With President Obama and Congress threatening to tag-spank credit card issuers, Slate is left wondering why the government doesn’t just issue its own credit card. Before you scream “SOCIALISM!,” consider the government’s heavy involvement in the banking sector, not just through the recent bailouts, but through long-standing institutions like Fannie and Sallie Mae, and Freddie Mac. Credit-worthy borrowers in Germany, France, and India all have access to low-interest, no-fee credit cards issued by their central banks. Would you ever be interested in an Obama-backed credit card?
Creating a government-sponsored lending agency-a Fannie Mae for credit cards-would rein the whole system in. For one thing, it would offer lower rates than the usual 18 percent. The government could charge, say, 8 percent interest and still turn a profit. It would include none of the usual hidden fees or surprise charges. (In 2007, penalty fees were $7.5 billion, cash advance fees were $5.6 billion, annual fees were $4.6 billion, and interchange fees were $23.6 billion.) And while the credit card industry spent $34 billion on marketing in 2007, the government would avoid that expense entirely. The card would theoretically be accepted everywhere, because merchants would know Obama is good for it.