If President Donald Trump wants to team up with Sens. Bernie Sanders (I-Vermont) and Elizabeth Warren (D-Massachusetts) on banking policy, JPMorgan Chase CEO Jamie Dimon has an idea: Try it first in their states to see how it goes.
Dimon warned Wednesday at the World Economic Forum that Trump’s idea to cap credit card interest rates at 10 percent, similar to previous proposals from Sanders and Warren, would reduce access to credit for about 80 percent of Americans. The reason is simple: Interest rates correspond with risk, and if card issuers can’t price risk accurately, they’ll stop offering credit to many people.
Though she despises Trump, Warren has remained insistent that capping interest rates is a good idea. The two even talked on the phone last week. Sanders hasn’t said as much recently, but he introduced a bill with Sen. Josh Hawley (R-Missouri) last year to cap credit card interest rates at 10 percent.
If politicians want to act like economic mad scientists, the states are the laboratories of democracy. “Force all the banks to do it in two states, Vermont and Massachusetts, and see what happens,” Dimon said. Throw Missouri in there, too, to reflect the bipartisan nature of this awful idea.
“The people crying the most won’t be the credit card companies,” Dimon explained. Restaurants, retailers and other businesses that accept cards would be livid that the most convenient way for many of their customers to pay for their goods and services had vanished due to government mandates.
It’s not as though consumer credit didn’t exist before credit cards. Individuals had separate accounts with each merchant they bought from. Stores were mini-banks in addition to their main business. They didn’t know how creditworthy their customers were and had to wait long periods of time before being paid. They don’t want to go back to that system, and neither do consumers who are used to paying with cards.
Let’s hope an object lesson isn’t necessary. Thankfully, Trump doesn’t have the power to cap interest rates on his own, and the banks have so far refused to comply. But if Warren, Sanders and Hawley really believe it’s such a good idea, what’s the harm in pushing their states to try it first?
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