A Most Curious Comedy of Credit

It has come to pass that our esteemed President, a gentleman not unfamiliar with grand pronouncements, has proposed a cap upon the interest levied by those purveyors of plastic promises – the credit card companies. A mere ten percent, he decrees! A gesture, no doubt, intended to alleviate the burdens of the citizenry. Yet, one cannot help but observe the inherent absurdity of attempting to regulate the appetites of those whose fortunes are built upon the very debts of others.

This edict, naturally, sends a tremor through the halls of finance. Certain establishments, those who thrive upon the misfortune of spendthrifts, find themselves in a state of mild agitation. However, fear not, gentle investors, for within this unfolding drama, certain players remain remarkably unscathed. Indeed, two in particular appear to be enjoying the spectacle from a position of enviable security.

A Target Most Convenient

Credit card interest, you see, is a most tempting target for the politically inclined. A percentage so lofty – often exceeding twenty-five, even thirty! – upon a debt so widespread (over a trillion dollars, if you please!) presents an opportunity too delicious to resist. To cap such rates would, naturally, diminish the revenues of those who issue these instruments of purchase. JPMorgan Chase and Capital One, amongst others, might find their coffers somewhat less full. It would, one imagines, necessitate a degree of prudence in lending, limiting credit to only those souls deemed sufficiently…responsible. A novel concept, to be sure, and one that might, alas, deprive many of the pleasure of immediate gratification.

However, let us not be overly concerned. The path of such proposals is fraught with peril. Legislative hurdles abound, bipartisan support is a rare and precious commodity, and the banking industry, with its legions of well-compensated advocates, is not known for its meekness. Indeed, this is not the first time such a notion has been aired, and one suspects it will not be the last.

Untroubled Players in a Grand Farce

Now, observe, if you will, the clever positioning of Visa and Mastercard. Unlike their brethren who extend credit and bear the risk of default, these companies merely facilitate the exchange of funds. They are, in essence, the stagehands of this financial drama, profiting from each transaction without assuming any responsibility for the debts incurred. A most ingenious arrangement, wouldn’t you agree?

A cap on interest rates might, one supposes, lead to a reduction in spending, as fewer individuals are granted access to credit. But this, too, is of little consequence to Visa and Mastercard. They earn their fees with each swipe of a card, and their network extends to over 150 million merchant locations. The more cards in circulation, the more valuable their platform becomes. A virtuous cycle, if you will, fueled by the insatiable desires of consumers.

This, my friends, is the essence of a sustainable competitive advantage. It allows them to generate profits with an astonishing degree of efficiency. During the recent quarter, Visa and Mastercard reported net profit margins of 54% and 47%, respectively. Numbers that would surely impress even the most discerning of misers.

Regulatory challenges will undoubtedly arise from time to time. But these two companies have demonstrated a remarkable ability to thrive in the face of adversity. They are, in short, masters of their domain, and their fortunes are likely to remain secure for the foreseeable future. One can only marvel at their ingenuity, and perhaps, with a wry smile, observe the ongoing comedy of credit.

2026-02-10 15:02

A Target Most Convenient

Untroubled Players in a Grand Farce

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