Posts Tagged ‘usury’

What’s worse: gambling or credit cards?

April 21, 2009

“There goes Delaware again, leading the way to the bottom.”

A number of years ago an employee of Delaware’s state department told me about a convention of employees from state departments around the nation. We were discussing Delaware’s status as a most-favored place for businesses to incorporate. The employee told me that Delaware is known for its liberal and deep body of corporate law and its hands-off approach when it comes to corporations. The employee also said other states regard Delaware’s political philosophy as more protective of corporations than of individuals. The employee then quoted another state’s employee – see quote above – to illustrate an attitude toward Delaware’s permissive corporate ways.

In the current debate over expansion of gambling venues in Delaware, one comment has stuck out like a sore thumb. I can’t remember the exact source, but the general sentiment expressed was that if a venture like the Del Pointe proposal with its thousands of promised jobs for Sussex County were proposed for New Castle County, the state would be shifting funds around and writing all kinds of special legislation to make it happen. New Castle County legislators, of course, would be rallying around the proposal because of its benefits to constituents.

Bull hockey, some might say? That’s crazy. Gambling’s different.

Not so. It happened a few decades ago when Delaware rewrote its laws to attract out-of-state banks here and enabled them to export Delaware’s unlimited usury rates to the rest of the nation. As a result, major credit card operations set up in Delaware. Companies were able to use Delaware’s laws to make major credit card marketing, with steep interest rates and increases hidden in fine type, a fact of life for our nation. Many people then, and now, saw that move as another example of Delaware “leading the way to the bottom.”

Economic times weren’t so different than what we face now. Delaware’s Farmers Bank, where most of the state’s funds were held, was on the brink of bankruptcy and Pete duPont had just been elected governor. He jumped into the state’s budget and cut, cut, cut and seized the banking law opening that ultimately resulted in thousands of jobs for Delawareans. It could easily be argued that had times been rosier, opposition to harboring credit card operations with virtually no interest rate caps would have been stiffer.

Is sanctioning more gambling venues, with appropriate regulations, worse than allowing an unlimited number of credit card operators into our state? There’s no doubt in my mind that far more people are in financial trouble due to credit card problems than due to gambling problems. This double standard is, at best, unbecoming for our state, and at worst, crippling an economy when it most needs help.