The CFPB’s rule slashes the cap to $8 and eliminates the annual inflation adjustment. Yet as even the CFPB acknowledges, the lower penalty may cause more borrowers to pay late, and as a result incur higher “interest charges, penalty rates, credit reporting, and the loss of a grace period.” This would make it harder to qualify for an auto loan or mortgage.
The agency concedes that credit-card issuers may also raise interest rates, reduce rewards, “increase minimum payment amounts or adjust credit limits to reduce credit risk associated with consumers who make late payments.” Because some states cap credit-card interest rates, “some consumers’ access to credit could fall.” Thanks, Mr. President.
By the way, the rule comes as credit-card delinquencies have risen to the highest level in more than a decade. Issuers are tightening credit to reduce charge-offs. The rule could force more borrowers to turn to higher-cost credit such as payday loans. Businesses that contract with banks to offer credit cards will also take a hit. Late fees account for between 14% and 30% of department store credit-card revenue. They’ll have to offset the rule’s impact somehow, perhaps with higher prices.
…..
The Biden Administration is playing up its price controls as an election-year gambit, but it never explains the unseen effects down the road. The forgotten man always pays.
Barry Brownstein explains the relevance of Solzhenitsyn’s line between good and evil.
Wall Street Journal columnist Mary Anastasia O’Grady counsels Javier Milei not to tarry in reining in Argentina’s inflation. Here’s her conclusion:
Mr. Milei has a mandate for change, but it won’t last forever. The longer it takes to solve inflation, the more time there is for something else to go wrong. To recover prosperity Argentina needs dollars to flow into the banking system. That will happen when Mr. Milei lifts exchange, capital and trade controls and lets the nation save, invest, earn and spend in the currency it chooses. Argentina will dollarize itself.
Meantime, the Securities and Exchange Commission on Wednesday finalized an 886-page climate disclosure rule that would open up public companies to scads of class-action lawsuits. Happy hunting for plaintiff attorneys. Chairman Gary Gensler has more than a dozen other proposed rules in the works that he could roll out at any moment, including one that would restructure the entire stock market’s plumbing.
The EPA is also soon expected to finalize three rules that would effectively mandate electric vehicles, force the shutdown of hundreds of power plants, and require local water systems to spend tens of billions to remove infinitesimal levels of so-called forever chemicals. Look forward to paying more for electricity and water.
Even some of Mr. Biden’s allies are kvetching about the administration’s unrelenting and haphazard regulation. Top research universities have lambasted the Commerce Department’s plan to expropriate patents for technologies that aren’t “reasonably priced.” The Federal Reserve’s proposed 1,087-page bank capital rule has drawn criticism from public pension funds and affordable housing groups.
A common complaint: The administration hasn’t considered the unintended consequences and costs of its policies. All this explains why a second Trump term is looking increasingly appealing to business executives, including Democrats.
Here’s the abstract of a new paper by Bullipe Chintha, Ravi Jagannathan, and Sri Sridhar: (HT Tyler Cowen)
China’s admission into the WTO in 2001 heralded a new era of globalization, increasing both import competition in domestic markets and foreign opportunities for US firms. In the aggregate, the average annual profitability of US public firms during the post globalization period (2003-2019) increased by 11.5% of the corresponding pre-globalization period (1984-2002) profitability. This increase in overall aggregate profitability was primarily driven by foreign profitability increasing by 47.4% for firms in the S&P 500 index, which are larger and have more intangible assets created by R&D and SG&A expenditures. In contrast, following globalization, the average aggregate domestic profitability of US firms remained flat, and firms employed more capital to generate sales. Firms with higher intangible assets benefited more from globalization.
Never forget how very insane much of humanity suddenly became four years ago: “The time has come for them to pay, campaign everywhere. Mobilize to get them out of power.” (HT Jay Bhattacharya)
