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Economy

Will The Fed Learn Its Lesson From The Sub-Prime Crisis?

credit_cardsweb.jpgToday, Federal regulators moved ahead with a good plan designed to stop credit card companies from taking advantage of their clients. The Federal Reserve, in conjunction with Office of Thrift Supervision and National Credit Union Administration, have released a specific, seven-point proposal to tackle “unfair” and “deceptive” practices by businesses that issue credit cards.

According to the Center for American Progress, the new rules would prohibit companies from:

– Raising interest rates on debt that has already been charged

– Assessing late fees when consumers are not given a billing statement within a reasonable amount of time to make a payment

– Applying a payment to the balance with the lowest rate if different interest rates apply to different balances on the same card

– Charging fees to open an account and receive credit

This move by the federal agencies comes with little time to spare. Now that borrowing in the mortgage market has stagnated due to the subprime crisis, credit card debt has skyrocketed for Americans. Between April 2006 and December 2007, the rate of national credit card debt increased four times faster than during the previous business cycle.

Similar to mortgages, credit cards can carry subprime-like lending conditions, such as poorly-disclosed, hidden, or higher fees, heavy interest rate burdens, and complex terms. Also similar to mortgages, credit card debt is packaged and sold off to investors as securities — and the $915 billion held in these securities can come tumbling down just as easily as the $900 billion that were held in residential mortgages.

The administration missed the regulatory boat once. One in 194 American households received a foreclosure filing during the first three months of this year, up 23% from the last final three months of 2007. After two decades of deregulation, the subprime crisis has sparked a need to reassess the Federal government’s role in protecting Americans against the predatory and abusive lending practices exercised mortgage lenders that caused the crisis in the first place.

Today’s proposal shows that the federal regulators are doing the right thing. They have undertaken “one of the most aggressive efforts in decades to crack down on the credit card industry.” Hopefully live up to this unique opportunity to learn from their mistakes.

Yglesias

Some Advice

If you’re going to use a gun in a crime, try to stay away from custom-made Belgian guns. The question becomes, how does this impact the Indiana primary? Is a custom-made Belgian gun beer-track because it’s a gun, or wine-track because it’s Belgian?

And, yes, I’m trying to avoid talking about the Wizards game.

UPDATE: Hawks!

Health

National Review Offers Weak Defense Of McCain Health Care Plan

Our guest blogger is James Kvaal, Domestic Policy Advisor at the Center for American Progress Action Fund.

The National Review editors defend Sen. John McCain’s health care plan, disputing that it hurts people with existing illnesses. Today we learned that group includes Jay Cutler, who is healthy enough to be the starting quarterback for the Denver Broncos but also has diabetes.

So how will the McCain plan ensure that people with chronic illnesses can buy coverage? The National Review takes a pass on advocating the McCain campaign’s preferred solution, high-risk pools that subsidize last-resort insurance. Instead, it argues that people who buy their own insurance while healthy will no longer lose it when they change jobs.

Fair enough, but this line of reasoning leaves out the 56 million chronically ill people covered by their employers today. And while individual insurance is generally renewable, “premiums can still increase dramatically for people who develop health problems.” So buying insurance when you’re healthy doesn’t guarantee that you can keep it when you’re sick.

There is a better way to make sure that people can always buy the coverage they need: require insurers to sell to all comers at fair rates and create new subsidies to ensure that premiums are affordable.

Politics

McCain’s staff and Bush’s staff talk ‘everyday.’

At a lunch hosted today by the Christian Science Monitor, former uber-lobbyist Charlie Black, who is a senior adviser to Sen. John McCain (R-AZ), said that McCain’s staff talks to the President Bush’s staff “everyday.” Black also said that before McCain offered harsh words last week about Bush’s response to Hurricane Katrina, the campaign gave the White House a “head’s up.”

Yglesias

Brownstein on McCain

Ron Brownstein nails why John McCain’s whining and crying about mean ol’ liberals quoting his oft-repeated dictum that he thinks our troops should stay in Iraq for 100 years rings so hollow — he won’t explain what he does think the future mission of our troops should be. As I’ve said before, McCain obviously isn’t in a position to decide what our troops are doing in the 22nd century, but all indications are that he would keep on fighting the war throughout a four or eight year term in the White House.

Politics

McCain implies U.S. invaded Iraq for oil.

During a townhall event in Denver today, John McCain made this eye-opening observation:

My friends, I will have an energy policy that we will be talking about, which will eliminate our dependence on oil from the Middle East that will — that will then prevent us — that will prevent us from having ever to send our young men and women into conflict again in the Middle East.

