South Dakotans Worse Than Average at Money Management

The Financial Industry Regulatory Authority has published results of its nationwide Financial Capability Study. KELO follows the order of the press release for South Dakota and puts the good news first: we South Dakotans are third best at "financial literacy." In this survey, "financial literacy" is determined by performance on a five-question financial quiz that you can take online to see how you score compared to your fellow South Dakotans. (Perfect 5 for me; South Dakota's average is 3.27; U.S. average is 2.99.)

In terms of what we actually do with our financial knowledge, South Dakotans are worse than national averages. 23% of South Dakotans spent more than they made... and that's not counting buyinh a house or car. 62% of us budget the way I play whist: living from paycheck to paycheck without much of a plan. 65% of us lack a three-month rainy day fund. 26% of South Dakotans have taken non-bank loans (e.g., predatory payday loans) in the past five years. 64% of us don't comparison-shop for credit cards (although on that score, does it really matter?).

It just goes to show that doing well on a quiz doesn't mean you'll do well in life.

Onward Christian Legislators... Against Usury!

On the off chance that our Republican state legislators get a little too excited about their supermajorities and go all theocratic on us, I hope they'll apply their Christian principles to South Dakota's usury industry.

Perhaps all of our legislators should join Father Timothy Logan Fountain in reading Bishop Paul Peter Jesep's Credit Card Usury and the Christian Failure to Stop It. In an excerpt chosen by Father Tim, the bishop notes that alongside the responsibility we consumers have to use our credit cards wisely, there lies an equal responsibility for credit card executives and bankers not to build business models on the exploitation and serfdomization of credit card users.

In a press release promoting his new book, Bishop Jesep adds a practical economic argument to his moral fight against usury: "Fair profit, not unjust gain from high interest rates, will spur economic recovery by putting money directly into the economy."

Are any of our Republican legislators willing to take up this challenge to Christian values?
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Bonus Ecclesiastica: Father Tim won't get me in the pews, but his post did get me to learn the difference between an autocephalous church and an autonomous church. Cool!

Usurers Prefer Federal Credit Card Rules over Bible

...if they know what's good for them!

We're a week in on the implementation of the new federal credit card rules, and I haven't heard the press release from Premier Bankcard or Citi laying off thousands of South Dakotans... or the press release from Governor Rounds or Senator Thune, Senator Johnson, and Rep. Herseth Sandlin explaining why they were wrong.

Our neighborhood usurers are grumbling that we're shifting too much responsibility away from borrowers and onto banks. But they (and you!) should take a look at Father Tim Fountain's reminder that, according to Scripture, lenders really should bear a lot of responsibility.

You shall not take interest...lend, expecting nothing in return... Boy, the Sioux Falls Chamber of Commerce would drive those Bible dudes right out of town, wouldn't they?

Selling Insurance Across State Lines Bad for Everyone (Except South Dakota?)

One of the few ideas Republicans have bothered to float amidst their health care obstructionism is allowing people to buy insurance across state lines. Ezra Klein explains why that idea would lead to worse health insurance... by comparing it to South Dakota's Faustian embrace of the credit card industry:

Conservatives... want insurers to be able to cluster in one state, follow that state's regulations and sell the product to everyone in the country. In practice, that means we will have a single national insurance standard. But that standard will be decided by South Dakota. Or, if South Dakota doesn't give the insurers the freedom they want, it'll be decided by Wyoming. Or whoever.

This is exactly what happened in the credit card industry, which is regulated in accordance with conservative wishes. In 1980, Bill Janklow, the governor of South Dakota, made a deal with Citibank: If Citibank would move its credit card business to South Dakota, the governor would literally let Citibank write South Dakota's credit card regulations. You can read Janklow's recollections of the pact here.

Citibank wrote an absurdly pro-credit card law, the legislature passed it, and soon all the credit card companies were heading to South Dakota. And that's exactly what would happen with health-care insurance. The industry would put its money into buying the legislature of a small, conservative, economically depressed state. The deal would be simple: Let us write the regulations and we'll bring thousands of jobs and lots of tax dollars to you. Someone will take it. The result will be an uncommonly tiny legislature in an uncommonly small state that answers to an uncommonly conservative electorate that will decide what insurance will look like for the rest of the nation [Ezra Klein, "Selling Insurance Across State Lines: A Terrible, No Good, Very Bad Health Care Idea," Washington Post, 2010.02.17].

