ACTION

WHEREAS, Banks and their affiliated companies issuing credit cards have a right to be fairly compensated for their risk,

WHEREAS, Credit card holders have the responsibility to compensate credit card issuers for there risk,

WHEREAS, If the interest rate on a credit card is 20%, then the total amount of interest charged over a 5 year period will equal an individual card’s credit limit,

WHEREAS, If the interest rate on a credit card is 30%, then the total amount of interest charged over a 3.5 year period will equal an individual card’s credit limit,

WHEREAS, The long term health of the national economy is substantially based upon maintaining a high level of consumer spending,

WHEREAS, The Federal Government, in conjunction with the Federal Reserve, has embarked on fiscal and monetary policies to protect the financial stability of banks operating in the United States,

WHERAS, The Federal Government, in conjunction with the Federal Reserve, has embarked in a program to lend funds to banks for their direct use and the indirect use of their affiliated credit card companies at significantly low interest rates,

WHEREAS, the Federal Government desires to continue to stimulate the national economy,

WHEREEAS, The Supreme Court has ruled in Marquette vs. First Omaha Service Corp that Credit card companies may charge interest rates that are usurious in one state if the card is issued in a different state, absent any preempting Federal Legislation,

WHEREAS, The Federal Government has not participated in the protection of the rights of credit card holders by limiting interest rates to a level that appropriately compensates credit card issues for their risk,

WHEREAS, The Federal Government desires to protect the rights of all consumers and credit card holders,

WHEREAS, The Federal Government considers that the ability of a credit card holder to pay off there outstanding balance is a mandatory basis for recalculating the risk of the credit card issuer.

The following rules shall immediately be adopted by the Federal Government into the Federal Statutes and will be applicable to all credit cards both (1) currently issued, with or without outstanding balances, and (2) to be issued in the future:

1. On any date the total interest charged over a 5 year period may not exceed the then current credit limit on an individual credit card.
2. Credit Card companies may not charge interest rates at a rate that is more than 10 times the interest rate which they or their bank affiliate or parent is charged upon any funds borrowed from either the Federal Government or the Federal Reserve.
3. A credit card company, in conjunction with the credit card holder, may agree to suspend use of a credit card and keep a low interest rate of 15%, in lieu of raising the interest rate and maintaining the current credit limit.
4. If on any date a credit card holder offers the issuer of a credit card a settlement that equals the recalculated balance, based upon an interest rate of 10% over the immediately preceding 5 years, then the credit card issuer must accept the settlement as payment in full, reduce the associated interest rate to 10.0% for the next 6 months, and reduce the going forward credit limit by not more than 50%. This settlement will be considered as a retroactive reduction of interest rate and will not be considered as a debt reduction or cancellation of debt for any purpose including both Federal and State income tax purposes and Credit Ratings.

Circular Creation of Risk by the Credit Card Companies

When a person elects to not pay off the entire balance of their credit card and elects to make monthly payments they are creating risk in excess of that which was contemplated at the issuance of the credit card. As a result, the Credit Card company has the right to begin raising the credit card interest rate. However, as the interest rate rises the debtor begins experiencing a much higher probability of defaulting upon their debt due to the compounding of the interest cost. This results in the sequential additional increase in the credit card issuer's risk, an additional increase in the interest rate charged, and the subsequent increase in the probability of default by the debtor.

Therefore, the Federal Government should legislate a maximum interest rate charged on unpaid interest at the statutory rate in the state of the taxpayer's residency, which in California is 10%. Current credit card statements show two categories of charges, (1) actual purchases, and (2) cash advances. The Federal government should legislate that there must be three categories of charges, (1) actual purchases, (2) cash advances, and (3) Unpaid interest. All payments should be first to Cash advances, second to purchases and third to interest charged.