Watch it:

[flv http://video.thinkprogress.org/2008/05/McCainIraqOil.320.240.flv]

The comments echo the words of former Fed Chief Alan Greenspan, who wrote that he is “saddened that it is politically inconvenient to acknowledge what everyone knows: the Iraq war is largely about oil.” Perhaps McCain truly is reading Greenspan’s book.

Health

McCain ‘Bold’ Solutions

To top off his “Health Care Week” John McCain has released an ad entitled “Bold Solutions.” Watch it:

Here’s a little reminder of what those “bold solutions” entail:

Yglesias

Shrill

One of the odder aspects of American punditry is what a bunch of shrinking violets a lot of my colleagues are — it’s an endlessly polite business and when some bloggers come on the scene with their name-calling everyone freaks out (“he said ‘wanker!’ I’m shocked”). Meanwhile, in the UK Martin O’Neil describes London’s new Mayor:

As well as being a famous liar, Johnson has skirted the borders of criminality when it has suited his interests or those of his foul, larcenous and over-privileged friends. [...] Boris Johnson is not only shady, dishonest and incompetent. He is also a particularly offensive kind of clown, as is evidenced by his absurd litany of gaffes and insults. [...] Worst of all is Johnson’s casual racism, although it is perhaps not wholly surprising from someone of his class and background. [...] In any sane society, Boris Johnson would not be a plausible candidate for Mayor, even within the Conservative party.

Good times. Good luck, London!

Politics

Sen. Kyl Still Convinced Of Saddam/Al Qaeda ‘Link,’ Says ‘Facts Are Stubborn Things’

kylweb.jpgWashington Post reporter Dana Milbank recently took Iraq war architect Douglas Feith to task in his “Washington Sketch” column, noting that Feith blames the Iraq war’s failures on “everyone but himself.” Milbank highlighted Feith’s failed pre-war attempt to link Saddam Hussein with al Qaeda, adding that “the CIA was correct” in finding no such ties.

Milbank’s column did not sit well with Sen. Jon Kyl (R-AZ). In a letter to the editor in today’s Post, Kyl took issue with Milbank’s assertion that “‘the CIA was correct’ that there were no links between al Qaeda and Saddam Hussein,” adding, “The historical record tells a different story”:

In 2002, then-CIA Director George Tenet wrote in a letter to Bob Graham (D-Fla.), then chairman of the Senate intelligence committee, that “our understanding of the relationship between Iraq and al-Qa’ida is evolving” and “we have solid reporting of senior level contacts between Iraq and al-Qa’ida going back a decade.”

But Milbank is right. The CIA found no ties between Saddam and al Qaeda. While the CIA did find “contacts” between Iraq and al Qaeda — as Kyl noted — the Senate Intelligence Committee concluded in its 2006 report on pre-war intelligence that the CIA said those contacts “did not add up to a formal relationship.”

But like all good conservatives who continue to argue — falsely — that Saddam was in cahoots with al Qaeda, Kyl was bound to get confused. In his letter, Kyl’s Saddam-Al-Qaeda relationship theory gradually weakened as he explained the evidence. First Saddam and Al-Qaeda were directly linked, then they shared associates, then they merely shared goals and objectives, and finally, Saddam was linked just to “terrorists” in general:

In his April 25 Washington Sketch column, “Iraq War Is Everyone Else’s Fault, Feith Explains,” Dana Milbank asserted that the “CIA was correct” that there were no links between al-Qaeda and Saddam Hussein. The historical record tells a different story. [...]

A March 2008 report by the U.S. Joint Forces Command included information about the relationship between Hussein and Ayman al-Zawahiri, Osama bin Laden’s second in command: “Saddam supported groups either associated directly with al Qaeda (such as the Egyptian Islamic Jihad, led at one time by bin Laden’s deputy, Ayman al-Zawahiri) or that generally shared al Qaeda’s stated goals and objectives.”

Critics of the war in Iraq often try to minimize — if not dismiss — the links between Saddam Hussein and terrorists. As they say, facts are stubborn things.

Kyl’s criticism of Milbank echoes a recent conservative movement to defend theories of a Saddam/al Qaeda “collaboration” after the Defense Department released a report last March confirming “no direct link between late Iraqi leader Saddam Hussein and the al Qaeda network.”

Indeed, facts are stubborn things, especially when they in no way support your disproven theories.

Yglesias

DC Madam

I hadn’t realized that the “DC Madam” has now killed herself after being publicly humiliated, arrested, etc. for the grievous crime of brokering an exchange of services for money between consenting adults. David Vitter, of course, is sitting pretty in the US Senate.

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