Audio Interview with Elizabeth Warren: The Right Rules for a Wall Street Run Amok

It is not true that "everyone" knows how much income they have. I know some fairly intelligent people who have trouble balancing their checkbooks. And I know of at least one person who makes pretty good money for an unskilled person, in the neighborhood of 25g, and he could not balance a checkbook or keep up with his bills without his sister-in-law's help and guidance. He is challenged intellectually, but he still deserves my compassion and yours. He certainly does not need credit cards, yet he receives unsolicited invitations. BTW, I'm not receiving nearly as many of those as I once did. My wife and I use credit cards as a convenience. Pay off the entire balance at the end of every billing cycle. But I can imagine a circumstance arising whereby we would not be able to do that. That would not make us fools, or undeserving of compassion.

I couldn't care less whether Congress passes the legislation or not, but keep in mind the long term consequences of these regulations: there will be fewer people who get credit cards because issuers will demand higher credit ratings and rates will be higher. Personally, I think that will be good for most Americans because most seem totally unable to handle credit cards. Anyone who carries a balance and pays interest on a credit card is a fool. This legislation will prevent fools from getting credit in the future.

There is some advantage in protecting the ignorant. (I would not equate the ignorant with fools). If the ignorant incur debts they cannot pay, ultimately the rest of us will pay one way or another. So this is in my self interest, even if I had no compassion for "fools," (which I do).

the long term consequences of these regulations: there will be fewer people who get credit cards because issuers will demand higher credit ratings and rates will be higher.

Hogwash!

Far...

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...to an unsupported claim.

Why is it with fundamentalists that they overlook unchecked corporate greed while charging American citizens with stupidity and evilness?
Do they think corporations are better people than real people?

To condemn credit card issuers of greed, you would need to be able to look into the hearts of the management and assess their intentions, which I'm pretty sure you can't do. When corporations do something you don't like, it's reasonable to consider other motives besides greed. For example, in the current situation credit card issuers are losing a lot of money because of the depression. People have quit paying their bills and many have declared bankruptcy. To some degree, the higher interest rates and fees are efforts to keep from going bankrupt themselves.

The evidence does not support your thesis. Elizabeth Warren's (the same one as in the post) work like her book, The Two-Income Trap (You have asked me to read work, Fundementalist. This would be an eye opener for you. The research is impeccable.) disproves your thesis, "To some degree, the higher interest rates and fees are efforts to keep from going bankrupt themselves." The banks have been engaged in predatory lending:

"Warren published a brilliant essay describing just how far the pendulum has swung since the Great Depression. We live, she observed, in an era of "runs on the customer," in which banks and credit card companies and insurers use credit scoring and gimmicks like universal default to pile on their most vulnerable customers, often driving them into foreclosure, default, and bankruptcy. (Runs on customers no longer require a late payment or credit card run-up-or any excuse at all, really. American Express (AXP), for example, will increase your rate or lower your limit based on where you shop; Capital One (COF) will shaft you and blame the "economic climate." At least you don't have to obsess over your FICO score any longer, I guess.) Warren's essay contained an implicit warning: Whether you ruin the customer or the bank first is irrelevant; in either case, you're headed for a systemic collapse." http://www.thebigmoney.com/articles/judgments/2...

The reality is that we sold the American Dream to a Wall Street Elite by deregulating. She proved to be a prophet, and like the prophets of old, we have to start listening to her. It is now time for this country to repent.

"But I say to you that if you are angry with a brother or sister, you will be liable to judgment; and if you insult a brother or sister, you will be liable to the council; and if you say 'You fool,' you will be liable to the hell of fire." Jesus, Matthew 5:22

Solomon called a lot of behavior foolish in Proverbs, and the people who practiced them fools. How do you reconcile the apparent contradiction?

"You have asked me to read different books, Fundementalist. This would be an eye opener for you. The research is impeccable."

I have no doubt that it is. However, research can be good and accurate and still lead to wrong conclusions if you don't have the larger picture. Context is important, as well as history, but even more important is a correct understanding of the market process, which a lot of mainstream economists don't have.

"The banks have been engaged in predatory lending before their big losses," and their big losses came from wild speculation and not from dead beats.

"Predatory lending" is in the eye of the beholder. What some consider predatory, others might consider sound judgment. You'll have to define what you mean by predatory lending. We were discussing credit cards, not investment banking. If credit card issuers were engaged in wild speculation, it was in allowing people with poor credit to have cards. As for investments in mortgage-backed securities, it's odd to consider that speculation when the state-sanctioned credit ratings agencies gave them AAA and AA ratings, the highest safety that can be bought. And the state has bailed out all banks with TARP money, so there is no need to charge more for credit cards.

"Runs on customers no longer require a late payment or credit card run-up-or any excuse at all, really."

In a free market, competitors would snatch up the customers who are unhappy with this treatment, which means that 1) either the credit card market is not free and state intervention prevents competition or 2) credit card companies are colluding on interest rates and treatment of customers, which is illegal and easy to uncover, or 3) the industry as a whole is in financial trouble as a result of massive defaults on credit.

