Access To Credit: Why Younger Generation Needs It

Credit cards
Credit cards

Last week the Federal Reserve and the Treasury came out with a plan that should actually help regular people get more and cheaper credit for cars, college tuition, and credit card bills.

You’d think this move would be universally applauded, right? Well, not by the personal finance community. The day after this plan was announced, Laura Rowley wrote a piece for Yahoo Finance called “Fed's 'Consumer Bailout' Encourages More Bad Behavior.”

Here’s the paragraph that made me blow my top, “But Treasury Secretary Henry Paulson doesn't want Americans to stop spending, because that will slow the economy. So he's using taxpayer dollars to make it easier for consumers to dig themselves more deeply into debt.”

That’s really the thrust of Rowley’s argument: making it easier for people to borrow money is bad because they’ll “dig themselves more deeply into debt.” My translation: making it easier for people to borrow money is bad because they’ll borrow more money. God forbid the government make it easier for us to pay for college, right?

Whenever supposed experts talk about consumer debt, there’s almost always this element of paternalism. The idea that people can’t make good decisions about borrowing money, so it’s better they not have the ability to borrow at all.

But consider what we’re talking about here. This program from the Fed and the Treasury is supposed to help unlock credit for student loans, cars, and credit cards. I can understand the many objections to credit cards, but student loans? Who thinks it’s bad to make it easier to get a student loan, especially given the whole credit crisis thing.

Individuals may make poor choices when they borrow money, sure. But that’s not what we’re talking about. The question is should we be able to borrow money? And the answer, from the perspective on any particular individual, should always be yes. Now, as we’ve seen, it can be an terrible idea for lenders to make more credit available, but it’s never intrinsically bad for borrowers.

The puritanical ideology that says all debt is bad, and people can’t be trusted to make good decisions with their money just drives me nuts. This is about freedom and opportunity. More credit, more freedom, more opportunity.

There are billions of people in developing countries with no access to credit whatsoever. That’s not a good position to be in. And while commentators like to whine about the increase in credit card and student loan debt held by recent college graduates, what exactly is their alternative?

Do they want members of my generation to not have access to credit? Because that’s what happens when you don’t let banks charge us exorbitant interest rates, or in a crisis, when the government doesn’t intervene to make it profitable to lend to us. When people like Rowley complain about what the Fed and the Treasury are doing, they’re basically saying it’s bad that more people are able to borrow more money. That’s the intellectually honest read on their position, and I think it’s insane.

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