Intended Consequences

In the middle of a recovery, in comes F-Troop!

The gist of the ‘60s sitcom was that nothing was too certain for those dopey Feds to mess it up. Whether it was a new peace treaty or a new railroad, Captain Parmenter and Sergeant O’Rourke were fully capable of fouling up the works.

So just as the banks are beginning to show signs of life and lending, in comes Senator Dodd with his proposal to freeze credit card rates. He says that his is proposing the freeze because banks are using the delayed implementation of new credit rules passed in May to push through rate and fee increases.

Well, this is a competitive market, isn’t it? Many people still receive so many card solicitations that they could heat their homes with them in the winter. Since new rules were enacted, banks have selectively increased rates imposed new fees. People have been free to cut up those cards if they wanted to.

We can script out what will happen if Dodd’s rate-freeze goes into effect. Banks will dramatically cut back on credit card loans. After credit is curtailed, we’ll hear story after story about how consumers lost their cars, homes, and businesses because they couldn’t get credit. Congress will mount an investigation. But will it ever point to itself? I don’t think so.

I know Dodd is facing a tough opponent in next year’s election and his reputation as the “Senator from Fannie Mae” isn’t working very well right now. But if Congress is the least bit rational, this bill will never see the light of day.

But what are the odds on that?

Douglas R. Tengdin, CFA
Chief Investment Officer
Hit reply if you have any questions—I read them all!

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By |2014-09-05T13:35:11+00:00October 27th, 2009|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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