Underlying Principles

1. This provision essentially limits credit card interest rates to a maximum rate of 20%.
2. This provision may periodically limit credit card interest rates to a maximum rate of 10%.
3. This provision is the basis to limiting certain credit cards to 15% while limiting the associated risk of the credit card issuer.
4. This provision will limit credit card interest rates to a maximum of 10% for individuals who pay off their recalculated balance in full.

At least that is what the markets are letting known is the driver and that is certainly part of the story.

Traders see through the stories but pay attention to them as well as the larger picture. Here is the TLT, an ETF representing 20 to 30 year bonds; rising interest rates have been killing it price:

If, that linked article is right, 10-year rates are going to 3%, that could put mortgages and the 30-year up towards 5% -- without the FED moving the overnight rate (the only rate they really control).  The market may see that as a way to keep Fed rates low longer (Bernanke threatened an increase on May -- see the result on the chart above).  All rates are linked together from short to long - see the yield curve here.  The "longer term rates" must stay above the "short term rates" for banks to stay profitable -- they make a lot of their money from the "carry" between the rate times, borrowing short and lending out long.  Play with the graph on the right and move a vertical line (that appears when you click on it, or you can animate it with the button) across the time scale.  Note the inverted curve (shorter rates higher than long term rates)  at the 2000 stock market peak and the similarly flat curve at the 2007 stock market peak.  Compare that to our current yield curve, held artificially low by the emergency (going on 6 years) federal policies, anchoring it at 0%.  Normal economic cycling has been suspended by the 5-year emergency measures!

"So we want stocks to go up for years?  Well hold down interest rates -- a crappy economy will help.  So what if it cripples growth to a crawl?  We will worry about that later.  What a juvenile selfish approach to managing our economy!   

Note the move to near 0% (bottom of the yield curve at the origin of the graph) overnight rates in 12/07, carrying through the present -- what makes that possible is the almost unlimited printing of money (TARP, QE1, QE2, Operation Twist), massively inflating the US money supply (To make matters worse, most foreign countries are in the same boat or even worse off!). While stocks may retrace in price somewhat, until that policy is rescinded (or at least there is an announcement of a time-table for rate adjustment (up), stocks should be buoyed at some intermediate level.  If they start to drop very low, despite the extremely loose money policy, that would be a very very bad sign for the market as well as the economy.

TLT should bottom out around 90 to 100.  If stock prices fall steeply, bond prices are likely to rise again.

Here is the latest campaign tactic to come out from the NON-PROFIT EDUCATIONAL ORGANIZATION MoveOn.Org: they are planning to send out e-blasts via Facebook and other social media to our young adults 'freaking them out' about students loans, debt, and the rising cost of college by blaming the GOP.  We are all well aware of the rising cost of an education in this country, but their whole aim is to blame the Republicans.  How is they are considered non-partisan and educational when they out right say their intent is to lay blame on the conservative candidate?  Their goal is not to make college any more affordable or to inform anyone of the facts concerning the cost, but to scare them into voting for a communist!  Anyway, you see for yourself what their latest messaging is all about.  And by the way, they want 5 bucks too...

How is it they qualify for this?  MoveOn.org Civic Action is a 501(c)(4) organization which primarily focuses on nonpartisan education and advocacy on important national issues. MoveOn.org Political Action is a federal political committee which primarily helps members elect candidates who reflect our values through a variety of activities aimed at influencing the outcome of the next election. MoveOn.org Political Action and MoveOn.org Civic Action are separate organizations.

____________________________________________________________________________________________

Hi—I wanted to make sure you saw this email we sent the other day. This is an incredible opportunity, and every dollar counts!

Dear MoveOn member, 

In 2008, young people voted in record numbers and went for President Obama over John McCain by more than 2-to-1.¹ This year, every election expert agrees that if that happens again, Obama will win easily—and the Democrats will probably win back the Congress.

And now Republicans have handed us a golden opportunity to fire up young people to vote in 2012.

