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[Tvoivozhd <tvoivozd AT infionline.net>]

clanSkeen wrote:

> > Credit cards are the best means of making money that banks have ever
> > encountered.  They absolutely will never give them up, and will readily,
> > if reluctantly accommodate to any and all State regulation designed to
> > rein them in.
> >
> >    
>
> Tvo,
>
> Rest of you answer acknowledged and appreciated.  I'm getting some good
> stuff out of this.  But this last above:  Of course, credit cards are here
> to say, and no mistake.  My question was not of them being eliminated, but
> ....... if I were a moron (economic moron, let's limit ourselves to that) I
> could get $60,000 of unsecured credit tomorrow, maybe a lot more.  Anyone,
> litterally anyone living or dead, human or not, can get a credit card
> tomorrow.   I am thinking the defaults and losses are well offset by the
> usurous profits.
>
> If regulations are enforces obviously credit cards would not disappear.  But
> would they then be about as difficult to get as a signature loan, and the
> limits be greatly reduced?   Would a very great number of people who can get
> one today not be able to get one under better state laws (or probably better
> put, under an elimination of bad federal laws)?
>
> Not that this would be a bad thing.
>
> But while banks, especially very large faceless banks, would be reluctant to
> change the status quo; I wonder if a great body of the unwashed  consumers
> would not be just as reluctant since it would put them out of loop.
>
> James
>
> tvovozhd---my guess is that the signature loan would come back into vogue, or even more likely they would be over the Internet with an electronic signature---same information and same limitations as imposed by the three reporting agencies and credit scoring agency.  If there were a few hundred or thousand small lenders who do not collude as do the Credit Card Mafia, real competition would be likely to rear its ugly head, interest rates reflecting a reasonable spread between lender borrowing cost and lender lending price. For many decades banks paid three percent on deposits and made loans at six percent---and the local bank president was still among the wealthiest in every small town, matched only by the physician and manufacturers such as my grandfather who owned seventeen creameries and as many farms, and besides the pretty lavish Wisconsin home, houses in Philadelphia and Atlantic City. His wife handled the books, she would have had a cat fit if he ever borrowed any money at over six percent interest, and after he got his start, if he borrowed anything at all. 
>  


A side-note.  I got my start in the landlord business while still in 
college by going around then signature lending practice.
The limits then were $1000.  I got two loans the same day, knowing the 
lenders wouldn't know about the other loan for a few days.  I had bought 
a couple five hundred dollars down houses a block from University 
campus, and wanted to convert them to student rooming houses.  They were 
structurally sound, needed some cosmetic repairs, student 
furniture---more than a single $1000 loan would cover.  I knew the 
student rental market, by working very fast, had their deposits before 
my first payment came due.  I knew all the numbers of course, no 
self-deception, and bought several more later, that time did not need a 
loan, had earnings from the landlord business in hand.

Of course interest rates were low on signature loans then---somewhere 
around eight percent, less with security (I put up no security).  The 
insane credit card rates would make a similar venture using them too 
risky today.  I vividly recall the Carter Era when a six month CD 
deposit earned twenty percent and business loans were around thirty 
percent.  No businessman in the U.S. can stay out of the bankruptcy 
courts with this kind of interest rate on his borrowing.  Brazil 
suffered under even higher rates, but had become accustomed to 
them---only the businesses with inordinately high and sustainable 
profits survived.