential of continuing institutional non-compliance with 50 state usury laws that can/will change frequently.

    The compromise might be an across the board applicaton of the credit union national usury ceiling. All parties get something; Big banks and payday lenders would see biggest losses-Congress can claim consumers significantly benefited.

  5. Interesting. I will try and argue the next time I am pulled over that I am only liable for the laws of the state in which I reside, and not the state I am driving through. Wonder how far that will get me.

  6. Great reminder about the usury cap that Federal Credit Unions live with. (Remember, you will usually see Federal or FCU in their name.) State credit unions don’t typically have the same caps.

    If you still use a bank then you are wasting money.

  7. I think we’re faced with an industry that does business this way, has always largely done business this way, doesn’t want any regulation, so….to still take action to fix the situation, do as follows: Pay off your credit cards, and close em out. Out of money? Too bad. Suffer. Quietly. Then, next time you get money, spend it frugally. Be a miser. You don’t expect the millionaires that run these outfits to send you free money, right? So, why send them free money? Get on a cash basis, and stay there. Throw all that junk mail in the shredder, and then in the trash, and problem largely solved.

  8. If Congress were to pass a law stating just that fact, as they are proposing to do in a similar situation concerning credit card interest rates, then you would get very far with that argument.

  9. Tell us, Bert, will you be the one to tell the airlines, the car rental companies, the hotels, and many other businesses that they can no longer require a credit card deposit for a reservation? There are good reasons why people have to use credit cards.

  10. Easy to say, but not always easy to do, especially for unexpected expenses.

    I was informed of a 30% interest rate by Citibank a while back and I cancelled the card. Coincidentally, I currently also have 0% teaser also by Citibank on a different card, which reverts to 15%. There’s no rhyme or reason to the charges.

  11. Third, the programming to ensure that you aren’t violating a state interest rate regulation based on the customer’s state is trivial (although, given most large enterprise IT environments, it could take months), especially compared to the programming the banks do to decide which mailing to send you.

    There’s a good example of how textbook “capitalism” is a fraud. The moment a business thinks it can get a better return through lobbying and scamming than through better competing, improving its product, truly innovating, it makes the switch from competition to racketeering.

    Thus the computer which “innovates” and carries out frauds and scams gets all the software investment, while the one that could keep track of state regulation gathers dust and cobwebs. It’s a better return on investment to bribe lawmakers.

    As always, it will be interesting to see if the nominally pro-states’ rights Republican Party will go along with an amendment that is all about states’ rights.

    They never do so where the result would be in the public interest. “States’ rights”, like every other ideological principle in the case of almost every person who claims to hold it, is almost always just a scam, to be exalted or trampled at will.

    How do Republicans feel about CFTC pre-emption of a CFPA? I think we know the answer to that.

  12. The good Christian’s accepted the fact that it was ok to accept “The Roman Cathalic” (fourth)- Ten Commandment, and eliminated it. They now observe the Sabbath, meaning Saturday, on Sunday! So what is the big deal? I think I go out side and get a (Sun)-tan. ;)

  13. The majority of people lived within their means,without credit cards and small loans, during the 1950s and 1960s. Why does it seem so immpossible now?

  14. You walk into a store and you use your credit card to buy stuff. You have no credit application to fill out its completely pre-approved without any collateral put up. I’d stay that’s a pretty generous loan offer. And who cares what the interest rates if you pay your credit cards off each month. They could be 110% but so what, you’re not going to pay any interest, your gonna pay your credit card bill each and every month. If the credit cards stop offering this ridiculous credit with no collateral then it was great while it lasted and we can all start using cash again. Do Corporations really want us to do that? Do you realize how much personal data they collect on us through our credit cards? Use your credit card wisely. It’s not a Government printing press. You eventually have to pay your unsecured loan with real money. Wise up.

  15. This is a great question. Think back to the 1950s and 1960s, if you were alive then. Families rarely ate in restaurants. Families had one car, usually one with crank windows and none of the other luxuries. The homes people lived in were small ranches or two-stories with no vaulted ceilings to waste energy. Families had no choice but to hand-down clothes from one child to another or to swap it with another family. Children did not have a closet-full of outfits and they certainly did not have cell phones and other items that come with a large monthly bill. Women sewed clothes for themselves and their families. Obviously I am talking about the middle class here, a species rapidly heading towards extinction.

    Today, if you are single and try to live frugally, you will be forever single, not to mention celibate. If you have children, you will be hounded mercilessly until you pay a king’s ransom for their many toys. It is impossible to buy that small house anymore, unless you wish to live in a neighborhood where owning a shotgun is a necessity. If you mention the subject of sewing to a modern woman, you will be termed a cave man. And just try and find a cheap car that accommodates anyone taller than 5’6″.

