Flood the White House switchboards! Considering that the government is about to be a 34 percent owner of Citigroup, couldn’t Team Obama have quashed the company’s decision to raise rates on 15 million cardholders — just as new curbs legislated by Congerss are about to kick in?
Perhaps, but such a move wouldn’t have made much business sense: a) unemployment continues to rise; b) higher unemployment mean higher default rates; c) add that to the reality that financial companies already face more writedowns on commerical real estate and other loans; d) the money to deal with these losses has to come from somwhere. So Uncle Sam the stakeholder has different priorities as Uncle Sam the consumer advocate. Of course, consumers may soon have an official consumer advocate to help them deal with finanicial product issues — such as enforcing new credit card rules. Of cours, one side effect could be higher rates and less credit availability.