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

 

 

Follow Arianna Huffington on Twitter: www.twitter.com/ariannahuff

Comments

[CroatianCritter]

Americans are tapped out so the only way banks can continue to make profits is by jacking up interest rates. When you have corporations with so much power over Congress, there is no difference between the parties and you need brave voices like Kucinich and Sanders to step up and at least TRY to fix the problem. As a final note, Obama always says the "right thing" in his speeches but I am not seeing the results in his policy so far. If he does not start acting on the things that he is saying, that makes him a "hypocrite." And he needs to stop appealing to the Republicans. They have a dead ideology and there is no reason to negotiate with them. If they get in power again, they will ignore the Democrats just like they did over the past eight years. Screw them!

[formerprosecutor]

"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.'

I am glad to find some validation for what I have saying for years; and especially the last few months.

I read this article with some cynicism, which quickltc hanged to a degree of relief. I am heartened that someone that is not on the front lines of poverty law, in the trenches, actually does understand what is going on "out there":

[Gdebs]

Did you ever wonder if all of the before and after pictures of people in advertisements are simply reversed?

[vippy]

I was disappointed when Obama signed this bill. I am not looking for change any longer. Should have voted for Kucinich but we listened to the press AGAIN.

[formerprosecutor]

me too; and even more dissappointed that the gun bill was a quid pro quo
I thought we were done with that type of "politics"
I really did

[elfNW]

Getting rid of the arbitrary changes in credit terms that credit card companies have been able to routinely apply is an excellent reform. I am sure the lawyers for the credit card companies will say it was all spelled out in the card contract, but does anyone ever really read those pages of print so fine it requires a magnifying lens? And s similar update every few months?
I also think some cap on “usury” interest rates is definitely appropriate. I just don’t think a fixed number (i.e. 15%) is appropriate. At the moment, with Treasury bill yields in the 1-2% range, 15% may still be too high. On the other hands during the 1970’s when treasury yields were in the double digits 15% would have been too low. I would prefer something like what goes on with mortgage rates: bench mark cost of funds plus a maximum of x%.

On the other hand consumers are not blameless. To many people stopped putting credit cards to appropriate use, a convenient alternative to cash and as a source of short term credit, and instead begin using credit cards to purchase items they just could not afford; including some very big ticket items. College graduates may be bombarded with offers of credit cards, but no one is forced use them. A recent graduate should just defer buying that big screen television or brand new car; not charge it on a credit card.

[Mike Bradley]

All those credit card enticements were like a lead anchor pulling me down to the bottom of the ocean after I just received my college degree.

[rocketman69]

Sodomites and blasphemers were in the seventh circle too. And, I seem to recall that usury, until rather recently, was ANY interest charged. Nevertheless, if you don't want to pay 20% interest don't get the card.

[sabredance]

I think Ms. Huffington was using the Bible as a way of pointing out the hypocrisy of RWingers, who do generally include the group known as fundamentalists, rather than as a foundation for determining right and wrong for the rest of us...

[sodisenchanted]

If we all want to put a halt to the power of the credit card companies then we need to start a grassroots movement where everyone who still owes them money takes bankruptcy. That will truly bring the banks down.

If you feel guilty about doing it just take how much you have charged on your cards and add it up, then add up the total amount you have paid them over all the years you have been paying and see how many times over you have paid them for what you originally borrowed. It probably isn't in the tens of times but possibly the hundreds. This comes from the way they compound interest and does not take into account all the little fees they sneak in and add on.

Sleep well knowing they have more than made their money off you.

These corrupt institutions need to fail.

[BevfromNYC]

Here's a thought. Why don't you just pay off your credit card bills and stop using them rather than try to take down the whole system. It's your debt. You signed a contract when you got that credit card - you would borrow money from the lender and pay it back in monthly installments. If you couldn't meet the minimum, you shouldn't have borrowed the money.

Yes, you are right that corrupt institutions need to fail? Which ones are those? The one's you own money to?