So I guess if we would like to bring a few thousand new health insurance jobs to South Dakota at the low, low price of weakening our insurance laws even further and screwing policyholders across the country, we South Dakotans should be all over this idea. But if we really want to live by our vaunted Midwestern ethos and take care of people... well, I hope the Republicans bring something better than interstate insurance purchase to the table at their Blair House meeting today.

Obama Loosens Gun Laws Tomorrow

The Credit Card Accountability, Responsibility, and Disclosure Act comes in with a bang tomorrow. But the bang won't be layoffs at Premier or Citi. An eager reader points out the bang comes in an odd amendment, Section 512 of P.L. 111-24, which allows firearms in national parks and wildlife refuges.

So even if Premier takes you to the cleaners with new annual fees and more 79.9% interest rates, you can still run to the wilderness, pin your credit cards to a tree, and do some target practice. Backpack with your Baretta! Camp with your Colt! Hike with heat!

And be sure to thank President Barack Obama for his continued defense of the Second Amendment.

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Update 2010.02.24: Understanding Government further refutes the NRA propaganda that President Obama is anti-gun.

Premier Bankcard VP: No Layoffs from Reform

...but 79.9% interest to continue!

Remember how South Dakota's leaders (bank-beholden GOP and Dems alike) justified their opposition to credit card reform by arguing South Dakota would lose thousands of jobs?

Cash this reality check from Premier Bankcard, courtesy of Watertown's Newsmonger:

Tom Hanlon, a vice president with Premier Bankcard, told the Watertown Rotary Club Thursday that credit card reform likely won’t cause any layoffs at the company’s local branch [jaosullvan, "Credit Card Reform," Watertown Public Opinion: Newsmonger, 2009.11.06].

VP Hanlon also said that credit card reform legislation is "forcing" Premier to issue cards with 79% interest rates (see, Rod? that was no hoax). Forcing—somehow, I missed that mandate in the legislation.

Premier Bank Credit Card: 79.9% Interest

Photo Credit:

Bob Hansen, NBC San Diego

There's usury, and then there's usury:

[South Dakota] doesn't have any limits on the interest banks and credit card issuers are allowed to charge. Which gets you things like this: A card offered by Premier Bank, based in Sioux Falls, carrying an annual interest rate of 79.9 percent. Perfectly legal [Kai Ryssdal, final note, Marketplace, 2009.10.15].

Ah, nothing like a moral basis for the South Dakota economy...

Credit Card Reform Act Kills No Jobs Yet

...Rounds Preaches Fear Instead of Forming Plan B

The Credit CARD Act of 2009, passed by Congress back in May, took effect seven days ago. The giant sucking sound you don't hear is jobs draining out of the Sioux Falls metro-usurial area. Anyone at Premier Bankcard sending out résumés yet? Anyone?

Governor Mike Rounds insisted that the law would kill thousands of South Dakota jobs. Governor Rounds' needle is still stuck in that groove. He argues that limits on fees on low-limit cards will drive the industry to increase fees on transactions. Another commentator echoes my own mild fear that we credit-card deadbeats may lose our bonus points and rebates. Governor Rounds thus predicts that credit card companies will lose customers and thus fire up to 3,000 good South Dakotans.

It is perhaps noteworthy that Governor Rounds was previously citing 5,000 as the number of jobs we could lose. Keep rounding down, Mike....

But 5,000, 3,000, whatever the number, I actually think 3,000 fewer South Dakotans profiting from usury would be an improvement in our quality of life. And if those job losses do ever happen, maybe the state can help those people transition to a more honest, satisfying work that actually produces something useful: growing industrial hemp!

Credit Card Rates Going Up: Pay Those Balances!

We still haven't seen the job losses that Governor Rounds insisted would happen if Congress passed the new credit card rules. (Ah, just wait: the law is still young.) But we do see credit card companies jacking up their rates before the new law clamps down on their usurial powers. The biggest goguer, Citigroup, just raised rates on 15 million cardholders. Their rationale:

We have adjusted pricing and card terms for some customers as part of our regular account reviews. This is an ongoing process to ensure we offer terms, interest rates, credit lines and products based on individual needs and risk profiles. These changes also reflect the dramatically higher cost of doing business in our industry as we work to preserve the broad availability of credit [Francesco Guerrera, Saskia Scholtes, and Tom Braithwaite, "Citi Raises Card Rates on Millions," Financial Times, 2009.06.30].

