- Wall Street executives warn Trump that a proposed one-year 10% credit-card APR cap and a DOJ probe of Fed Chair Jerome Powell could destabilize credit markets and undermine Fed independence.
- With average card APRs near 20–21%, the cap could cut roughly $100 billion a year in bank revenue and pressure issuer business models.
- Banks and co-brand partners say tighter margins would shrink credit availability—especially for near-prime/subprime borrowers—and disrupt rewards-heavy airline and retailer card programs.
- Critics across parties call the Powell investigation unprecedented political interference that could erode market confidence and lift inflation expectations.
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The Trump administration’s twin policy moves—the proposed 10 % credit-card APR cap and the DOJ’s criminal investigation into Fed Chair Jerome Powell—have triggered a strong backlash from Wall Street, highlighting the potential destabilizing effects for the financial system. These do not appear to be isolated proposals but part of a coordinated push to exert executive branch influence over interest-rate setting, financial regulation, and industry fees at a time when consumer affordability is politically charged ahead of midterm elections.
On the credit-card rate cap: with average APRs hovering around 20-21 %, cutting them in half would inflict severe margin compression on financial institutions whose business models rely heavily on high interest rates and risk premiums. Banks like Capital One, Synchrony, and Diversified lenders are seen as most exposed. Additionally, partners in the co-brand card market, such as airlines and hotel chains, are bracing for revenue losses tied to swipe fees and interest-funded rewards programs.
The DOJ investigation compounds the pressure: grand jury subpoenas over Powell’s statements related to the $2.5 billion renovation of Fed buildings represent an unprecedented legal move targeting a sitting Fed chair. Powell’s defense is rooted in fears that this sets a precedent of political interference in monetary policy, especially given the Fed’s mandate to act on data rather than political directives to lower rates. The investigation has sparked warnings from former Fed Chairs, economists, and even some Senate Republicans.
Strategic implications include weakened investor confidence in institutions perceived as politicized, possible upward pressure on inflation expectations, and distortion in credit allocation—particularly harming lower‐income households. The administration may believe these measures resonate with voters facing high costs of living, but there is risk of legislative, legal, and market backlash. Key open questions: whether Congress will enact rate caps, whether Powell stays on the Fed Board post-May 2026, and whether the DOJ investigation results in formal charges or settles before escalating institutional damage.
Supporting Notes
- The Trump proposal: a one-year, 10 % cap on all credit-card interest rates by January 20, 2026.
- Current average credit card rates are between about 19.65 % and 21.5 %.
- Estimated loss to banks from the cap: approximately USD 100 billion annually.
- Major credit card issuers like JPMorgan, Citigroup, Capital One, American Express, and others saw stock declines in response to the proposal.
- Warnings from bank CEOs and CFOs: credit supply could shrink, consumers particularly with low credit scores would be harmed, business models disrupted.
- The DOJ investigation into Powell includes grand jury subpoenas over his congressional testimony about the Fed’s building renovations and concerns over misleading statements.
- Powell framed the investigation as a threat to Fed’s ability to set rates based on evidence, not political pressure.
- Former Fed Chairs and economists have called the investigation an “unprecedented attempt” to undermine central bank independence.