Business World: Credit Crunch? Let's Sue Visa and MasterCard
Last year was a year of record profits for Criimi Mae, a business whose name no poet will ever make a sonnet of. Everything was going fine and then it collapsed on the same heap as hedge-fund guru John Meriwether.</br></br>Criimi Mae managed a portfolio of commercial mortgages, buying half of all such securities underwritten by Wall Street. The strip malls, apartment buildings and supermarkets behind the mortgages did not all become delinquent. They're doing fine -- rents have held up, consumers continue to consume. The underwriters did not all flee to the Bahamas, leaving a wake of disorderly paperwork.</br></br>What dropped dead was demand for mortgage-backed securities. This is what a bank run looks like in a world where banks are no longer the most important lenders. Superficially everything seems fine in the economy, but beneath the surface there has been a sudden withdrawal of liquidity from various markets that you didn't even know existed.</br></br>This might seem a bad moment to be attacking the consumer credit industry. Yet the Justice Department last week filed an antitrust case against Visa and MasterCard. Let's see, the vital sectors of the economy now under assault include Microsoft, Intel, Cisco Systems and 30 or 40 industries subject to grand-jury investigation. In a world ravaged by deflation, where the uniform wail of CEOs is that "we have no power to raise prices," Justice believes now is a good time to go hunting cartels.</br></br>The latest complaint is the usual quizzical piece of work. The credit card business is wildly competitive, with every mail bringing come-ons for lower rates, bonus points and higher credit limits. Some 6,000 banks issue Visa and MasterCard in ferocious rivalry with each other.