Last month, representatives from both the Consumer Federation of America and the Financial Services Roundtable proposed reducing the amount of credit card debt held by financially troubled consumers by 40 percent:
The unusual joint request from the Financial Services Roundtable and the Consumer Federation of America highlighted the urgency of the situation: consumers — even those with strong credit records — defaulting at high levels on their credit cards, while banks battered by the credit crisis bleed tens of billions in red ink from the losses.
The reduction would have to be approved by U.S. Comptroller of the Currency John Dugan, whose Treasury Department agency oversees national banks.
Here’s an even better idea: The Federal Reserve estimates that the total of all credit card debt in the United States is $900 billion. Why not use taxpayer money to pay off all consumer credit card debt in one fell swoop?
Hey, $900 billion is a steal in comparison with the money we taxpayers are shoveling out to Wall Street, the automakers and the citizens of Iraq.
First of all, as someone who works for a credit card issuer, somebody is out actual money here. Just like with mortgages, at some point a lender dug into his or her pocket and came up with the cash so you could have your iPod, restaurant meal, pair of pants, or tank of gas just at that moment. What is the lender supposed to do, say, “Oh well. I’ll never do that again. Live and learn?”
Second, it’s not so much the people of Iraq, who probably would have been quite happy had we never spent a dime (or sent the first troop) there, but defense contractors who are soaking up that Iraq money.
And finally, as someone trying to pay off my own thousands of dollars in credit card debt, heck, where do I sign up?
To be clear, what I’m saying is, we submit our credit card bills to the Treasury and the Treasury pays the credit card issuer, who theoretically then should pay the lender.
What the banks/issuers would lose is the interest the thousands each of us personally owes, but folks could go out and start charging again right away. I wouldn’t (I SWEAR!), but others could.
The banks that gave out all this credit are now having to borrow money from the taxpayers who are the same ones who owe all this credit card debt.Why not just write it all off so no one owes anything?