  16. Because wages have stagnated for nearly 40 years. I choose not to use credit, but for some families in dire straights with things like unexpected medical costs, etc, they oftentimes have few choices but to do business with these loan sharks(banks).

  17. Its time to get the SIEU over to the ABA houses next to protest like today in DC. I’ll tell you this, my friends, the intellectual battle is working, but boots on the ground create tipping points. The ABA is a disgusting organization, bluntly put. The disturbing work they do to subvert the majority must be put in a spotlight and more.

    Keep up the great work Simon and James!

    Let’s not all forget we play a ROLE in all of this. Others are playing other roles. I wish it could be coordinated better.

  18. Debit cards can be used for this. If not, make the policy illegal. It is doable

  19. I wrote “or to swap it with another family.” Obviously I was referring to clothes, not children. I should have written “or to swap clothes with another family.”


  21. Anyone involved in paying too much for a home due to the central banking fraud complex should be allowed FICO score amnesty on walking away, just like the banks get for walking away from their deals.


    Amnesty can be applied to lots of debt, if the ABA isn’t careful and pushes the country over the cliff.

  22. “As always, it will be interesting to see if the nominally pro-states’ rights Republican Party will go along with an amendment that is all about states’ rights.”

    I don’t see how this amendment is even marginally about states’ rights. Indeed, if a “states’ rights” argument can be made, it will be made against the amendment because it arguably encroaches on state contract law, something which was reserved to the states under the Tenth Amendment.

    Moreover, the law is all about consumer protection, something that the GOP scoffs at as paternalistic. “Caveat emptor,” they’ll say, arguing that people won’t learn “personal responsibility” unless there are consequences to making bad decisions, like carrying a balance on a 30% APR credit card.

    What will be interesting to see is whether the GOP breaks from states’ rights and “personal responsibility” rhetoric and actually goes along with this amendment, which would signal some real momentum in financial reform and provide immediate relief to a lot of their constituents.

  23. Huh? You’re using the road in the state you are currently in. Therefore, you are subject to the laws of the state in which you are driving.

    So when you take out a loan in your state, you also should be subject to the laws of the state in which you are borrowing.

    Your argument makes no sense.

  24. Oh, great, just take your deposit out of my bank account. Good luck getting any leverage in a dispute with one of these companies if they are holding your money. And you could try to make the policy illegal, but then travel soon will become as difficult as it used to be.

    Libertarianism is great in theory, not so good in practice.

  25. His argument is the same as yours. Just a little sarcasm. You are both right.

  26. Elizabeth Warren suggests that families are not overspending on luxury goods, but instead are being overwhelmed by medical expenses, housing in safe school districts, and taxes. I read the book she wrote on the topic, and was surprised by many of the statistics. For example, as you suggested, decades ago kids may not have had a closet full of outfits, but clothing also costs less now. The article I quote below states that “And yet, when all is added up—including the Tommy sweatshirts and the Ray-Ban sunglasses—a family of four spends, on average, 21 percent less on clothing today than in the early 1970s, according to our analysis of data from the Bureau of Labor Statistics.”

    Here’s a couple of other clips:

    “The over-consumption story dominates every discussion of the financial condition of America’s families, but when all the changes in family spending over the past generation are added up, a very different picture emerges. Families are spending less on luxuries and more on the basics of being middle-class. Even with two people in the work force, today’s families trail those of a generation ago in the struggle to make ends meet—to pay for their homes, health insurance, transportation, and child care.

    But the new family budget is notable for another reason: it is far more deeply leveraged. A generation ago, the one-income family committed about 54 percent of its pay to the basics—housing, health insurance, transportation, and taxes. That is, the one-income family spent about half its income to make the “nut”—the basic expenses that must be paid even if someone gets sick or loses a job. Today, these basic expenses, including child care so that both parents can work, consume 75 percent of the family’s combined income. With 75 percent of income earmarked for fixed expenses, today’s family has no margin for error.”


    Here’s also a presentation Warren did at Berkley on the same topic: http://www.youtube.com/watch?v=akVL7QY0S8A

  27. You know I think we need to close our banks accounts and just go with community and credit company. Let’s start the rumor that pull close your bank acount with Chase, Wells fargo, BofA all the big one’s, let’s make them small again and see how they like it. They don’t help anybody but them selves. They are bad for America and small business !!!

  28. I gotta say that the only reason I see for allowing financial services across state lines is that the cost of telemarketing nationally has gotten so cheap. In 2007, I worked for a company providing information services to one of the most egregious “nationwide” mortgage originating companies. Texas had particularly strict home equity lending laws, and consequently, did not bubble over to the same extent on home valuations as much of the rest of the country. And, it still had a strong economy. In late 2007, there were rumors that there was still live brains to feast on in Texas. Believe it or not.