Translation (Google Translate really needs a PR-spin-->English setting):

We've jacked up rates because we're always looking for ways to make more money. We use all the tricks at our disposal to respond to the individual needs of our executives and the risk we face of going under from all those stupid loans we gave out during the housing boom. Without the easy money of subprime loans and the new law banning our worst practices, we've got to squeeze our customers as much as we can now, but it's our patriotic duty to make credit available (for as big a fee as we can charge), so kiss our keesters.

But remember: those rates hikes won't affect you if you just keep paying your balance. Easier said than done, I know, but you can do it! Use that credit card for convenience, not long-term loans!

Sunday Potpourri: Usury Jobs, Political Blogging, and No Nukes

Sunday notes:

• Today's online poll at that Sioux Falls newspaper asks if folks expect the new credit card regulations to lead to layoffs in the usury industry. When I voted (just once! promise!) at 10:15 CDT today, over 97% of respondents said no. Barring online click-chicanery, it would appear that our governor and craven Congressional delegation are in a profound minority. But don't put it past Citigroup and Premier BankCard to use the regulations as an excuse to announce big layoffs sometime this year.
  
• Minnesota blogger Michael Brodkorb has been elected deputy chair of the Minnesota Republican Party. Alas, he says he will stop blogging when his job starts on July 1. It reminds me of Jon Lauck, pioneer of online propaganda in South Dakota, who left our happy blogosphere upon his formal designation as senior advisor to Senator Thune. Are political ascendancy and blogging mutually exclusive? We'll perhaps get some insight on that question over the coming year from the Munsterman for Governor campaign manager.
• Environmentalists get one present this week: the Nuclear Regulatory Commission told Canadian Powertech Uranium Corporation that it needs to submit more information to earn consideration of its application to mine uranium near Edgemont. What is it about Canadian energy companies trying keep information from South Dakotans?
  

New Credit Card Rules: The Personal Perspective

So what do the new credit card rules mean for me? I like to think of myself as a "good" credit cardholder. I've carried a balance once, for two months. For the last ten years, I've paid the full bill every month, with maybe two late payments due to sheer forgetfulness. Of course, "good" is in the eye of the beholder. Credit card companies call cardholders like me deadbeats, because I don't generate profits for them. Heck, with rebates and no annual fees, I'm costing Citigroup and Chase money. Who wants a customer like that?

There have been some suggestions in the news that credit card companies may nuke those cashback awards and other perks and impose more annual fees in order to recoup what they'll lose now that they'll be forced to play fair with borrowers. And if Citi does hit me with an annual fee, then I face the choice of eating that cost or cutting up my card and dinging my credit score. Ouch.

But you know, I've been having a free lunch for years. Citi has been providing me a service and losing money. Worse, I've been making money, in the form of cashback rebates, on the backs of folks carrying more debt and suffering from the very predatory, usurious practices of which I've been so critical. There's a bigger ouch.

Ezra Klein reminds us that there is no such thing as "good" and "bad" credit cardholders. Each of us is just a layoff or a car wreck or one lost envelope away from finding ourselves on the wrong end of the credit card companies' big guns. Why should I profit from folks just like me whose abuse at the hands of credit card corporations is triggered by nothing more than bad luck?

The new credit card regulations will give Citi a convenient excuse to jack up fees and cut benefits (but wait a minute: even before these new regs, was anyone getting letters from Citi et al. announcing lower rates and fees?). If Citi decides it can no longer afford to pay me for using its card, I won't like it. But I can live with it. Nobody should profit from deceptive business practices... not even me.

New Federal Credit Card Rules Won't Kill Jobs, Will Restore Fairness

So Bill Janklow, a Harvard prof, and the Madville Times walk into a bar....

The Credit Cardholders Bill of Rights, which is headed for the President's desk, may be a bigger deal than I thought. No, not because it will kill thousands of South Dakota usury jobs, but because it will restore fundamental fairness to the credit industry, and maybe even help the free market.

Former Governor Bill Janklow, the man who brought South Dakota the credit card boom, doesn't see any job losses coming. He apparently disagrees with current Governor Rounds's assertion that Premier BankCard et al. won't be able to compete without their current preadatory lending practices:

"I don't think the people in this state are going to have any trouble. Citibank is an honorable credit card company this mothership they have in Sioux Falls is the best in the world. The same thing is true with First Premier and First National in Yankton," Janklow said.

