‘In the Money’ Crew Rams Viewers Like a Bus With anti-Banking Bias
Co-hosts Cafferty and Serwer decry average interest rates as ‘usury.’

By Ken Shepherd
Free Market Project
Jan. 9, 2006

     Hitting viewers like a Mack truck with biased bluster against credit card companies, CNN’s Jack Cafferty threatened to end it all over “usurious” 16 percent interest rates. Ranting against a federal banking guideline which recently pressed banks to raise the minimum monthly balance that credit card companies can charge consumers, Cafferty angrily denounced Congress. “If any incumbents are re-elected in the year 2006, I'm going to go throw myself in front of a cross-town bus. What a disgrace,” harrumphed the “In the Money” co-host in a segment on the January 7 show.

     Responding to Cafferty’s rant, Ed Mierzwinski of the left-leaning U.S. Public Interest Research Group (USPIRG), erroneously asserted that 16 percent was the average interest rate paid by consumers. Mierzwinski was about three whole percentage points off.

     An on-screen caption during the segment reported the actual average to be 13.4 percent, according to Bankrate.com. The same Web site accessed at time of publication showed the average rate Americans are paying on credit cards is from 9.8 to 13.55 percent. None of the “In the Money” crew corrected Mierzwinski’s error.

     While Serwer agreed with Mierzwinski that the newly-enacted minimum balance requirement is a good policy because it forces heavy credit card spenders to pay back more of their debt each month, he also tag-teamed with him to attack the banking industry, asking why Congress doesn’t impose a national cap on interest rates.

     “Why not regulate the interest rates that the banks charge on these cards,” the CNN business contributor asked Ed Mierzwinski, consumer program director for Ralph Nader’s advocacy group. “It's usury, you know, it’s seven, 16 percent APRs… why don’t they attack that,” demanded the Fortune magazine editor, echoing Cafferty.

     USPIRG’s spokesman replied that federal courts have ruled that credit cards companies are governed by state law based on where they incorporate, so that “a bank can move to South Dakota where there are no usury ceilings and treat everybody around the country as if they lived in South Dakota with those bad laws.”

     Mierzwinski’s argument rang hollow. South Dakota may have no usury law, but credit card-holders enjoy rates similar to the nationwide average, according to figures available from BankRate.com.

     Additionally, economists argued that to impose an interest rate cap would do more harm than good. The Federal Reserve Bank of Chicago explained on its Web site that “when the legal ceiling is below the market rate of interest, the regulation can affect the market outcome.” An interest rate cap at about seven percent, for example, would lead to a credit crunch. “[E]stablishing a lower-than-market interest rate by means of a usury ceiling will also bring about a decrease in the quantity of credit supplied. Given lenders costs, the amount of credit they will provide when the interest rate is held down is limited,” according to the Chicago Fed’s Web page.

     Towards the end of the interview, Mierzwinski – whose political leanings were never disclosed by the “In the Money” team – charged that marketing practices of credit card-issuing banks were “deceitful and dishonest” before plugging a USPIRG Web site critical of credit card issuers. At no point in the program was a banking industry representative brought on to challenge the anti-industry views pushed by USPIRG or to talk Cafferty down from the ledge, or out of the bus lane, as the case may be.