Huffpost Politics
The Blog

Featuring fresh takes and real-time analysis from HuffPost's signature lineup of contributors

Arianna Huffington Headshot

Obama Calls for An Extreme Makeover of Our Culture: Are the Credit Card Companies Listening? [Updated]

Posted: Updated:

In his masterful commencement speech at Notre Dame this weekend, President Obama took his campaign theme of Change to a whole new level, telling the graduates -- and the rest of us -- that we find ourselves at "a rare inflection point in history where the size and scope of the challenges before us require that we remake our world to renew its promise."

So, as we stand at this inflection point and gradually move from what Jonas Salk called Epoch A (our survival-focused past) to Epoch B (our meaning-focused future), we have to ask ourselves what this remade world will look like -- and what steps we need to take to get there.

At Notre Dame, Obama offered a devastating teardown of Epoch A and its "economy that left millions behind even before this crisis hit -- an economy where greed and short-term thinking were too often rewarded at the expense of fairness, and diligence, and an honest day's work."

The problem, according to the president: "Too many of us view life only through the lens of immediate self-interest and crass materialism; in which the world is necessarily a zero-sum game. The strong too often dominate the weak, and too many of those with wealth and power find all manner of justification for their own privilege in the face of poverty and injustice."

The president should email his speech to Wall Street. And while he's at it, he should also blast it out to the people running the giant pharmaceutical companies, the ones who knowingly allow deadly drugs to remain on the shelves; to the people running chemical plants releasing deadly toxins into the water and air; to the factory farmers filling our food with steroids and additives; to the dentists exposed for trading their Hippocratic oath for profit by performing unnecessary surgeries on children.

And he should definitely send it to the credit card companies, which, faced with customers choking on debt and forced to use their credits cards to pay for essentials like food and medical care, respond by jacking up interest rates and tacking on penalties and fees. Even as credit card defaults reached record levels in April.

As we move to Epoch B, we need to ask ourselves: do we want to continue living in a world where banks can gouge their customers with sky-high interest rates?

The Senate seems to think so. Last week it voted down a measure introduced by Bernie Sanders that would cap interest rates at 15 percent. And it wasn't even close. Sanders' amendment only got 33 votes, with 22 Democrats joining those who voted against the interests of their constituents (a shout out to Sen. Grassley, the lone Republican to vote for the amendment).

"When banks are charging 30 percent interest rates, they are not making credit available," said Senator Sanders. "They are engaged in loan sharking." Also known as usury.

Throughout history, usury has been decried by writers, philosophers, and religious leaders.

Aristotle called usury the "sordid love of gain," and a "sordid trade."

Thomas Aquinas said it was "contrary to justice."

In The Divine Comedy Dante assigned usurers to the seventh circle of hell.

Deuteronomy 23:19 says, "thou shalt not lend upon usury to thy brother."

Ezekiel 18:10 compares a usurer to someone who "is a thief, a murderer...defiles the wife of his neighbor, oppresses the poor and needy, commits robbery, does not give back a pledge, raises his eyes to idols, does abominable things."

The Koran is equally unequivocal: "God condemns usury." And it goes on to say that "those who charge usury are in the same position as those controlled by the devil's influence."

Up until the late 1970s, America's laws followed suit, keeping interest rates in check.

Then, in 1979, a Supreme Court ruling allowed banks to charge the top interest rate allowed by the state where a bank is incorporated as opposed to the borrower's home state. Hoping to lure banks' business, states like South Dakota and Delaware repealed their usury laws -- and off we went.

That same year, Congress passed the Depository Institutions Deregulation and Monetary Control Act which, among other things, allowed federally chartered savings banks and loan companies to charge any interest rates they chose -- putting us on the path that led us to today, where banks routinely gouge their most vulnerable customers.

According to Elizabeth Warren, credit card companies "have switched from the notion of 'I'll lend you money because I think you'll be able to repay and we'll find a reasonable rate for doing that' over to a tricks and traps model... The job is to trick people and trap them and that's how you boost profits."

