Are banks benefiting from re-regulation?

FILE - This file photo taken Nov. 18, 2009, a pile of MasterCard and VISA credit cards are displayed in Frankfurt, Germany. A sweater you buy for Christmas goes on sale for half price the next day. You might be able to get the difference back if you paid with a credit card.(AP Photo/Jochen Krause, File)

St. John's University Law professor Jeff Sovern, writing on Public Citizen's Consumer Law & Policy Blog, sees mounting evidence that, despite their fights and protestations, most banks are thriving under the stricter rules imposed since the Great Recession and financial crisis:

As is well known, opponents of consumer financial protection regulation often argue that the regulation will reduce the availability of credit and raise its price. Despite such claims and the increased consumer credit regulation in 2009''s Credit CARD Act and 2010's Dodd-Frank Act, today's NY Times reports Rising Bank Profits Tempt a Push for Tougher Rules. According to the article, "analysts think the banks’ first-quarter profits will be their best ever." While we don't know whether the profits would have been higher in the absence of regulation, it seems clear that at least at this point, regulation is not preventing the banks from thriving. Of course, we also know how they did before those laws were enacted. Anyone remember Bear Stearns, Lehman Brothers, Countrywide, etc.?



And what about the price of credit? Well, according to the NY Daily News, Credit cards are offering lower interest rates and higher cash back bonuses to those with good credit. The article explains that those with good credit are benefiting from "lower interest rates and more robust sign-up bonuses, according to a new report from" Again, we can't know what would have happened if Congress hadn't acted, but certainly it is hard to argue that those with good credit are finding credit less available or more expensive. The article points out that those with bad credit are having a different experience, but even so, the articles undermine the tired old industry argument against regulation.


There's nothing radical in the argument that well-designed regulation can help businesses thrive, by creating a level playing field and avoiding race-to-the-bottom problems. That's what consumers witnessed in the credit-card market in the years prior to the the CARD act, as major card issuers competed with practices that were finally labled unfair and deceptive in 2008 by the Federal Reserve.

The Fed and then Congress cracked down, but only after too many luckless consumers were dragged into debt they could never hope to pay off - consumer debt that deepened the damage caused by the housing bubble and subprime-mortgage crisis, which were also fueled by loose rules and a classic race to the bottom in lenders' bad practices.