Citi raises card rates on millions
People close to the situation said that Citi, which is about to cede a 34 per cent stake to the US government as part of its latest rescue, had upped rates on between 13m and 15m credit cards it co-brands with retailers such as Sears.
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Citi’s rate increases emerged on the day the government proposed legislation to create a new regulator with sweeping powers on consumer protection
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Citi’s increases have been larger than those of its main rivals, according to Lightspeed, which tracks about 12,000 US credit card accounts.
And thus you get the worst of all worlds: Citi is still run on the principle of maximizing short turn profits at a time when it is unlikely to be ever making real profits, given the losses it is hiding in its books, so it will (i) not make any profits for the taxpayers that largely own it, and (ii) squeeze poor people yet again in the process.
Given the amount of money provided by taxpayers to Citi, both in the form of actual cash (preferred shares and the like) and indirect guarantees, why is it still taboo to ask that Citi run lending policies that follow guidelines defined by the government, other than the unsubstantiated argument that government is evil and incompetent?
The reality of increasing interest rates on credit cards is that it increases payments by the credit card debtors to slightly limit the losses borne by taxpayers. Given that the poor are more likely to be directly hurt by credit card charges, and that taxes are largely paid by richer taxpayers, the effect of citi's moves is, overall, a net transfer by poor to rich.
In today's economy, this means more people going under water, losing homes, avoiding necessary medical care and not spending, thus ensuring further weakness for the economy as a whole - just to ensure that the humongous hole on citi's books is slightly less than before, ie real damage in exchange for a non-solution.
Is that what the government intended?
And if not, why is it not using its powers as the major shareholder of Citi to change this?
Oh yes, government is evil. I forgot.