New York Mayor Michael Bloomberg is complaining that the Occupy Wall Street protests could wind up harming one of the city’s major employers: banks. [1] He sees an inconsistency in saying that there should be more jobs, while at the same time attacking institutions that employ a large number of people in the city.
Of course, Mr. Bloomberg’s reasoning, taken to its logical conclusion, would exempt all business from any criticism whatsoever. He is also ignoring the fact that banking in the United States has some criticism coming to it, particularly in the area of interest rates.
In the U.S. many state laws provide that you cannot loan money at an interest rate higher than a statutory maximum. [2] In Michigan, for example, the general usury limit is 7%, and in Alabama the limit is 8%. In Colorado, on the other hand, the general usury limit is 45%, although it has a limit of 12% for consumer transactions. The Depository Deregulation and Monetary Control Act of 1980 passed by Congress has effectively eliminated state interest rate limits, permitting banking institutions to charge any interest rate they choose. [3] [4]
What is a fair interest rate? When should a level of interest be considered usury under the law? The average rate of inflation in 2010 was 1.6%. So a lender would have to charge that much to get its money back. What is a fair profit on the loan? Is it 5%? Let’s give them 10%. That would set a fair interest rate at 11.6%. This is a far cry from the 30% interest rate credit card companies charge some people. [5]
Thus, in 2009, Senator Bernie Sanders of Vermont introduced legislation that would cap credit card interest rates at 15%. That was a fairly lenient limit given the above considerations, but the Senate rejected it nonetheless. What, one wonders, was the motivation of those senators who voted against it?
So Mayor Bloomberg should not wonder for long why the Wall Street protestors seem not to appreciate the benefits afforded our nation by the banking business. Of course, it is Congress that allows this to go on. So it seems that the Occupy Wall Street movement might want to redirect its attention and become Occupy Washington.
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