You see, because of Republican obstruction in Congress, interest rates on college loans are set to double this July—pouring even more debt on a generation already drowning in student loans. President Obama is pushing Congress to stop it, but as usual Republicans have dug in their heels.²

To make sure young people know what's happening, we're launching one of the largest online ad campaigns in MoveOn history—putting ads on the Facebook page of every college student in America to warn them about this Armageddon of student debt.

We've already tested several versions of these ads, and we know they're effective at getting students to take action. But we'll have to scrap the plan unless we can raise $200,000 from MoveOn members. Can you chip in $5?

Yes, I can contribute $5 to help make sure young people vote in 2012.

MoveOn has already heard from hundreds of thousands of young people freaking out about this—and we're already working to make sure they call Congress, register to vote, and keep taking action on campus.

But really, we need to reach the millions of young people who aren't hearing about this, and hands down the best way to reach them is on Facebook. 

Facebook ads are awesome because unlike TV, radio, or newspaper ads, people can click on them and sign up to take action. And of course, Facebook is where young voters spend so much of their time.

Nothing strikes fear into the hearts of Republican strategists like the idea of another wave of young voter turnout like in 2008, and this Republican war on students gives us a chance to make it happen, if we can act fast.

Click here to contribute $5 to help make sure young people vote in 2012.

Student debt has become an absolutely explosive issue among young people. Since 1999, student loan debt has increased by more than 500%. You may not realize it if you don't have kids or if you went to college 10 or 20 years ago, but it now costs on average more than $21,000 a year to go to a public school with in-state tuition. The best private schools are almost triple that much.³

In fact, we've seen two of the largest petitions in MoveOn history in recent months calling on Congress to provide relief for those drowning in student debt. This is a sleeping giant of an issue, and in the coming weeks it can really blow up.

The Republicans' doubling of interest rates is just the latest attack on students. For years they've been slashing funding for higher education, leading directly to skyrocketing tuition at public colleges and universities. Just last year, they cut $8 billion out of the Pell Grant program for low-income students and reduced the income threshold for eligibility for a full Pell Grant.⁴

This is the ultimate teachable moment for young voters, showing them who's on their side and why it's so important to vote. With your help, we can make this one of the key turning points of the 2012 election.

Can you contribute $5 to help make sure young people vote in 2012?

Thanks for all you do.

–Steven, Joan, Wes, Marika, and the rest of the team

Sources:

1. "Young Voters in the 2008 Election," Pew Research Center for People & the Press, November 12, 2008
http://www.moveon.org/r?r=274743&id=40284-21569168-ZY9eAtx&t=5

2. "Obama To Make Student Loans a Campaign Issue," Slate, April 20, 2012
http://www.moveon.org/r?r=274744&id=40284-21569168-ZY9eAtx&t=6

3. "Chart of the Day: Student Loans Have Grown 511% Since 1999," The Atlantic, August 18, 2011
http://www.moveon.org/r?r=274368&id=40284-21569168-ZY9eAtx&t=7

"College costs climb, yet again," CNN Money, October 29, 2011
http://www.moveon.org/r?r=274745&id=40284-21569168-ZY9eAtx&t=8

4. "Student loan rate hike: What you need to know," CNN Money, April 24, 2012
http://www.moveon.org/r?r=274746&id=40284-21569168-ZY9eAtx&t=9

Paid for by MoveOn.org Civic Action, www.moveon.org, not authorized by any candidate or candidate's committee.

Want to support our work? MoveOn Civic Action is entirely funded by our 7 million members—no corporate contributions, no big checks from CEOs. And our tiny staff ensures that small contributions go a long way. Chip in here.

MoveOn.org Civic Action is a 501(c)(4) organization which primarily focuses on nonpartisan education and advocacy on important national issues. MoveOn.org Political Action is a federal political committee which primarily helps members elect candidates who reflect our values through a variety of activities aimed at influencing the outcome of the next election. MoveOn.org Political Action and MoveOn.org Civic Action are separate organizations.