DONALD TRUMP SEEKS FRIENDSHIP OF DON CORLEONE.

Populist froth is populist froth, no matter who peddles it.  "Trump pushes a 1-year, 10% cap on credit card interest rates."  Dear reader, for all the happy talk about bipartisanship and gauzy memories of Ronald Reagan and Tip O'Neill quaffing a few after hours, bipartisanship is the political class doing dumb things.

Sen. Roger Marshall, R-Kan., who said he talked with Trump on Friday night, said the effort is meant to “lower costs for American families and to rein in greedy credit card companies who have been ripping off hardworking Americans for too long.”

Legislation in both the House and the Senate would do what Trump is seeking.

Sens. Bernie Sanders, I-Vt., and Josh Hawley, R-Mo., released a plan in February that would immediately cap interest rates at 10% for five years, hoping to use Trump’s campaign promise to build momentum for their measure.

Hours before Trump’s post, Sanders said that the president, rather than working to cap interest rates, had taken steps to deregulate big banks that allowed them to charge much higher credit card fees.

Reps. Alexandria Ocasio-Cortez, D-N.Y., and Anna Paulina Luna, R-Fla., have proposed similar legislation. Ocasio-Cortez is a frequent political target of Trump, while Luna is a close ally of the president.

If the lender can't price the risk premium in the finance charge, he can either refuse to make the loan, as the article notes is the case in states with existing usury laws, or increase the penalty for late payment.

Does anyone seriously think that when Our President and Fauxahontas agree on something, that's a course worth pursuing?

One irony in the calls for price caps from a certain type of populist, whether on the (nominally) left or (nominally) right, is that price levels are, in some respects, as representative of popular opinion as it is possible to get.

Should prices be set (directly or indirectly) by countless interactions between countless people, or should they be set by someone in government — in Washington — who supposedly knows best?

Oh well.

Yes, that's all standard stuff, as will be the predictable consequences for people with credit scores lower than the cruising speed of a Lear Jet.

If Donald Trump’s promise to institute “a one year cap on Credit Card Interest Rates of 10%” were to be measured in an opinion poll, it would likely prove extremely popular. Bolstered by the usual demagoguery, mawkishness, and indignation, the question would be abstracted into the heady realm of theory, and its opponents would be cast as the dastardly handmaidens of greed. In all probability, the public would be 80–20 in favor of the move — perhaps even more.

If, by contrast, Donald Trump’s promise to institute a one-year, 10 percent cap on credit card interest rates were to be implemented, it would provoke a populist backlash on a scale that we have not seen in the United States for a while. There is a reason that unsecured loans carry high rates when granted to risky debtors, and that reason does not evaporate in the face of good intentions or disgruntled rhetoric. If, in a fit of wide-eyed ideology, the president or Congress elects to change the law, they will create a set of ineluctable knock-on effects for which, before too long, they will be harshly blamed. In a matter of weeks, 80–20 would become 20–80.

When Trump and his acolytes imagine a 10 percent limit, they seem to envision the current system, unchanged but for that small detail. But this is absurd. Interest rates are inextricably tied to exposure. To restrict the ceiling to 10 percent APR is to inform banks that they may charge no more than 0.83 percent interest per month to anyone, irrespective of their financial history. The result of this would not be some lofty 10-percent-for-everyone paradise, but an extremely selective universe in which only the most secure candidates were accepted. Within a month of the new rules, most new applicants would be turned down, longstanding credit limits would be lowered, and existing customers who exhibited even a modest pattern of delinquency would have their accounts canceled on the spot. One does not have to try too hard to imagine how this would play out on social media, in the press, or in November’s midterm elections.

With the spring semester getting under way, David Henderson offers a refresher course.  Put simply, whether Donald Trump is proposing it, or Elizabeth Warren is proposing it, interest rate ceilings comprise "A Progressive Plan That Aids Loan Sharks."  Other entrepreneurs in the poverty industry, such as payday loan and check cashing shops, pawn shops, and the sort of durable goods dealer who will hold your cash without paying interest until you've brought enough in to buy that recliner, will also get to wet their beaks.

If you think late fees are predatory now, wait until they're capped.