Changes to help a troubled economy
Allan Sloan is a senior editor-at-large at Fortune
TEXT OF INTERVIEW
Renita Jablonski: President Obama signed the American Recovery and Reinvestment Act into law last week -- also known as the $787 billion stimulus package. Just before the bill went to the president's desk, Senate Banking Committee Chair Chris Dodd added a little amendment that essentially bars bonuses for executives of banks that took bailout money. The amendment doesn't limit salaries, so there are plenty of ways to make up for what would have been in that bonus check.
And that's only part of what has Allan Sloan riled up this morning. All right Allan, you say the move against bonuses is symbolic at best, and that there are plenty of ways that Congress could take on changes that would have some actual meaning that could help people hurting most in this economy. So how would you set that agenda?
Allan Sloan: Well, I have three really simple things, two of which involve what I consider credit card abuses that are legal but wrong. And the third involves closing what I think is the biggest and most egregious loophole that shovels tons and tons of money to a select handful of people on Wall Street.
Jablonski: Well, let's start with credit cards. What would you do there?
Sloan: All right: There's this provision which pretty much says we can do whatever we want to do as long as we give you notice. And one of the nasty little things that happens is if you miss a single payment on a single credit card, suddenly instead of paying 12 percent interest, which to me is bad enough, you find yourself paying 29.9 percent interest on all of your cards, and you're just sort of stuck. And that should be made illegal -- I know, I don't care how it's done, but that's just wrong. The second credit card thing that drives me absolutely wild is the way that credit card companies go fishing for people with troubled finances and try to get them to have cards on the assumption that they'll pay a lot of interest and a lot of fees before they go under. Because this whole thing is aimed at people who shouldn't be borrowing.
Jablonski: One of the things you mentioned was this tax loophole, and I imagine you're mostly talking about people like hedge fund managers that are managing to bring in some major cash despite what's happening to the economy because of the bets they're making.
Sloan: Exactly. So if you run a hedge fund or a buyout fund and you get a piece of your investor's private, which is called a carried interest, in most cases the carried interest that the managers get is taxed like capital gains. Which to, on the federal level is 15 percent, rather than ordinary income, which for these guys would be 35 percent, plus a little bit more for Medicare. I mean, it's just an outrage, and it's been kicking around in Washington for a couple of years. But no one is going to do anything, because Wall Street is a source of enormous campaign contributions.
Jablonski: What does it take for something like this to be addressed?
Sloan: I think it would take a batch of national outrage, and right now I don't see it. Because I see most people -- including, on occasion, me -- worried about survival.
Jablonski: Fortune Magazine's Allan Sloan. Thank you.
Sloan: You're welcome.