The New York Times asked us to help explain the problems with the latest consumer protection measures coming out of the Senate. Here’s what we told them.
SENATOR CHRISTOPHER DODD of Connecticut is trying to help consumers. Unfortunately, his plan is likely to backfire.
Despite the recent promising signs on economic growth, unemployment is rising and consumer spending is contracting. The slight rise in home prices we saw over the summer is already sputtering. Credit card rates have been shooting up — even though the Federal Reserve has extended generous interest rates to banks.
Mr. Dodd, the chairman of the Senate Banking Committee, has proposed legislation that would immediately freeze credit card rates. “At a time when families are struggling to make ends meet, jacked-up rates can quickly create crushing debt,” he said in a statement. He also wants to extend and expand the tax credit for first-time home buyers, which was due to expire on Dec. 1.
At first glance, both proposals look like pragmatic attempts to relieve the tough economic problems faced by ordinary Americans. Unfortunately, the unintended consequences of the proposals may wind up creating even worse problems.