Administration Attacks Credit Rate Cap : Economy: Brady says ‘wacky, senseless’ Senate plan caused stock market plunge. Quayle virtually promises presidential veto.

With the nation nervously awaiting today’s opening of trading in stock markets, the Bush Administration stepped up its attack Sunday on the Senate’s vote last week to cap credit card interest rates.

In television interviews, Vice President Dan Quayle virtually promised a presidential veto of the bill that contains the interest cap and Treasury Secretary Nicholas F. Brady denounced it as “wacky, senseless legislation” that panicked Wall Street into a loss of more than 120 points Friday.

Congress’ attempt to control credit card rates was seen on Wall Street Friday as a potentially devastating blow to banks. Because the banks already are struggling with heavy loan losses--particularly in commercial real estate--investors dumped bank stocks on worries that a credit-card cap would further erode bank profits.

The bank stocks’ decline was a major factor in Friday’s 120.31-point drop in the Dow Jones industrial average. Investors in other stocks also sold, fearing that Congress’ meddling would ultimately hurt the economy rather than help it.

On Sunday, Quayle and Brady both backpedaled furiously from President Bush’s own statement early last week that credit card rates--near 20% at most big banks--should drop to encourage consumers. They said that Bush was simply “jawboning” the banks, not asking Congress to try to regulate money markets.

“The President is going to resist this,” said Quayle on ABC’s “This Week With David Brinkley.” And he added: “I’m not going to say whether he will (veto) or not. That’s the President’s decision. But . . . I am confident that the President will make sure that this does not become law. And, if that requires a veto, so be it.”

Quayle also predicted that the rate cap, which won lopsided support in the Senate, would never be passed by both houses, once senators and representatives see its impact on financial markets.

Most big banks have said that they would be forced to call in thousands of credit cards if lower interest rates are mandated. The high rates help cover losses caused by late or defaulted payments, they have said.

Brady, speaking on NBC’s “Meet the Press,” also predicted that the bill, pushed by Sen. Alfonse M. D’Amato (R-N.Y.), would “never see the light of day.” He denounced as “wacky” the very thought of regulating rates on borrowing and warned that a resulting recall of credit cards would leave most consumer credit available only to the rich.

“Let me tell you what’s wrong with it,” Brady said. “It was tried in 1980 by Jimmy Carter. They put credit controls in in February of 1980. It was so bad for the economy--it caused the recession in 1980--that by May of that year, they took it off the books. That’s what’s wrong with it. It doesn’t work.”

He added: “This legislation is bound to result in credit cards which are elitist. If this legislation went through, the only people that’d have credit cards would be the rich people in this country.”

He said that the average credit card holder has an income of about $30,000 a year and carries a balance of $1,500. A bank’s profit per card is about $20 a year, he said.

“If you lower the interest rates on that card . . , you wipe out the profit for the banks. The whole system will change. There will only be credit cards for the very, very rich. This is elitist legislation.”

But D’Amato, who responded to Bush’s “jawboning” last week by pushing to a floor vote the cap on credit card interest as an amendment to pending banking legislation, was quick to counter that argument. His goal was to help the “working middle class,” he told “Meet the Press” interviewers. In his comments, he all but charged seven of the nation’s 10 largest banks with collusion for setting exactly the same 19.8% rate for credit cards.

“We see seven out of 10 of the largest banks charging the identical interest rate,” D’Amato said. “There’s no free market. They’re charging 19.80--right to the decimal, 19.80--seven of the largest 10. So what I’m saying is . . . there’s no competition. If there was competition, this legislation wouldn’t be necessary. Secondly, it passed 74 to 19.”

D’Amato also harshly criticized Brady, who repeated Sunday the Administration’s view that the limping economy already has come out of recession--though admittedly “slower than we want it to be.”

But D’Amato, who is often out of step with the Administration and faces a tough reelection contest next year, declared: “We are in a tremendous recession. I don’t know where the secretary (Brady) is but he’d better recognize unemployment levels moving up and the fact that there is great disquiet out there.”

At least some of that discontent is attributable, he said, to “the discount rate going down, the prime rate going down and none of those savings being given to people.”

Both Brady and Quayle, in their separate interviews, tried to ward off criticism from Democrats and some conservative Republicans that Bush is taking too long to put together a credible anti-recession program.

Quayle called for a capital gains tax reduction, an idea that Bush has frequently pushed.

Times staff writer Tom Petruno contributed to this story.