[sensiblethinking]

Radicalized individuals want to destroy and tear down, not build. It's easy to radicalize the mob, once radicalized the mob will do anything. We've seen it over and over again.

[Mike Bradley]

Heres a thought, why should these companies get away with ramming their products down the troats of recent college graduates who eagerly are willing to be unchained from the struggles of living at bare minimums? Then gouging them.

[Billie]

You are correct on personal responsibility, however: these banks with their trick and trap mentality and their toxic subprime mortgage programs have created this recession. They were the leaders in urging bad money management. The made it acceptable. And now people have lost jobs, homes and what do these banks do with their bailout? Increase rates. So I think that your blithe comment that "why don't you just pay off your credit card?" ignores the terrible plight some people are in.

[myparty]

The small percentage of people whom share your simplistic view on consumer debt is insignificant, yet still disturbing. Consumers who have credit card debt are not asking for a free ride and want to protect their credit and fulfill their obligations. The absolute blatant arbitrary gouging of those consumers being charged 30% interest rate on relatively small amounts of money is preventing anyone, but the very wealthy, to ever fulfill their obligations. That is the whole point. The banks are more than happy to arrange it so an individual will go to the grave in debt.

In the interest of short-term gain in the housing industry, we have seen the banks bad practices nearly bring this country to its knees. The taxpayers are bailing them out. Do you not understand that they have no credibility any longer? Do you not understand that they are trying to do the same thing with credit cards interest rates? This helps no one, not even you. Forcing people into bankruptcy is not going to help restore our economy. Making people be able to afford nothing but their absurd interest charges on their debt, will not help the economy either. It is the next big disaster.

The banks recent threats stating that if legislation is passed to assist the consumer, they will retaliate by gouging their good customers should tell you something. When they start suggesting debtors prison, I suppose you will be for that as well? Do some more thinking on this matter.

[formerprosecutor]

If the contarcts could not be changed unilaterally by the CC companies; you would be correct ; but since they can, you are not .

[Kassandra]

The credit cards companies aren't listening, because, even tho they have "personhood status" they have no ears.
But Senator Dodd is:
Dodd Now Shooting For Cap On Credit Card Interest Rate, Merchant Fees
http://www.baltimoresun.com/business/bal-dodd-credit0523,0,2063810.story

Maybe he'll get this thru before 2010. I hope so, for his sake.

[CarmanK]

A lot of these corporate giants and their lackies think that they hide behind the corporate shield for their sins against humanity. No matter what, people are making the decisions every day that do harm to their fellow countrymen and are weakening this nation if the face of financial disaster. And if there is justice, they will be held accountable.
In heaven, there is no corporate shield, just people who lived their lives well. And those that don't as Dante said, they are just assigned to a circle in hell. The ones who committ usury are in the 7th circle, and it doesn't matter if the company did it, each person who aids and abets such conduct is guilty.

[GaryA]

I am for walking away from credit card debt and for boycotting these big banks. I am aware that this credit card plan doesn't cap credit card debt. I suggest that congress blinked when told by the big banks to tow the line. When it comes to usury we know where the power lies:

http://www.bank-abuse.com

[Roxanna]

It is not just banks and credit cards. It is the idea of "unlimited profits" along with CEO gouging bonuses which refuse to share in those profits with the workers who made them for company.

Not old is greed immoral, it is unintelligent.

It is shooting one self in the foot because eventually in time it comes back on it's self.

[Kassandra]

Cancer Capitalism: Devouring the host.

[Jay Adler]

Please allow me to clarify my statement about determining profit in an economic climate that is threatening the underpinnings of our financial system. We are currently in a verifiable economic emergency. There is no assurance that gas prices will not go back up to where they were and they are headed in that direction. For those of you that are old enough to remember wage and price controls, sometimes the protection of American debtors in this case is going to have to be wrestled in an uncomfortable way. You sink or you swim. I see the capping of interest rates as something similar to Marshall Law. I also am amazed that when I make comments about the subject of dealing with the credit card people, I often and astoundingly so get right back aches from individuals who diffidently defend the banks in a big way. These may be the cash in the mattress crowd, who knows? I am speaking up for millions of Americans who no longer have the cash, just the credit, potentially our undoing.