The former South Dakota Governor says this bill levels the playing field for all the companies across the country.

"So, as long as everybody in the NFL, everybody in Major League Baseball, or everybody in the credit card industry have to follow the exact same rules I don't think it makes any difference. It's when you have an un-level playing field where they give an advantage to one player, or one set of players over another, it becomes a problem" [Ben Dunsmoor, "Janklow: SD Credit Companies Will Adapt to Rules," KELOLand.com, 2009.05.20]

Speaking of a level playing field, Tony Amert rightly directs our attention to Elizabeth Warren. She's a Harvard law prof and overseer of the Troubled Assets Relief Program. She emphasized the need for a level playing field between lenders and borrowers in a Frontline interview in 2004:

[Question]: So the credit card industry says ... "We provide the credit, in many cases, for people to start businesses ... to buy more, to live a better life, to do things that they could never do any other way." So what's the problem?

[Warren]: There is no problem if they would do it on terms that are fair and if they would make their contracts transparent so that the person who's borrowing the money is borrowing it in a way that he or she understands and appreciates the risks.

I believe in free markets. I teach contract law; I believe that value is created when two people come together, and they understand a contract, and they say, "I think if I borrow this much money at this interest rate, I can do better than that; I can start a business; I can buy something I want to buy that's going to be important to me, and I can make money out of this proposition." That is a good use of credit. It's a use of credit we've had in the United States since colonial times.

What's changed is [that] when credit was deregulated in the early 1980s, the contracts began to shift. And what happens is that the big issuers, the credit card companies who have the team of lawyers, started writing contracts that effectively said, "Here are some of the terms, and the rest of the terms will be whatever we want them to be." And so they would loan to someone at 9.9 percent interest. That's what it said on the front of the envelope. But it was 9.9 percent interest ... unless you lost your job, or 9.9 percent interest unless you applied for a couple of other credit cards, or 9.9 percent interest unless you defaulted on some other obligation somewhere else that doesn't cost me a nickel. And at that moment, that 9.9 percent interest credit suddenly morphs to 24.9 percent interest, 29.9 percent interest, 36.9 percent interest. Well, you know, ... nobody signs contracts to buy things that say, "I'm going to pay you $1,200 for the big-screen TV unless you decide, in another month or two months, that it should really be $3,600 or $4,200 or $4,800." But that's precisely how credit card contracts are written today.

...But [the credit card companies] would say they're just making capital or money available to people in a convenient way.

Well, in a convenient way, and changing the price after people borrow it. You know, that's a heck of a deal. I don't know any merchant in America who can change the price after you've bought the item except a credit card company. After you have borrowed the $5,000, they can change the interest rate from 9.9 percent to 29.9 percent. I just don't know anyone else who can do that.

Contrary to the curmudgeonly (and implicitly self-righteous?) grumblings of various arch-conservatives, the new credit card rules aren't about giving handouts to irresponsible borrowers in the name of wimpy liberal "fairness." They're about making credit card companies play by the rules of the free market that we expect every other player to follow. Transparency and honest dealing—not so novel concepts.

(Tony also points to a couple of intelligent videos with Prof. Warren's insight: This 2007 lecture at UC Berkeley on "The Coming Collapse of the Middle Class," and this 2007 NightLine feature. Warren is an engaging and passionate speaker about economic topics that many folks would consider dry.)

Credit Cardholders Bill of Rights Passes... No Thanks to South Dakota

The cheese stands alone: Senator Tim Johnson is the only Democrat in the U.S. Senate to vote against the Credit Cardholders Bill of Rights. Senator John Thune was almost the only Republican Senator to do so: only three other senators could rustle up a reason to vote against making credit card companies deal honestly with customers.

Recall that three weeks ago, Representative Herseth Sandlin similarly played the cheese in the House on this bill. So South Dakota has the distinction of its entire Congressional delegation voting in favor of supporting deceptive, predatory lending as a basis for economic growth. How embarassing. Fortunately, the vast majority of our delegation's colleagues from other states are able to see the sensibility of requiring credit card lenders to play fair. President Obama will sign this bill, and we will have the pleasure of calling Premier BankCard's bluff: Are you guys really going to close down because of this law? Are we really going to see consumer credit dry up just because you won't issue cards to people who are bad risks any more? Go ahead, make my day. Even if Governor Rounds's worst-case scenarios come true, our state and our economy will still be better off getting rid of these near-criminal business practices.

