To a foreigner you may charge interest, but to your brother you shall not charge interest, that the LORD your God may bless you in all to which you set your hand in the land which you are entering to possess. (Deuteronomy 23:19,20)
I usually try to avoid Biblical quotations, but this time I just could not resist. To be honest, I do not really agree with the quote. I am, after all, a fixed income trader whose career hinges on the usefulness to society of lending money at interest. I include it here to make a point: throughout history, the charging of interest has been a controversial topic. Some argue that it leads to investment and progress. Others argue that it is immoral and contrary to scripture. I would argue that the controversy stems from the fact that while it does lead to economic progress in the majority of instances, there are also times when lending can be predatory and immoral. Lending money to a small business at 9% sounds like a good deal for everyone. But lending money at an annual rate of 25% to a single mother who is struggling to put food on the table does not result in economic progress. Rather, it results in richer guys getting richer and poorer people staying poorer.
So, I was quite disappointed today when the Senate killed a proposal by Senator Bernie Sanders, Independent from Vermont, to put a cap on the rate banks charge credit card customers. Unfortunately, Congress lacks the will to inhibit the type of irresponsible lending that financially cripples families and leads America further down a seemingly never-ending hole of bad debt.
In general, I oppose Congressional interference in business matters. But today an exception to that rule should have been made. Taxpayers are currently propping up Wall Street banks for the good of the country, or so we are told anyway. It is perfectly reasonable for that assistance to come with some strings attached. One very good string would prevent bailout recipients from engaging in a practice (usury) that exacerbates the very same problem (a debt crisis) that the bailout money is intended to resolve.
I would have liked Sander's proposal even more had it only applied to bailout recipients. That way the problem of interference with free markets would be irrelevant. But either way, it is very disappointing that our government has again failed to protect American families because the interests of banks got in the way.
