Wall Street's bane: Real competition

Credit card regulatory reform is forcing issuers to scramble. But they'd rather not work so hard for their money

Published February 16, 2010 4:29PM (EST)

Buried inside a Bloomberg News story reporting the not-very-surprising news that credit card companies are competing harder than ever for borrowers with high credit scores, (instead of raising rates on them to make up for losses expected under the Credit Card Accountability Responsibility and Disclosure Act), is an eye-opening quote from an industry analyst.

"The CARD Act is leading all issuers to the top of the credit food chain, and more competition is never a good thing in any industry, regardless of the product, but particularly in the relatively homogenized card space," said Jason Arnold, an analyst at RBC Capital Markets in San Francisco.

Arnold's job, presumably, is to evaluate the profit-making potential of companies in the credit card sector, so maybe we can excuse him for having blinders on. The rest of us know that while competition might be a pain for corporations who would rather have monopolistic or oligopolistic control of a market, the same is not true for consumers. Competition is supposed to be good for us, right? Isn't that one of the foundational principles of anti-trust law, and more broadly, capitalism itself? A "free market" results in robust competition which lowers prices and benefits the general public.

That's the theory, anyway. In practice, Wall Street financial institutions prefer to avoid both competition and government regulation, which suggests that there are still a few kinks in the system to work out.

By Andrew Leonard

Andrew Leonard is a staff writer at Salon. On Twitter, @koxinga21.

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Credit Cards How The World Works U.s. Economy