Saturday, November 15, 2008

Treasury's proposed bailout of credit cards is not helpful

James Surowiecki criticizes the now proposed Treasury bailout of consumer debt:
There is no way that having the U.S. government subsidize credit-card lending makes sense. But yesterday Henry Paulson seemed to suggest that that’s what TARP funds would, among other things, now be used for. ...

What, exactly, is the harm that we’re trying to remedy by making it easier for people to use credit cards? That people aren’t shelling out enough of their money to cover exorbitant interest payments? Are we really saying that the wellbeing of the U.S. economy depends so much on people borrowing money at fifteen to nineteen per cent that we’re willing to spend taxpayer money subsidizing that market? I’m sorry, but there’s no way that’s true. ...

There are lots of things the government can and should be spending its money on to get the economy moving again. But on any list of those things, subsidizing credit-card issuance has to be right near the bottom.

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