Credit Card Reform Bill in America- first regulation initiated by Obama

  Recently, American president Barak Obama has signed credit card reform bill into law as it triggered some serious problems for the big credit-card issuers in America. These reforms mainly impose restrictions on the interest rate posed by the card issuers to the consumers, the fees charged for the money lending and penalty charges for the delay in payment of the bill. 

  For the recession-struck consumers, this bill will provide great relief as many of them have lost their jobs and the source of income; on the other hand, it is a major setback for the major card issuers like Citigroup Inc, Bank of America Corp, JPMorgan Chase & Co and Capital One Financial Corp as they seek this credit card transaction to retain more revenues by imposing high interest rates on card holders. 

  It seems that the reasons given by the banks against these restrictions are not satisfactory enough for Obama administration as the banks argued that this law will halt the process of money circulation and will make it more difficult for card issuers to fix the interest rate according to the risk posed by the card-holder.

  The industry is supposed to loose $15 billion as this law has deprived them to impose penalty fees onto the card-holders. However, Americans owe more than $945 billion in the credit card debt and the debt-income ratio, i.e. total household debt as a proportion to total personal disposable income(income after paying taxes) in America was 130% till end of 2008 as we all know the rise of credit-debt boom in the backdrop of Subprime Mortgages. 

  With this law, Obama completed first major financial reforms after sworn in last year. It also can be interpreted in a way that Obama has given the signal of more financial  and market regulations in the future.

  It is my individual opinion that his theory about the capitalism has refused to accept much debated and much hyped theory of financial deregulation in order to create a free and absolute liberal market and financial system which is always advocated by the Capitalism. This global crisis originated in and triggered by America has made it clear that absolute liberalism and deregulated monetary system always leads to a dead end. 

  Since, Indian voter has elected its government in the center; interestingly, Indian share market soared to new heights and it gives us the impression that India is no longer in the recession. This government will left no stone unturned to deregulate the financial and market system as they know there is no direct opposition of any party who can restrict them, thus making the few upper class big money players to gain as much as they want from the deregulated policies. Idon't mean to say that Obama's action is worthy to be followed, but Indian government has to take some serious step in the light of US crisis as India is following the footmarks of pre-crisis US financial structure through deregulation of banking and insurance sectors, increase the Foreign direct investment(FDI) cap up to 51%, pushing privatised pension reforms, inviting more FDI in crucial retail sector.