When President Obama lobbied for the Financial Reform bill cobbled together by Senator Chris Dodd and Congressman Barney Frank, he could have easily repeated what Nancy Pelosi said about Health Care Reform – let’s pass it so we can find out what’s in it. I couldn’t find a synopsis of the bill prior to its passage, but I’m now shocked to discover that this is a mammoth extension of the nanny state.
Getting your first credit card has always been a rite of passage for college students. Even though credit card companies have recently tightened their requirements, a smart student with the help of a cooperative parent could still obtain a card in his or her own name. This helped the student establish an independent financial life after graduation.
I helped both of my college-age children acquire their first credit card by working with a regional bank located near my home. I had to convince them to give one to my son, although they insisted that we use his Certificate of Deposit (CD) to secure the card. By the time my daughter came of age, they just acquiesced and issued her one without security. Recently we tried to redeem my son’s CD, but we were told that this would void the credit card. If my son wanted an unsecured card, the bank now required him to submit a financial statement along with recent pay stubs. We asked why this was necessary; after all, he had used the card responsibly for two years and had made all the payments in full and on time. The bank replied that they had no leeway because of the new Financial Reform act. Since many college students – if they work at all – don’t consistently earn enough money to obtain a credit card under the new rules, very few of them will be able to establish their own credit. But most kids attending an out-of-town school today need a credit card, even if it’s just to avoid carrying around lots of cash. Yet instead of establishing these young adults as independent beings, the new regulations will force them to continue using an associate card from their parents. Even when they get their first post-college job, they will still be tethered to their parents for a period of up to six months while they are building work history.
Young adults should be encouraged to assert their independence and break from their parents, but the government is now hindering this important process. For 50 years, credit card companies balanced the risk of providing entry-level cards to students against the prospect of obtaining long-term customers. But now, the federal government - in its infinite wisdom and without the input of millions of parents – has decided that this no longer makes sense. In effect, they have unilaterally determined that college students aren’t smart enough to responsibly manage their own credit cards.
Some people think the new rules in the financial reform bill make sense. Matt Miller, a columnist for the Washington Post, wrote about how we need a consumer protection agency because he was “screwed” by a car leasing company. He had turned in his car, having completed all the routine maintenance, but was ultimately charged for two tires that did not meet standards. He felt that because he hadn’t read his contract, he needed a new federal agency to protect him from himself. Having leased cars for 25 years, I know that you have to return your car with a specific minimum tire tread. It is in every contract and they even send you simple instructions before the lease termination to alert you to what may create charges. We don’t need a nanny state to protect us from a leasing agency.
Mr. Miller makes the case for bringing on Elizabeth Warren to help us protect ourselves from making any decisions – or taking any responsibility – in our lives. He believes that we need a level playing field from the evil lenders. President Obama made Ms. Warren his 932nd czar, this one to oversee the start of the new consumer protection agency. The President had to install Ms. Warren as a Czar because her radical views would clearly have precluded confirmation by the Senate. But while everyone was discussing her leftist opinions, no one was asking exactly what qualifications she possessed to be appointed in the first place. Yes, she has written over a hundred articles in which she has pontificated about consumer issues, but the biggest thing she has ever managed is her law school office. Like Van Jones and Donald Berwick, both of whom Obama selected to lead agencies in his administration, Warren has no experience running anything. Of course, she did go to a good school and she writes nice articles.
Warren wants to create an agency that protects us from ourselves. I’m not saying that there aren’t any companies that abuse some customers, but what we are about to get is a significant restriction in our ability to obtain credit. Warren is going to create a plethora of new directives that will supposedly be protecting us, but will ultimately cost many Americans the opportunity to a get a credit card, lease a car, buy a home or move up the economic ladder.
Warren thinks she knows better because she teaches at Harvard Law. The 2,200-page Financial Reform bill, none of which Congressional Democrats read before voting to enact it, will soon be the genesis of thousands of pages of regulations – regulations that restrict our most basic choices and empower the government to make decisions for us. This wasn’t the cause of the financial crisis, but the nanny-staters will now be in control of every single financial aspect of our lives. It is a huge price to pay for not reading your lease.
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