[iblogleft]

So if we cap interest at 25% it will destroy the industry? I think not.

[freshnotbitter]

Hi Arianna,

Love that picture of you in the right hand side bar link to this story.

And you have a master's degree in economics from Cambridge!! which I just learned recently. Very, very impressive. Way to make me feel small. My favorite saying comes via your alma mater, natura saltum non facit. Actually Marshall said it though it is credited to Keynes.

But the real reason for this post is to alert you to Jonathan Tasini's appearance on CNBC today. I happened to surf in at 1645 hrs 5/21/09 and he was saying that if there were a single payer health care system "we" would not be sitting here discussing this subject (the subject was the car industry). His opponent said he did not agree with his solution - single payer system - and Tasini said that we could discuss that but the removal of health care costs from the equation would remove the problem with the big three's cost structure to the extent that nobody would be going bankrupt.

You should check it out.

[mcjorich]

I have noticed that all of the people occupying places of authority on Obama's cabinet or in advisory positions, in positions of power, SEC, etc, are all 'old familiar faces'. No CEO's, as far as I can tell have lost their jobs in the financial institutions, none have taken a salary cut, all have gotten their bonuses, they keep their perks, the people who caused this $21-trillion train wreck are still in power, doing well, collecting their coinage in the billions, collecting their taxpayer monies in the trillions, given to them by people who have been in charge throughout all of this unfolding debacle, Summers, Geithner, Paulson... they still all blather on about how they are TOO BIG TO FAIL.

Does anyone believe all of their insane rhetoric? Does Obama really believe all of the persiflage? Or as Durbin pointed out, the 'financial industry owns the hill (congress and the presidency). If all of the 17 biggest financial institutions failed, were taken apart and sold off we could have saved ourselves $700-billion and the mid-sized banks and community banks could have taken over and we would have done very well. Wonder how long that idea will take to jell up on the hill or in the president's brain, will he be able to admit he was wrong? That it was a totally futile effort and simply prolonged the banks' ponzi schemes they are running on Americans.

Just a View from My Trailer Park.
MJ Richards

[freshnotbitter]

Yes, and they did not lose their jobs because the people in Washington are "wanna-be's" who are looking forward to a big payday on wall st when their liliputian "duty" at Treasury is over.

Why didn't he just bring in a heavy hitter like Dimon (CEO of JPMorgan Chase) who knows banking forwards and backwards and has no financial aspirations - he's already a multimillionaire - and would have loved putting together a real rescue package for America.

I hate seeing Obama fail just because he did not have the Bagavada Ghita courage required of a President. Did I get that spelling right? I've tried for decades and still can't spell it.

[robbrian]

Unfortunately, every national, elected official is aware of what banks and financial institutions are doing to this nation through their control of creation of money . Yes, these officials know about and protect the Ponzi scheme that contributes to their election and re-election. The problem is they lack the courage to initiate "Change That Mattters."

You see, there is no other mechanism, under our current monetary system, through which the government can finance the debt. It can't raise taxes high enough, it can't continue to print money and avoid hyperinflation, and it can't continue to borrow its way out of debt.

The President would have to use the Emergency Powers of his office to repeal the Federal Reserve Act of 1913 and authorize the Treasury to create debt free U.S. Notes rather than Federal Reserve Notes. (See the history on "Colonial Script" and "Lincoln's Greenbacks" for the benefits of debt free currency. Or, google the phrase.) Debt free currency is the only way out of this descent into the abyss created by private bankers and the privately owned Federal Reserve System.

Debt free currency would eliminate the need for an income tax. Pls read, Ellen H. Brown, J.D., "The Web of Debt." Also, watch several 8-10 minute Youtube videos on "Abolishing the Fed."

Debt free currency allows us to fund all public sector initiatives, universal health care, education, and infrasturcture rehabilitation, etc. without budget deficits. What a world we could have.