But remember, by Rep. Herseth Sandlin's logic, if she's catching hell from conservative Republicans and liberal Democrats, then she must be doing a good job. Cool: then the liberal Democrat writing this blog will be happy to forward her cause and Senator Johnson's by heaping plenty of criticism on them for their bad, bad, bad votes on this credit card legislation.

Question for Rep. Herseth Sandlin and Sen. Johnson: where are all the moderates you so ably represent who are crying out for you to protect the usury industry from regulation?

Usurers Cloud Governor's Vision on Credit Regulation

Governor M. Michael Rounds is at it again, repeating the scare tactics he and Senator John Thune trotted out last December. He says that H.R. 627, the Credit Cardholders Bill of Rights, will cost 3000 to 5000 South Dakotans their jobs.

I'm sure similar arguments can be heard when folks suggest outlawing all brothels in Nevada. As I've suggested previously, if our economy depends on deceptive marketing, surprise interest rate changes, and extending credit to risky borrowers, then we need a new economy.

I will give the Governor rhetorical credit: he is able to argue that he opposes increasing protection for credit cardholders because he wants to protect credit cardholders. Read that sentence again, then read the governor's words:

Rounds agrees with most of the bill but is against the section that would crack down on high interest credit cards for consumers with bad credit scores. Rounds says the law will put South Dakota card companies in a crunch and lead many customers to other high-interest loans.

"There's 70 million of those cards in America today that will probably become extinct, and they will have only pay-day lending, which is marginally regulated, as a place to go," Rounds said [Ben Dunsmoor, "Credit Card Bill Costly for South Dakota," KELOLand.com, 2009.05.14].

Governor Rounds is in so deep with protecting his usurer pals at Citigroup and Premier Bankcard that he misses the obvious solution: listen to Rep. Joni Cutler and regulate the payday lenders! But no, that would make too much sense, wouldn't it?

The Governor admits to Dunsmoor that Premier BankCard and the other subprime credit card outfits can't compete without their current deceptive, predatory practices. So let's put them out of business. We see what happens when we let lenders (and borrowers) go crazy with money they don't have. Stiff credit card regulations may cost jobs, but they are jobs we can do without.

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More notes on HR 627:

• Senate Amendment 1062 from Vermont Independent/Socialist Bernie Sanders would have established a national usury rate and capped credit card interest at 15% [Update 18:35 CDT: Hey! That's the same usury limit that credit unions must obey, and they're staying in business just fine!]. As Senator Sanders said, “When banks are charging 30 percent interest rates, they are not making credit available.... They are engaged in loan sharking.” The amendment failed 33–60, with Senators Johnson and Thune voting Nay.
• The Durbin-Bond amendment could check the power of credit cards companies in another way: it would allow merchants to give you and me a discount for using cash, check, or debit card. (I didn't know merchants needed permission.) Remember, each time you swipe your card, you cost the merchant 1.5% to 3% in "interchange fees," the price the business pays for Visa et al. to process the transaction. Bankers hate the idea; the National Retail Federation loves it. NRF says interchange fees cost $48 billion a year, a cost passed on to us to the tune of $427 per household. I'll trade my cashback percentage from Citibank for a 2% cash discount straight from Dan Roemen at Sunshine. Do pass!
  

Herseth Sandlin Beholden to Usurers...

...just like every other South Dakota politician...

Here's one I'm having trouble with: Representative Stephanie Herseth Sandlin casts the lone Democratic vote against the Credit Cardholders' Bill of Rights (HR 627), which passed the House 357–70yesterday. Not even a majority of House Republicans voted against this bill. SHS found herself standing with GOP standard bearers Rep. John Boehner (R-Ohio) and Rep. Eric Cantor (R.-Va.) as well as Rep. Michelle Bachmann (R-Minn.), Rep. Ron Paul (R/L-Tex.), and Rep. Jeff Flake (R.-Ariz.). (Interesting: OpenCongress.org reports that Flake is the Representative our gal Stephanie votes least like.)

Says SHS on the logic that no other Democrat in the House bought:

"In a time of economic instability and decreasing credit availability, I think it's essential that we consider the full impact of limiting access to credit," she told reporters before her vote. "People need access to credit while at the same time striking at the deceptive and unfair practices that we know have been going on, and this bill, in my opinion, doesn't strike the right balance" [Ledyard King, "House Tightens Credit Card Rules," that Sioux Falls paper, 2009.05.01].

