WASHINGTON - The movement in Congress to put a ceiling on credit card
interest rates lost steam Monday as House Speaker Thomas S. Foley said he wanted to "slow it down" because of the potentially negative impact on the economy.
Rep. Foley's announcement, on top of a veto threat by the White House, dimmed the chances of any rate cap this year.
Instead of a cap, a compromise was shaping up in the House to form a seven-member commission to deliver policy recommendations to the President 18 months from now.
The maneuverings in the House came just five days after the Senate resoundingly passed an amendment to limit the annual interest rate on cards at 14%.
"There's a lot of concern about the impact of credit card legislation," Rep. Foley said. "I am personally increasingly reluctant to see us move rapidly into some formal cap."
Foley Switches Gears
The comments by the top House Democrat contrasted with his enthusiasm last week about a rate cap.
They also indicated that members of Congress were taking to hear warnings from bankers and the Bush administration that the proposal would exacerbate the credit crunch and deepen the recession.
Bankers warned that as many as 60 million consumers could lose their credit cards if the cap were enacted.
May Not Pass Compromise
Rep. Foley, who comes from Washington State, said the prospects for "an absolute cap were diminished quite a lot" and said Congress may not even be able to pass the comrpomise that Democrats worked on over the weekend.
As the measure is now shaping up, the seven-member commission would present its findings to the White House after spending 18 months studying the impact of a limit on credit card rates.
If the commission recommended a cap and the White House failed to support it, Congress would be committed to rapid action on the recommendation.
In part, the postponement reflected Rep. Foley's desire to proceed cautiously. But it also reflected a split on the consumer affairs subcommittee of the House Banking Committee, where a majority of votes belong to a coalition of Republicans and conservative Democrats.
Annunzio Backs D'Amato Plan
Rep. Frank Annunzio, D-Ill. is expected to offer the Senate version of the interest rate cap as an amendment to the omnibus banking reform bill, the beleaguered measure scheduled for consideration today by the full committee.
The Senate amendment, sponsored by Sen. Alfonse M. D'Amato, R-N.Y., would cap card rates at four percentages points over the rate that Treasury charges for underpaid taxes.
Currently, that Treasury rate is 10%, which would result in a maximum credit card finance charge of 14%.
At the White House, presidential spokesman Marling Fitzwater on Monday reiterated a veto threat issued over the weekend by Vice President Dan Quayle.
Mr. Fitzwater said President Bush had commented on credit card rates last week out of concern that consumers were being overcharged.
But Mr. Bush had never intended to suggest that Congress try to limit rates by law.
"It's like Fed policy," Mr. Fitzwater said. "Occasionally, we criticize rates, but we don't proposed legislation to tell the Fed what to do."
A credit card cap, he said, would prompt banks to rescind credit to low- and moderate-income families, so that "only the rich would have credit cards. People that need them the most would be cut off."
Table Set for 3d Bank Bill
Meanwhile, Rep. Foley expressed optimism that a new version of the omnibus banking bill would pass the House this week.
Although two separate efforts at broader measures have failed on the House floor in recent weeks, Mr. Foley said support was growing with each vote.
"We are getting closer, if you have noticed the trend," he said.
The House Banking Committee is scheduled to consider a measure today that would provide the Federal Deposit Insurance Corp. with an additional $25 billion to cover losses.
The bill would also address deposit insurance reform and a few other issues, such as a proposed liberalization of the qualified thrift lender test.
The measure is likely to move to the floor on Thursday, Rep. Foley said.
The banking committee is also scheduled to take up a funding measure for the Resolution Trust Corp. today.
That bill would provide an additional $80 billion for the savings and loan bailout.
Sen. Riegle Calls for Action
Speaking Monday on the Senate floor, Donald Riegle, chairman of the Senate Banking Committee, said it is essential to pass banking legislation and send it to the White House for President Bush's signature before the recess that Congress hopes to take within a week.
Sen. Riegle, D-Mich., said he intends to press ahead with the Senate bill in its current form, which includes an interstate banking provision that the House has rejected.