  29. Next time you meet someone who has a government job and doesn’t belong to an NCUA Credit Union, be sure to ask them when they first discovered they had a learning disability. They’ll be touched you understood.

  30. Why doesn’t the nominally nanny-state Democratic Party simply set national rate caps, and eliminate most fees? Should be an easy sell in this environment. Wrapping the fees into some combined APR is just a recipe for more legal fine print and confusion for the consumer. Perhaps this is a feature, not a bug, for the nominally lawyer-dominated Democratic Party. Pretending that any of the common fees won’t automatically exceed any usury limit strikes me as a way to turn a two-sentence post into a long rant on what used to be a smart blog.

  31. oh boy………we all know state legislatures are cheaper than the federal one. The banks will be going in with deep pockets.

  32. This would seem to clearly evidence exactly where large amounts of the ABA’s funding comes from. Not small neighborhood banks, that’s for sure.

  33. As a computer programmer who has spent years working in the banking industry, I can assure everyone that the computer programming required to keep up with 50 state interest rate caps, even in the unlikely scenario that they were all different, would be less work than the writing that has been done in the comments here. It would be part of the interest charge calculation, which is something that the banks do every month anyway.

  34. States’ rights issues end many times. States’ rights issues often end without one blip on the MSM radar screen. States’ Rights are important if it means companies and doctors can weasel their way out of liability. But when Republican Senator Dick Shelby and Republican Mitch McConnell have private meetings with banks and hedge funds where campaign money and future jobs for their friends are promised for soft banking laws, those states’ rights all of the sudden don’t mean ANYTHING.

    Of course, none of our MSM can stick a microphone in these politicians’ face and ask them “Why the hypocrisy on the states’ rights issue on bank regulation?? Why does the weaker federal law trump the states’ laws, when states’ laws have superior consumer and depositor protections???” This is just much too much to ask from Rupert Murdoch’s Wall Street Journal.

    Besides…. next time that “journalist” needs a softball interview to include in their column, or want to steal a sandwich and couple nachos off the Senator’s food catering in his office it just makes things easier.

  35. What you do not know is that there there is already a federal cap that solves this problem. But through obfuscation and indifference, what was once clear has become lost.

    After three years of painstaking research, I have found the missing key that puts the stake in the heart of the bank’s subterfuge and have a test case pending in Massachusetts where I have won the key 12(b)(6) motion to dismiss. Now summary judgment should be automatic, absent the Banks putting their thumbs on the scales on justice. Then it will be ut to the SJC and eventually the Supreme Court to confirm my research.

    I am happy to share it with you, James. You will be shocked at the simplicity. But, then, as Galileo observed, “All truths are easy to understand once they are discovered; the point is to discover them.”

    Richard Wise

  36. A good take on this issue is by Tom Geoghegan in Harpers Magazine in 2009 and interview on Democracy Now March 24 , 2009.

  37. Well, I think some people here have lamented supporting John Edwards.

    I had high hopes for this “man”, Richard Blumenthal. It is obvious to me now those high hopes were misplaced. Another Liar, and another Liar with zero conscience. I hope all the ex-military guys in Connecticut get out and vote against this basturd. Sometimes you have to admit when you are wrong. I was very very wrong on this imposter, fraud, and shell of a man. Details at NYT:

  38. Try to maintain a good credit rating without one. I find it important to have a good credit rating in case of emergencies. The card was quite useful when I was recession road kill for 6 months one time.

  39. Did that book take in to account the wage inflation that occurred when women left the house and joined the workforce throughout the 60s and 70s in force? I know they’re not paid as much as men on average, but essentially doubling the supply of workers meant the price of workers went down. Pretty soon it meant everybody HAD to have both parents working, instead of having the choice one way or the other.

    I’ve always kind of wondered: if the vast majority of families moved to keeping one parent at home full time (in the spirit of equality, I don’t care which parent) would middle class single income families become widely viable again?

  40. Simon, James, others:

    Do you think the free trade agreements of the last two decades made it easier to “hide” easy money supply and inflation?

    My theory is, free, unbalanced trade made capital flight easier, which in turn drove so much productive capital investment out of the US, that it created the system in which you can hide what you’re doing at the FED, invisible money pools, so to speak.

    When you add the decreasing price of goods from China, the increased internet competition, this created a deflation which allowed Greenspan to ease money to banks, pump loans to corporations, which in large part fed production elsewhere. So, this new money wouldn’t “come back” in prices. CPI stayed low no matter what.

