April 6,2009
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Dodd's Credit-Card Bill Inches up Capital Hill, Pt.2
Too close for comfort.Standing in opposition was one key Democrat, Sen. Tim Johnson of South Dakota. His concern is that the credit card reform bill "...goes too far in prohibiting lenders from adjusting prices to account for increased risk." In addition, he shares the concern voiced by the credit card industry that the bill, as written would stifle the availability of future credit card lending by taking away their ability to adequately manage risk. Of course, the Republicans will always side with industry over consumer protections. Senator Dodd realizes he will have to overcome this.
The day before the opening meeting, 10 large industry groups banded together and drafted a joint letter to the committee. The letter was a reinforcement of earlier joint statements from the credit card industry voicing serious concern over these matters. They are predicting a serious contraction of credit to credit card consumers in the future if the bill stands as is. Interest rates, they claim will invariably go up and the consumers, themselves, will be the losers. Small business would suffer the same fate.
They warn of an even greater threat. The new key government initiative called TALF (Term Asset-Backed-Securities Loan Facility), they suggest, would be more prone to fail. The investor confidence in the securitization market is already at an extreme low point and to stifle it any further could cloud the whole recovery of the nation. Restoration of the securitization market has already imploded down to $3 in value for every $1,000 that it was worth. This market is considered key to our nation's economic recover. Not just the credit card industry but employment, housing and retail spending, as well. Because of the way our markets have evolved, securitization is now considered to be crucial.
So, Senator Dodd's work is cut out for him. But, this is all in stride and he expects there to be much needed refinement before moving forward with this credit card reform bill.