Two-Part Irony

Banks have been complaining about the government's decision to alter the terms attached to TARP funds, requiring, after the initial round, that executives accept salary caps and other such outrageous things. This, of course, has much support from the pro-business folks one finds on CNBC and other media outlets (Larry Kudlow is a fine example). Yes, it is a bit sneaky on the government's part, but hardly something to worry multi-millionaires whose own clients are, in too many cases, trying desperately to avoid personal bankruptcy.

Enter today's discussion between President Obama and credit card companies. Kudlow and many of his fellow commentators are crying foul that the government might try limiting the ability of companies issuing consumer credit to change the terms of that credit after it has been granted, even penalizing people who pay on time every time.

Don't get me wrong, I understand that dead companies provide no credit and that increasing those companies' exposure to risk means that fewer consumers will qualify for credit. This last point means that recovery due to consumer spending will be longer in coming. Fewer plasma screen TVs and iPods mean fewer dollars circulating through the economy (I love the way that the same money gets counted every time it is spent, but such are the joys of economics). Still, financial institutions, whether they be banks or other credit-issuing organizations, must expect to play by rules that at least resemble those we consumers deal with, right?

Finally, is it really such a bad thing if we ask that fewer people have free access to easy credit? Isn't loose credit precisely what precipitated this entire mess in the first place? Go back twenty-two years and look at how many high school seniors had credit cards (I was a senior in 1987, so this is easy for me to think about), and for those who did, how many cards they had. Compare that to two years ago. Was the change really that bright? President Obama has declared that he wants have his administration usher in a "new era of responsibility," and both sides of this—consumers and lending institutions—could use a little more of that.

Now if only we could get government on board with this concept.