Plastic Politics

CONGRESS got a swift, sharp lesson in economics last week - accompanied by a rap on the knuckles.When the Senate rushed through a bill Thursday to cap credit-card interest rates at 14 percent, it looked like a political freebie. The card rates were such an easy target. The average interest rate on plastic is stuck above 19 percent during a recessionary period when all other interest rates have declined. Surely the issuers of credit cards - primarily banks - are just being arrogant and greedy. Hadn't President Bush in a speech the previous day jawboned the banks to lower credit-card rates? The Senate bill won wide bipartisan support after just 30 minutes of debate. Then came Friday: On the New York Stock Exchange the Dow Jones industrial average plummeted 120 points. Over the weekend Bush's economic advisers practiced their own jawboning against the bill, which Treasury Secretary Nicholas Brady called "wacky." Their words, plus frantic lobbying by the banking industry, caught the attention of Congress - but nothing like the market plunge. The invisible hand - unseen, but holding real money, the investment dollars of millions of Americans - gave Congress a slap. By Monday senators who supported the bill were looking for graceful ways to reverse themselves, and Speaker Tom Foley placed House consideration of the legislation on a slow track. In the intensive media coverage of the episode we've learned a lot about credit-cards: that they are profitable for banks but not immensely so; that credit cards, once just a convenience for the affluent, have - through banks' technological and risk-management innovations - become a remarkable source of credit for all but the poorest Americans; that a sharp reduction in interest rates could cripple already ailing banks and cause the withdrawal of credit from millions of moderate-income families, while pr oviding little stimulus to the economy. Is it too much to ask of our lawmakers that they apprise themselves of such facts before acting on an ill-conceived bill for a quick political high? The stock market didn't drop just out of sympathy for banks. It fell because Congress (and, to a lesser extent, President Bush) revealed itself capable of hasty, careless, unpredictable interference in the economy. May the great credit-card caper of November '91 teach that the American economy, resilient as it is, won't forever put up with a preference for gimmickry over fundamentals in solving problems.

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