Treasury Secretary Nicholas F. Brady's suggestion that Americans expect their governmental bodies to be "considered, quiet and sensible" rather than "wacky and senseless" was directed solely at the Senate but it could have been as easily aimed at his boss in the White House.
President Bush set off the current flap over credit card interest rates with some ill-considered words at a Republican fund-raising affair last Tuesday. By the time the dust began to settle, the Senate had voted spastically to slap a mandatory cap on these rates and the stock market had reacted by plunging 120 points on Friday, the fifth largest drop in history. This was something a very fragile economy could have done without.
By yesterday, matters had stabilized a little as Wall Street steadied, the White House backtracked and a House subcommittee decided to think things over before following the lead of what is laughably known as "the world's greatest deliberative body." Sen. Jake Garn, R-Utah, scathingly described the Senate as a "waterbug on top of smooth water, where we dart here, there and every place and there is no consistent policy on anything."
The matter at issue -- sky-high credit card interest rates at a time when the discount rate is at its lowest in years -- is political dynamite ready to be ignited. Mr. Bush lit the match when he thoughtlessly ad-libbed before a New York GOP audience that he wished credit card rates would come down to spur consumer spending. Sen. Alphonse M. D'Amato, R-N.Y., facing a desperate race for re-election, heard his words and was on the Senate floor next day with an incendiary proposal to have government cap rates at 4 percentage points above the rate the government charges late income-tax payers. This effectively would drop the rate from an average 19 percent to 14 percent.
To expect the Senate to resist so demagogic an appeal was out of the question. After only a short debate, the proposal whipped through by a 74-19 margin. Maryland's two populist Democrats, Paul S. Sarbanes and Barbara A. Mikulski, predictably went along with the bank-bashers.
Out of this whole affair, we hope those relatively few banks offering lower interest rates will force down rates through the tried-and-true mechanism of competitive marketing. But for the government to intervene will only tempt the banking industry to deny millions of not-so-wealthy Americans their plastic passports to credit. The result could be lower consumer buying and a further downward drag on the economy.
Mind you, most of the senators among the craven 74 knew this. Some came from states, like Maryland, that had tried to legislate against usurious rates only to wind up losing a lot of business to the Delawares of this world. Sen. Joseph Biden, D-Del., even conceded that "a reputable economist could not be found who would argue that a legislative mandate capping interest rates is a good policy." Then he voted for the D'Amato amendment.