SHS also noted that she buys the fear tactics of the South Dakota Bankers Association that such regulations will kill their industry and a whole mess of jobs in the South Dakota usury industry. But as I read the bill, things like requiring credit card companies with all their computers and mailing operations to do things like give customers a clear 45-day heads-up on interest rate changes and other contract changes fail to reach my threshold of job-killing tyranny.

I suppose I shouldn't scratch my head too much on this one. King tells us SHS did the same thing last year, and Senator Tim Johnson broke with Dems to vote against a similar measure in March. I will suggest, however, that if our economy hinges on extending credit to folks at 30%, maybe we need a new economy.

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Update 07:35 CDT: For a view from outside the state, see DownWithTyranny:

...the DCCC went on the attack against Republicans, like Don Young (R-AK) who they feel will vote against the bill today. Young is a strange target since he was one of the 84 Republicans to cross the aisle and vote with the Democrats in 2008 on this [Young voted aye yesterday, too —CAH]. (Funny enough, a better target would be Blue Dog Stephanie Herseth Sandlin (SD) who crossed the aisle in the other direction and voted with the GOP. South Dakota has a huge credit card industry and I suppose the thinking goes that if they steal from the rest of us, it'll trickle down to Herseth Sandlin's constituents-- or at least to her campaign donors. (Yes, she raked in a startling $629,895 from the banksters since being elected to the House in 2004.)

Mmm, that sure helps our state's image.

Sioux Falls After Credit: Let's Go Fishing... and Data Farming!

Marketplace runs its second report on Sioux Falls and the credit card industry, specifically on how the recession caused in part by the credit industry has impacted Sioux Falls. Layoffs at Citibank, Department of Labor going from offering a job-hunt class once a month to four times a week, people glad just to cling to a job—as anyone with a credit card should know, the credit card companies giveth, and the credit card companies taketh away.

If the credit industry goes further south, perhaps Sioux Falls can find a roadmap in a couple other Marketplace stories on Iceland. Much like their fellow Viking descendants in Sioux Falls, the sweater-wearing Icelanders staked their economy on the financial industry and were making out like bandits. But now their three largest banks have collapsed, taking the national economy with them. In response, Icelanders are going back to their simpler, self-sufficient roots:

TEITUR THORKELLSON: Like Icelanders were all crazy about flat screens one year ago. They're now all crazy about going fishing , making a living, survival.

Teitur Thorkellson runs an energy consultancy called FTO. His firm's income has been cut in half. Everywhere, he says, there are signs of a new austerity.

THORKELLSON: If you travel the country now -- six months after the crash -- you will stop at a gas station, and the girl who's attending the gas station, she will be knitting socks. People are not spending. They're not eating as much out. So we're adjusting pretty fast [Stephen Beard, "Iceland in the Cold After Collapse," Marketplace, 2009.03.26].

Fishing and knitting—there's a plan South Dakotans can relate to! Clean up the Big Sioux, stock some perch and walleye, maybe offer a yarn subsidy, and folks laid off from Citibank could make a living!

Perhaps Sioux Falls and South Dakota could also compete with another Icelandic plan for economic recovery: data farming! Marketplace reports this morning that Iceland is hoping to establish a big international server farm. The big perk to doing it in Iceland: less cost for air-conditioning.

If temperature is the competitive advantage, South Dakota can offer Icelandic temps (or colder!) for at least a few months a year. Dig a nice deep hole (or just create some space out in the Homestake Lab) and you get even better climate control, plus a nice EMP/al-Qaeda proof bunker for everyone's data. Plus, for big U.S. companies, data retrieval from South Dakota will be several milliseconds faster than from Icelandic servers.

Fishing, knitting, and server farms: opportunity awaits, South Dakota!

"Sioux Falls: The Town Credit Built"... or Bilked?

Sioux Falls gets some national coverage on public radio: Marketplace is reporting on "The Town Credit Built." Last night's program (audio archived here) featured former Governor Bill Janklow* touting South Dakota's embrace of unfettered usury and Citibank's move here as "a heck of a deal for my state." Lincoln County Commissioner Jim Schmidt tells Marketplace reporter Stacey Vanek-Smith that Sioux Falls went from almost no white-collar jobs in the 1970s to 20,000 jobs—15% of the metro workforce—in the financial sector today.

