Econ 101: Credit Card Fees

Banks opened a dirty, ugly Pandora’s box when they destroyed their balance sheets to the point that the Federal government HAD to bail them out.   Unfortunately now they’ll be paying for it, dearly. President Obama is going after their credit card fees and will likely not stop there. Our government will start setting interest rates banks can charge…

Banks opened a dirty, ugly Pandora’s box when they destroyed their balance sheets to the point that the Federal government HAD to bail them out.   Unfortunately now they’ll be paying for it, dearly. President Obama is going after their credit card fees and will likely not stop there. Our government will start setting interest rates banks can charge and thus will be effectively determining banks’ profitability.

I am sure this will be a very popular with voters, but it is horrible for banks, the economy, and the population whom Mr. Obama is trying to “defend.” When you lower the price of something you’ll have less of it. But maybe all this won’t matter in the short-run as consumers are deleveraging and paying off their debts.

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