Tighter Regulation = Less “Innovation”?

Thirty years ago credit cards were exceedingly simple. They charged high annual fees just to own them (often $40-$50), high fixed interest rates (approaching 20%), and offered no cash rebates.

Today credit cards are more complex, but they are also better. They offer no annual fees for no-frills cards, flexible interest rates, and more benefits. Competition is fierce and consumers have a wide range of choices.

–Todd Zywicki, “Let’s Treat Borrowers Like Adults“; The Wall Street Journal (7/08/09)

What I find interesting about Zywicki’s op-ed piece is not his (rather lame) case against creating a consumer financial products safety commission, the goal of which would be to curb predatory lending practices.

Rather, it’s his pitch-perfect channeling of Wall Street’s strongest argument — being revved up and honed as we speak — for fending off tighter financial regulation.

Namely, that it would stifle “innovation.”

Let’s see . . .

On one side of the ledger, we have: almost $10 trillion in financial damage (and counting); the worst recession since the Great Depression; and the spectre of runaway inflation caused by huge Federal deficits ostensibly incurred to mitigate — if not repair — said financial damage.

On the other side of the ledger, we have — exactly what?

No-annual fee credit cards with frequent flier miles??

Are you kidding me? Are they?

Bring on the regulations!

P.S.: let’s hear it for simple credit cards that charge only 20%.

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

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