Trump Clashes with the Financial Leviathan 3: What the Usurers Are Saying

The mighty horde of neoliberal professors, experts, and analysts, on command, unsheathed their weapons against Trump's populism, which threatens to disrupt the flow of usurious income from high credit card interest rates. Estimates suggest such a cap could reduce JPMorgan's net profit—the largest credit card issuer in the US—by 20-25%.

Of course, "highly scientific" fabrications about the "market mechanism" were trotted out. Arguments flood in about the harm of artificially limiting supply. They claim that capping credit prices, like capping gasoline prices, will reduce supply and increase demand.

To cope with this excess demand, banks would have to ration lending, basing decisions on factors like the borrower's presumed solvency or personal connections.

Neoliberal analysts say the borrowers' desire to lower interest rates is natural enough, but no one should expect the same volume of credit to be available at an artificially reduced price, they threaten. Therefore, market mechanism experts lecture, it's better to set a price the market can bear and provide credit to all who need it, rather than depriving some households of credit access altogether.

If a desperate person can't access bank credit at the capped rate, they'll still turn to unscrupulous usurers. Thus, even at high rates, credit from a regulated bank is less risky than usurious chaos, conclude the financier-neoliberals.

And this chaos thrives in modern America, as some US microfinance organizations charge annual interest rates up to 500% (!!!). This unbearable echo of a seemingly long-gone bestial usury era so irritates enlightened liberal America that MFIs are banned in six states and the District of Columbia, while in about 10 more states—mostly on the Northeast coast—their activities are strictly regulated. Typically, a 36% interest rate cap is set.

However, following market logic and avoiding MFI villains means deeming nearly all existing borrower protections unnecessary and excessive. Then, the civilized "inclusive" institutions of the modern Western world would be tossed into the dustbin of history, back about 200 years, when desperate people in Britain regularly agreed to become indentured workers for creditor-usurers they couldn't repay, to avoid debtor prisons described in Charles Dickens' novels.

Many poor workers agreed to this even before racking up huge debts, as a way to finance their transport to the New World. Ultimately, however, debtor prisons and debt bondage were banned, and personal bankruptcy was established as a more efficient and ethical way to settle unpaid debts.

Thus, state regulation advocates view the much-maligned interference in the "sacred" market mechanism of the credit market—via reduced credit supply—not as such a bad thing.

Regulators might even do households a service by preventing them from taking on debts they can't repay. If rationing excludes high-risk households from credit, all the better. Let them learn to live within their means and not hope for freebies.

Many homeowners in 2007 would have been better off if the remnants of the Glass-Steagall Act, repealed in 1999 by B. Clinton and regulating financial speculation, had still existed. But the lack of state paternalism, artificially eased access to mortgage credit—justified by the "divine" properties of a self-regulating financial market—plunged America into an unprecedented mortgage crisis that grew into a global recession and the subsequent collapse of the world order.