    I saw the US sort of split into two markets. If you shopped at Wall Mart, you could get golf balls at decreasing prices each year. If you went to Sax Fifth Avenue, that scarf was increasing each year, now $350. Big difference. When I did expensive things competing with wealthy people, it was much more expensive. More common activities, competing with average people, things were very cheap. I know this doesn’t apply to gas, medical, etc.. But.. This difference become profound to me around 2006.

    I got to thinking that NAFTA, WTO, etc., must have not only changed us structurally, but really changed the game for the FED. The had a huge gap they could fill without being noticed (politically). 30 years ago, if the FED is giving out zero interest loans in huge sums, that money would come back at you fast in CPI. Goes to a US plant or business, etc..

    I’m thinking the FED used these conditions to fly large sums of money under the radar. Am I wrong? So many people got ULTRA rich off this easy money. Emerging markets bubbled until finally our asset prices bubbled too. But, it still didn’t show up in CPI triggering focus on the FED. NAFTA, WTO and the new Pax Americana of easy money between the FED-large corporate complex worldwide kept wages flat here and CPI low here, while very few took the huge proceeds.

    I’m probably reiterating something everyone already knows, but as a non-economist, it occurs to me as double cheating. You’d think the American public would get these dividends, cold war end dividend, cheaper products dividend, an internet-productivity dividend. But, instead it feels like the FED used these conditions in their home country (following the commands of the Fed reserve law technically) to ramp up scale worldwide and become the central banker to large international corporations, who profited greatly and will continue to do so.

    I don’t feel like this FED is the U.S. Fed or doing things in the best interests of the United States (banking fraud aside). They’re the international Fed. I feel as if they stole the dividends that should have accrued to this country and spread them to int’l corporations.

    Am I wrong?

  41. True, but I still think it’s legitimate to call them out when they engage in especially egregious violations of common sense.

  42. Publius, regardless of where you live, you like everyone else now owns a fractional piece of a loan on the Parthenon. Think of it as part of a big CDO, and for this piece the underlying collateral is certainly occupied by a subprime borrower. Distributing the risk world-wide doesn’t make your personal exposure go away

  43. James, I understand and agree with your syllogism except for what is, perhaps, the most obvious feature that you neglected to mention here… but do mention elsewhere in another context – “state” regulatory capture. The banks have the means to achieve this and in Delaware and, as you illustrated in South Dakota, already have!

    I live in the South and in a Red State. This is not a political tirade – I am an independent.

    But anyone acquainted with the following will surely agree that you have a blind spot in your proposition.

    1. “States rights” rhetoric (demagoguery that for many years have allowed both Democratic and Republican corruption to flourish – see Dan Carter’s “The Politics of Rage”) is not what we desire. Why? Not only does it poison the well with anti-intellectual rhetoric that is socially damaging but it obscures important issues that the state citizens never learn about – see 2 and 3.

    2. Presently, “local” Republican capitulation to “national” Republican interests is common in the South even when it hurts the red state (e.g. just look at Alabama’s failure to pursue $ for federal off-shore oil leases it was owed because Republican Gov. Riley did not want to piss off Bush/Cheney). This was pathetic.

    3. And the near complete judicial ownership in the south by big businesses who fund judicial campaigns has made for a judicial environment favoring business over the citizenry

    For example: Many years ago a large oil company spilled a lot of oil off the Alabama coast. Appeal after appeal resulted in the successive lowering of the damages. Once it was lowered to a level acceptable to the oil company, they immediately settled, paid the damages… and established a precedent by which future oil spills will only result is this same fine and it is treated as a “cost of doing business” – to the detriment, once again, of the citizenry.

    Take Home Message: Do not put this in state’s hands – they are just as corrupt and susceptible to rent seeking as the D.C. scum. Fix it at the federal level.

  44. “The majority of people lived within their means,without credit cards and small loans, during the 1950s and 1960s. Why does it seem so impossible now?”

    Here’s why…

  45. Bad folks, bad law, lots of money spent opposing it. One answer is to expand federal credit unions. They certainly can address the “pay day loans” and similar loan sharking but they cannot cure credit card rip- offs, but, unfortunately, no one else will either. After all, which side pays the lobbyists and politicians?

  46. Citibank wrote South Dakota’s laws; Chase wrote Delaware’s. You can read all about this, and the details of the “state capture,” in my book, Treasure Islands, which is coming out in April next year.

  47. Why not just set the max interest rate at a fixed 12 points above the fed rate? Allow for fees, set a maximum fee scale, and list the types of fees that can be charged. Creditors should eliminate their exposure to risk by controlling the size of credit lines, not by charging more in rates and fees. How hard can that be?

    Remember, credit card companies get paid not only in interest, but also in charging transaction fees to the seller.

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