Tarjeta de credito for everyone!

By DAVID MOON, Moon Capital Management
February 25, 2007

Former state senator Ray Davis pleaded guilty last month to defrauding investors out of $2.5 million in an old-fashioned Ponzi scheme.

Maybe we ought to find out where Davis does his personal banking and hold the place accountable. Perhaps his cable company should be criticized on television. Possibly the FBI and Securities and Exchange Commission should show up on the doorstep of his cell-phone carrier with a search warrant.

And what about child molesters, cockfight operators, and habitual DUI offenders? Maybe the folks who market goods and services to them ought to share in the reputation of these societal scourges.

That's what crossed my mind when I first heard the uproar about Bank of America's plan to stop requiring Social Security numbers as a qualification for getting a credit card, thereby enabling illegal residents to obtain the addictive plastic.

What makes serving one criminal more offensive than serving another?

I don't favor illegal immigration. I don't even understand our immigration laws. But there are positive economic consequences of Bank of America's plan.

Estimates of the number of illegals in the country range from 8 million to as many as 20 million. This demographic traditionally has a much higher savings rate than U.S. citizens do.

Furthermore, Dun & Bradstreet tells us that people spend 12% to 18% more when making purchases with credit cards than with cash. The average McDonald's transaction increases from $4.50 to $7 when paid with plastic versus cash.

Imagine 6 percent of the American population increasing its spending by almost 20 percent. That would have a significant impact on the U.S. economy. And that helps everyone.

Latino immigrants, both legal and illegal, sent an estimated $45 billion back to their countries of origin in 2006. That offends many in this country ' that foreigners would come to this country, 'take jobs from Americans,' and then ship the wages out of the country. My guess is that many of the people who make this argument are the same people who are also angry at Bank of America.

But the Bank of America plan will keep much more of those immigrants' earnings in the U.S. If you don't like exporting immigrant savings, you ought to want immigrants to have credit cards. They'll buy more U.S. goods and services, and they'll pay finance charges to boot. More of those earnings will stay on this side of the border.

And if you just don't like illegal immigrants, then you really ought to favor the Bank of America plan, because it introduces these outlaw residents to another of our uniquely American economic experiences: the implacable minimum monthly credit-card payment.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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