Marketplace plans more Sioux Falls coverage tonight, with a discussion of the flipside: what happens to Sioux Falls's house of cards when credit freezes and no one can take on any more debt. Should be interesting! If you're interested, listen tonight on MPR at 6:30 or SDPB at 7:00.

Restore Bad Credit Through Local Bank and Hard Work, Not Credit Cards or Payday Lenders

Governor Rounds characterizes the new federal regulations on credit cards as "totally backwards." He frets the regulations will "make it more difficult for people with bad credit to get a card" [paraphrase from AP].

(Never mind the job losses Rounds fears: corporate propaganda from Total Card and Premier Bankcard says they foresee no staffing changes.)

Might I suggest that making it difficult for people with bad credit to get credit cards might actually be common sense? Maybe instead of opening up avenues for predatory lending, we should cut off more sources of easy money for folks with a demonstrated history of bad money management.

If Governor Rounds and other friends of Premier Bankcard are worried that stiffer credit card regulations will drive folks with bad credit to the payday lenders, maybe they should get on board with Rep. Joni Cutler's proposals to regulate the payday lenders (she tried last session, and she's ready to try again).

While I heed Mr. Schoenbeck's warning that the new regulations might hurt "distressed consumers that need credit," it would seem that neither credit card companies nor payday lenders are the best judges of who needs credit. If folks are in bad financial straits, either through bad decisions or bad luck, their credit "needs" might best be determined by their community banks, by real neighbors with a little more interest in their community's welfare. If those community banks decide, under the practices of responsible banking, that a neighbor just doesn't qualify for a line of credit, then that person may just have to live with not getting that new house or new car. That person will then be that much more motivated to work hard, pay off old debts, and save for the future.

Isn't that the personal responsibility my Republican neighbors preach?

Calling Rounds/Thune's Bluff: Feds Pass Sweeping Credit Card Regs

You know those onerous credit card regulations that Governor Rounds and Senator Thune said would kill thousands of jobs in South Dakota? The feds approved them (the regs, not Rounds and Thune) today.

Expect pink slips at Premier Bankcard any day now... right, Governor Rounds?

Rounds, Thune Protect Predatory Lenders

—oops! I mean pillars of our community....

The lead story in this morning's Rapid City Journal (complementary copy greeting me at my motel room door here in Sturgis—thank you, Holiday Inn Express!—as I wake to judge State Interp) finds Governor Mike Rounds and Senator John Thune, good Republicans both, standing up to big government to protect South Dakota jobs.

At least that's how they would like the story to read. Unfortunately, the rules Rounds and Thune are opposing are new regulations, proposed by the Bush Administration (remember them?) in May, to provide some relief for folks with credit card debt. Included in these regs is a change that, according to Jeremy Fugleberg's report, would "bar credit card providers from charging fees up front and putting them on the first month's bill for the credit card. Instead, a provider would have to spread the charges out over 12 months."

Supposedly this one rule change could put South Dakota credit card companies like Premier Bankcard out of business.

Premier Bankcard—you know, where T. Denny Sanford made all of his money, handing out the plastic version of subprime mortgages to folks who maybe shouldn't have credit cards in the first place.

Ah, now things make sense:

The fee rule could upend the business model for South Dakota-based Premier Bankcard and other businesses involved in providing cards to high-risk borrowers.

"We're appealing to them to moderate this so we don't end up putting an important industry out of business here in South Dakota," Sen. John Thune, R-S.D., said.

If approved, the rule could be a "deal breaker" for Premier and similar banks, Roger Novotny, head of the state Banking Division, said.

...About a third of sub-prime borrowers default on their card account within the first few months, and the rule would bar credit card providers from charging them the fees that make that risky lending worthwhile.

"So there's a tremendous potential for loss there," Thune said [Jeremy Fugleberg, "Fed Rules Could Cost South Dakota Thousands of Jobs," Rapid City Journal, 2008.12.06].

Sanford, Janklow, Rounds, Thune, et al.—I guess you've got to give 'em credit for building an "important" industry on the idea that "you've got to give 'em credit"... and sock 'em with fees and rates that keep 'em in debt.

In other words, the GOP plutocracy has built South Dakota's "prosperity" on a fundamentally irresponsible, untenable industry that preys on our neighbors (also known to avid readers of the Bible as usury).

Premier Bankcard and the other lenders of last resort in our state have smart people working for them. One decent rule from Washington won't throw them out of business... although if it does, maybe they shouldn't have been in that business in the first place.