This profit-uber-alles mindset is why the banking industry, looking at the world through what Obama described as the "lens of immediate self-interest and crass materialism," is fighting tooth and nail against the Senate's new credit card reform bill that is set to come up for a vote this week (the industry already having spent $42 million on lobbying this year alone). Although, to hear the bankers' lobbyists tell it, all they really want is what is best for the consumer.

"It is vitally important for policymakers to get the right balance of better consumer protection while not jeopardizing access to credit and the credit markets," said Ken Clayton of the American Bankers Association. "We are very worried that the Senate bill fails to achieve this balance, to the detriment of American consumers."

Yes, I'm sure they are losing a lot of sleep worrying about American consumers. But the problem for most consumers isn't getting access to credit cards (see the endless credit card come-ons clogging our mailboxes). It's being hammered with 36 percent interest rates for missing a single payment or bombarded with a never-ending array of fees (lenders raked in over $18 billion on penalties and fees alone in 2007).

In any case, the Senate bill, while definitely a step in the right direction (and even tougher than the measure the House passed in April), will, with a few worthy differences, impose the same limits on the credit card industry as the new rules passed by the Fed in December. And, like the new Fed regulations, the Senate legislation won't take effect for close to a year.

Don't get me wrong: having the president sign the bill into law will send the right message to the banking industry (important after the cramdown debacle) and offer added protection against a future Fed chairman arbitrarily rolling back the new rules.

But if the new rules are important enough to consumers for Congress to enshrine them into law, why not make them effective immediately? As Obama said at last week's town hall meeting on credit cards, the predatory practices of the credit industry have "only grown worse in the middle of this recession, when people can afford them least." Almost a year is too long to wait when people are struggling -- and being bled dry.

"Both the politicians and the regulators are riding in like the cavalry, and the settlers are already dead," David Robertson, publisher of the Nilson Report, a newsletter that monitors the credit card industry, told the Washington Post.

As HuffPost's Ryan Grim reported, Obama has been much more involved with the credit card bill than he was with the anti-foreclosure legislation. But, given the impassioned case he made at Notre Dame and his call to "align our deepest values and commitments to the demands of a new age," he should take it one step further and throw his weight behind Sanders' effort to limit usurious interest rates.

Just because it didn't pass doesn't mean it's dead. History is filled with causes that took many battles before they were victorious (women's suffrage, the Voting Rights Act, the Clean Air Act, the American with Disabilities Act, etc., etc., etc.).

Our deepest values and commitments are certainly being put to the test. Questions we thought had been settled for hundreds of years are suddenly back on the table. Are we a country that tortures or not? Are we a country that financially tricks and traps millions of vulnerable working families, binding them to the whims of bankers who have lost all sight of fairness?

Appearing on Real Time with Bill Maher, Elizabeth Warren put the question this way:

"This is really about whether we have a government that just recedes and says, in effect, 'Hey, the strong can take from everybody, they can write these [rules] however they want...we can have a totally broken market that makes a few people very rich and robs the rest of them. Or you can write a set of rules that says, 'You know, it's just gotta be kind of level out there.' ...Everything we have, your shoes, your clothes, the water you drink, the air you breathe, we have basic safety rules in the United States... But we don't have them for consumer credit products."

Heading into Epoch B, and seeing the devastation all around us here at the tail end Epoch A, can anyone -- other than the banking lobby, that is - argue that we shouldn't?

The moment to act is now. Inflection points in history don't come along very often.

UPDATE: The Senate overwhelming approved legislation reining in some of the most egregious practices of credit card companies. But the reforms, which don't include a cap on the interest rates banks can charge, won't go into effect for another nine months -- which is too long for struggling Americans to have to wait. Nevertheless, the House is expected to endorse the Senate measure as is and President Obama could sign it by the end of the week.

UPDATE II: Here is Sen. Bernie Sanders speaking today on the floor of the Senate, discussing usury... and quoting at length from this post. Check it out: