Chuck Schumer To Bernanke: Your Failure To Protect Consumers Is "Unconscionable"
Sen. Chuck Schumer (D-N.Y.) scolded Federal Reserve chairman Ben Bernanke on Tuesday over the Fed's reluctance to speed up the implementation of consumer protection from arbitrary rate increases on credit cards.
"I believe the Federal Reserve's failure to protect consumers from these outrageous rate increases is unconscionable," Schumer said to Bernanke at a hearing before Congress' Joint Economic Committee. "You've acted swiftly to use your emergency powers to steady teetering financial institutions. It is fair to ask why you won't use the same powers to aid American families who are at just as great a risk."
In December, the Fed adopted regulations that would ban arbitrary rate increases on existing balances (among other things), but the new rules won't take effect until July 2010. Meanwhile, members of Congress have been hearing from constituents as credit card issuers -- often companies that benefited from billions in taxpayer bailout dollars -- have been jacking up rates willy-nilly.
The House recently passed a measure that would essentially speed up the Fed's rules by a few months, and a similar measure is on tap in the Senate. But those measures wouldn't take effect for at least a year. Last week Schumer and Sen. Chris Dodd (D-Conn.) asked Bernanke to use his emergency powers to implement the new rules immediately. Bernanke declined.
"How do the benefits of prolonging the suffering of consumers outweigh the costs of forcing these banks to immediately improve predatory credit card practices?" Schumer asked.
Bernanke replied with a zinger: "I note that Congress is also putting delays into their proposed credit programs."
"Not as long!" Schumer said. "The congressional delays are not close to as long as yours."
"We have here a quandary," Bernanke said, moving on. "We could move up the date on which this prohibition is effective -- my question that I think we would need to think though is whether that would be good for consumers or not. If we moved it up the obvious response of the companies would be first to raise rates preemptively," Bernanke said, "and secondly ... their short term response would be to just cut a lot of people off."
Schumer closed out his questioning with something of a bitch slap.
"My time's up, but I think you could figure out a better way than the one you've chosen," he said.
UPDATE: C-SPAN's video of the hearing is here -- the Schumer-Bernanke exchange happens at 45:55.
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05/ 5/09 04:00 PM