"She proved to be a prophet, and like the prophets of old, we have to start listening to her."

Mostly what she does is judge the motives of others, something that Christians used to think only God could do. It's easy and trivial to take any action that anyone does, even giving to the poor, and attribute evil motives to the person and provide sufficient evidence to convince those who want to believe it. It's simply not true that we deregulated the economy. Anyone who has ever looked at the laws on banking knows this. The tiny amount of deregulation that took place is like spitting in the ocean. The banking industry is the most heavily regulated industry in the US outside of healthcare.

If massive regulation could have prevented this crisis, then Europe should never have had a crisis due to their massive regulation. In fact, much of what people call deregulation was nothing but our adopting European regulation of banking, the Basel I and II accords.

thank you for simplifying Christianity so that it boils down to all sins being related to economics. So when two teenagers "get it on" it's because of consumerism, no doubt. I guess it's a form of consumerism: I want to have sex and I want it now, because everyone is doing it. Maybe it's good for the condom industry and Planned Parenthood, not to mention the abortion doctors...

I doubt that the Commodity Futures Modernization Act of 2000 caused the crisis. As with G-S repeal, it might have made the crisis worse, but who knows. Counterfactual history is really difficult to play. The European Basel I and II banking regulations that the US adopted claimed that the derivatives that banks bought actually reduced their risk.

There are many theories of business/financial cycles. I'm not aware of any that give regulation center stage as the main cause. There is more reason to believe that the conflicting regulations had more to do with it than the repeal of any. The latest crisis is typical of many past cycles. There is no reason to think this one is unique. The best business cycle theory is the one developed by Hayek in which the central bank expands reduces interest rates and floods the country with credit. Without that credit expansion, little regulation is needed; with it, regulation of any kind is impotent. If you don't like Hayek, then check out Kindleberger's book on the history of crises. He comes to the same conclusion.

Because, YOU are obviously NOT Solomon :)?

Common sense? Hardly.

Fundamentalist, I find the typical claims you make related to economics on the God's Politics blog are counter intuitive, are driven by orthodox libertarian ideology, are politically right wing extremist and are not supported by real world experience and facts on the ground, let alone cogent argumentation.

In fact many of your claims and the ideology on which they are based have actually been implemented over the last several decades. So called "free market" ideology has been given ample opportunity to succeed in the American economy but sadly it has utterly failed, leading us into the present crisis, with permanent damage inflicted on American citizens and the American way of life.

This is why I cannot accept your libertarian ideology under the "common sense" umbrella.
Nor can I accept your arguments based on your flippant response, "prove me wrong".

You expect us to read libertarian propaganda, but we've had enough of your failed free market ideology.
I think it's time for you to expose yourself to some progressive ideas.
I would be happy to supply you with a reading list to broaden your intellectual development.

Sincerely, justintime

And I am obviously not Jesus.

Just to be clear, my response was to fundamentalist, not ckgmail :).

While ckgmail stated he would choose Jesus over Solomon, he did not appear to be using Jesus to justify his own judgmental proclamations, as fundamentalist appeared to me to be doing with Solomon and himself.

"I find the typical claims you make related to economics on the God's Politics blog are counter intuitive,"

Good economics is often counterintuitive. That's because the average person focuses on the short run and the immediate effects of things, while good economists look to the long run and the wider effects.

"

It is not true that "everyone" knows how much income they have. I know some fairly intelligent people who have trouble balancing their checkbooks. And I know of at least one person who makes pretty good money for an unskilled person, in the neighborhood of 25g, and he could not balance a checkbook or keep up with his bills without his sister-in-law's help and guidance. He is challenged intellectually, but he still deserves my compassion and yours. He certainly does not need credit cards, yet he receives unsolicited invitations. BTW, I'm not receiving nearly as many of those as I once did. My wife and I use credit cards as a convenience. Pay off the entire balance at the end of every billing cycle. But I can imagine a circumstance arising whereby we would not be able to do that. That would not make us fools, or undeserving of compassion.

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I couldn't care less whether Congress passes the legislation or not, but keep in mind the long term consequences of these regulations: there will be fewer people who get credit cards because issuers will demand higher credit ratings and rates will be higher. Personally, I think that will be good for most Americans because most seem totally unable to handle credit cards. Anyone who carries a balance and pays interest on a credit card is a fool. This legislation will prevent fools from getting credit in the future.

Based on fundo's indifference to the pain and suffering caused by irresponsible behavior on Wall Street, I couldn't care less what he thinks about consumer financial protection.

Until our dysfunctional Congress does the right thing, I recommend:

1. moving your money out of Wall Street banks and into local community banks investing in your local economy.

2. staying away from Wall Street credit loan sharks - if you need revolving credit, your local bank or credit union has a much better deal.

the long term consequences of these regulations: there will be fewer people who get credit cards because issuers will demand higher credit ratings and rates will be higher.

Hogwash!