Restricting credit card rates and fees is not a good idea during a financial crisis

In today's New York Times it was reported that the Obama administration is supporting legislation to limit the fees and rates credit card companies can charge people (Obama Pressures Credit Card Issuers on Rates, NY Times 2009-04-24). This seems to me to be a really dumb move.

What are banks going to do if they can't raise rates and fees on their higher risk credit customers enough to cover their default risk? That's right: The banks are going to get out of the business of offering credit cards to higher risk borrowers. Which is probably for the best for the people who get cut off (borrowing on credit cards to finance consumption is always and everywhere a poor financial strategy). And it would be a great idea if we weren't in a recession. But isn't reducing the availability of consumer credit during a recession attributed to a credit crunch kind of a dumb move?

On a related front, what is going to happen if banks are not allowed to raise rates and fees on existing credit card balances as the risk of default on those existing loan balances increases? That's right: The banks are going to lose even more money and they are going to need an even bigger bailout from the government to survive. In effect, the costs will be shifted from the higher risk borrowers to the taxpayer. Which makes me feel like a chump for being a taxpayer but not a borrower.


The price of oil and the recession

An article today in the New York times talks about the fact that the price of oil has been holding up remarkably well despite weakening demand and swelling inventories.  Oil Prices Resist the World’s Recession Trend (NY Times 2009-04-22).  The author credits the resiliance of the price of oil to OPEC supply cuts and people investing in oil futures as a hedge against the USD and inflation.

To me this dynamic risks worsening the global recession.  As one economist once said, a recession is a deflation trying to happen, i.e. when demand drops, but prices don't drop enough to keep pace, then a recession happens as people buy less.  As long as the price of oil is artificially propped up by hot money and OPEC the world will continue to consume less and less energy.  That doesn't sound so bad on it face. Isn't saving energy good?  But the energy will be saved because people are consuming fewer goods and services and because whole businesses will go under because high energy prices cause them to lose money.

The way I see this playing out is that either:
  • The price of oil will collapse in the near term, which will provide a stimulus to the economy which will help shorten the recession, or
  • The price of oil will continue to be propped up by speculators and OPEC, which will prolong and deepen the recession, which will in turn cause an even deeper collapse in the price of oil later.


Maybe genes don't determine many diseases after all

This article in today's New York Times:

Genes show limited value in predicting diseases

Supports my longstanding suspicion of claims that certain diseases (depression, autism, schizophrenia, etc) were caused by genetic defects.  It always seemed to me that if a disease truly was caused by a genetic variation then the expression of the disease would follow simple Mendelian rules, like is the case with Huntington's Disease or Tay Sachs disease.  And my skepticism increased when the years and decades went by without indentifying the specific culprit genes for various diseases that were attributed to genetics.