TO: Anyone who endorses government
restrictions on the terms on which credit-card customers can contract
with credit-card issuers
FROM: An economist
Trusting that you have the best interests of consumers in mind, I gather that you believe that current credit terms — the terms to which you object and want government to restrict — serve only to inflate
issuers' profits rather than to expand the supply of consumer credit. (If you believed instead that these current terms are what give issuers the incentives to extend more credit than they otherwise would to consumers, especially to low-income consumers, I trust that you would not support the restrictions that you now call for so loudly.)
Because the credit-card-issuing business is quite competitive, I don't share your belief about current credit-card terms. My strong sense is that the terms to which you object increase the supply of consumer credit. But if I am mistaken and you are correct, then the best way to help
consumers is for you (along with Pres. Obama, Rep. Carolyn Maloney, Sen. Chris
Dodd, and other proponents of these government restrictions) to quit
your current jobs and start a bank that issues credit cards.
When you
more-enlightened and responsive issuers enter the market and offer
clearer and more-attractive terms to credit-card users, customers will
flock to you! Other credit-card issuers will either go out of business (assuming, of course,
that they're not bailed-out!) or be forced by competition to match your
clearer and more-attractive terms.
Unless and until you take this step that puts your own money where your mouths are, I see no reason to credit your claims.
