Is the credit-card debt crisis becoming the next housing-debt crisis? That prospect is raised by Robert Reich, a former secretary of labor, now a public-policy professor at Berkeley.
“The Federal Reserve reported recently that consumer credit — basically everything we all owe money on except our houses — rose more than 7 percent last month to $2.5-trillion worth of revolving debt,” Reich writes. “And the price tag is mounting daily as interest charges accumulate.”
Card companies offer what look like great deals, he says, then suddenly crank up interest rates and penalty fees, and shorten billing cycles. “Sound familiar? It’s just like what mortgage lenders were doing before the bust,” he says.
Congress and the Fed are contemplating action, Reich writes, but the bankers’ lobby is powerful, and argues that if card companies can’t come down hard on debtors, other customers will end up being charged the difference. That was housing lenders’ argument too, says Reich, who writes that “the Fed may be the only hope for protecting Americans while avoiding the kind of meltdown that hit the mortgage market.”
“It’s another reminder,” he writes, “of how our democracy has drifted into the hands of nondemocratic agencies like the Fed, because the political branches are answerable to money interests rather than to the public interest.”
