The more the recession deepens, the more concessions the banks are getting from the government.

President Obama held a meeting with prominent credit card industry executives during which he gave them some friendly advice that they should moderate their most egregious practices so as to deflect additional damage to their public image among the mass of the population. The executives listened politely, but gave no indication that they intended to follow Obama’s advice.

The banks remain determined to continue to exploit this, one of their few remaining sources of profits. Fitch Ratings reports that US credit card delinquencies and charge-offs exceeded record levels last month as a result of the economic crisis. Nevertheless, yields to the card issuers increased, indicating that terms are being manipulated to squeeze borrowers even more tightly.

The “scissors effect” between payment defaults on the one hand and rising interest rates and fees on the other is becoming ever more pronounced. The Washington Post reports, “Already some credit card issuers are seeing close to double-digit charge-offs. For example, Capital One Financial said its charge-off rate spiked to 8.4 percent in the first quarter, up from 5.85 percent in 2008 and 3.72 percent in the first quarter of 2007. The company said it expects further increases in its US credit card charge-off rate through 2009 as the economy continues to weaken.” Charge offs are losses that the companies remove from their balance sheets because they have no hope of collecting what is due. The amounts of money involved are substantial. According to Time, analysts predict credit-card defaults could total more than $75 billion this year.

Credit cards are a form of “predatory lending” as was the whole range of risky mortgages and mortgage-related “instruments” that have already blown up into a major financial crisis. Credit card debt has been “bundled” and sold off by the banks in a manner similar to what was done with subprime mortgages. For years, both of these investment categories were virtually unregulated mechanisms for banks and similar institutions to realize large profits by selling and reselling the same assets at increasingly inflated prices and with less and less relation to real value.

The credit card industry is raising the claim that government regulations, especially via legislation rather than the more easily reversed moves by the Fed, would simply result in greater restrictions on the availability of credit to “good” borrowers, making them pay for the mistakes of “bad” borrowers. The hypocrisy of such statements is colossal given that the banks are already engaged in a major triage of credit holders after having practiced outright usury on a massive and uncontrolled scale.

Tied to this is the myth of “good” verses “bad” debtors—the former being those who pay their bills on time, maintain balances below the maximum and don’t behave in ways that the banks consider “risky.” Good debtors deserve the government’s help, but bad debtors don’t. This mythology is intended to justify the ruthless behavior of the banks by demonizing people who are being hit by the economic crisis. As a consequence, cosmetic changes can be heralded as restoring “fairness” for the good debtors, while the banks are pretty much left to do what they like. Of course, as the crisis deepens, more and more people will be driven into the bad debtor category.

But yet there is a paradox here.  We argue that the credit companies are screwing the consuming public, but are they?