CREDIT CARD DEBT CRISIS IN AMERICA
ASCENDANCY OF THE CREDIT CARD INDUSTRY
Not only are their nations, their state, and their cities and towns in debt but they themselves as
individuals and as family units also find themselves going deeper and deeper in debt to finance
their present lifestyle. Most now have and use a credit card from their bank which allows them
to purchase their nations goods and services without using cash or the money in their bank
account at the time of purchase. The Credit Card Industry is now the most profitable sector in
American banking. In 2004 it generated nearly 30 billion dollars in net revenue. The standard
industry interest rate on any outstanding unpaid balance is 18%.
The average household credit card debt has tripled since 1990 - from $2,500 to $7,500. Last
year, penalty fees alone generated $12 billion in revenue.
THE LAWS OF USURY
Four Urgent Telephone Calls From New York
In 1980 Usury Laws were still on the majority of State Law Books. These State Usury Laws
held 12% as the maximum interest limit a bank could charge for consumer loans - any thing
more than 12% was subject to these usury laws and the penalties that attended the law.
In 1980 one of America’s largest banks, based in New York, was being squeezed between New
York State’s Usury Laws and national double-digit inflation rates. The bank employed 3,000
people in its Long Island credit card unit, a fact that the bank used to entice New York State to
offer relief from their Usury Laws. The state’s answer to this proposal was negative.
These N.Y. bankers were aware that The Marquette Bank Opinion permitted national banks to
export interest rates on consumer loans from the state where the credit decisions were made to
borrowers nationwide.
At that time South Dakota’s economy was in financial distress - “we are in the poor house” said
the Governor. The price of wheat had fallen sharply and greatly impacted the states economy.
The president of the New York Bank, hearing of South Dakota’s dire economic needs and
mindful of his own bank’s interest rate predicament with the several million cards they had
distributed, thought of a proposal he would make to the Governor who needed money and
people to save his economy. That day the Banker called the Governor four times and in effect
told him that if South Dakota would amend their State Usury Laws the bank would move its
credit card business unit to South Dakota, bringing hundreds of high-paying jobs to the State.
The Governor agreed to the proposal and South Dakota changed their Usury Laws to suit the
needs of the bank. Those four 1980 telephone calls were a pivotal moment in the ascendancy of
the American credit card industry. Other states soon followed suit allowing bank to operate in
their states without any Usury Laws to worry about.
The inflationary period of the 1980s propelled the credit card industry into a decade of
enormous growth and enormous profits. The elimination of Usury Laws restrictions paved the
way for double-digit growth. Card holders were willing to pay 18% interest long after the
inflation spiral subsided and the Federal Reserve Bank lowered the interest rates it charged
chartered banks. Today that rate has reached historical lows 1-2% without any relief from the
18% interest charge on credit card loans. Several legislative attempts have been made
suggesting lower interest rates for card holders but each reform proposal has met with strong
opposition from both banking and governmental administrations and as such all were defeated.
BIRTH OF PERSONAL INCOME TAX
Seeing the vast amounts of money needed to wage a war, and the super profits it can return on any investment, some shrewd politicians decided that instead of going directly to Bankers the would tax the wages earned by wage earners as a major and continuous source of government income. Although a federal income tax has now become universal no one living today can remember a time in history when these taxes did not exist.. Most Income Laws, as we now know them, came into existence at the turn of the new century: in the United States in 1913, in Canada in 1917, at first a temporary tax and then established on a permanent basis. At the start Income Tax Rates were in the low 3-5% range. Previous to the personal and corporate income
tax era, governmental income was based on a series of export, import income duties and excise taxes. The income tax rates escalated surely and quickly to reach today’s universal standard of a 30 - 50 % range. These higher rates based on today’s much higher wages and profits, along with
implementations of new provincial and state sales and services taxes in the ranges of 5 to 15% have provided most of the governments of the western world with astronomical amounts of money by which to govern the state and the welfare of the general public. War making is now a tax based expenditure. The irony of all this income tax history is that a few years ago most economists generally agreed and predicted that once personal income and sales taxes on societyreached 33% there would be rioting in the streets.
"The course of Russian history has, indeed, been greatly affected by the operations of international bankers… . The Soviet Government has been given United States Treasury funds by the Federal Reserve Board acting through the Chase Bank, England has drawn money from us through the Federal Reserve Banks and has re-lent it at high rates of interest to the Soviet Government."
(Rep. Louis T. McFadden, chairman of the House Banking
and Currency Committee, 1920-1930)
