NEW YORK (AP) — Until this week, Wall Street has generally benefited from the Trump administration’s policies and supported the president. That relationship has suddenly soured.
When President Donald Trump signed the One Big Beautiful Bill into law in July, he pushed through another significant round of tax cuts and also cut the budget of the Consumer Financial Protection Bureau, sometimes the banking industry’s nemesis, by nearly half. Trump’s banking regulators have also been pushing a deregulatory agenda that both banks and large corporations have embraced.
But now the president has proposed a one-year 10% cap on credit card interest rates, a lucrative business for many financial institutions, and his Justice Department has launched an investigation into Federal Reserve Chairman Jerome Powell, which many say threatens the institution that is supposed to set interest rates free of political interference.
Bank CEOs warned the White House on Tuesday that Trump’s actions will do more harm than good to the U.S. economy. But in response, Trump did not back down from his proposals or his attacks on the Federal Reserve.
BNY CEO Robin Vince told reporters that pursuing Fed independence “doesn’t seem to us to achieve the administration’s primary goals on things like affordability, lowering the cost of borrowing, lowering the cost of mortgages and the cost of everyday living for Americans.”
“Let’s not shake the foundations of the bond market and potentially do something that could cause interest rates to actually rise, because in some ways there is a lack of confidence in the independence of the Federal Reserve,” Vince added.
The independence of the Federal Reserve is sacrosanct among the big banks. While banks may have wanted Powell and other Fed policymakers to move interest rates one way or another more quickly, they have generally understood why Powell has done what he has done.
“I don’t agree with everything the Federal Reserve has done. I have enormous respect for Jay Powell, the man,” JPMorgan Chase CEO Jamie Dimon told reporters Tuesday.
Dimon’s message did not appear to resonate with President Trump, who told reporters that Dimon is wrong to say it is not a great idea to undermine the independence of the Federal Reserve by going after Chairman Jerome Powell.
“Yes, I think what I’m doing is good,” Trump said Tuesday in response to a reporter’s question at Joint Base Andrews after returning from a day trip to Michigan. He called Powell “a bad Fed person” who has “done a bad job.”
Along with attacks on the Federal Reserve, President Trump is attacking the credit card industry. With “affordability” likely to be a key issue in this year’s midterm elections, Trump wants to reduce costs for consumers and says he wants a 10% cap on credit card interest rates by Jan. 20. It’s unclear whether he hopes to achieve this by bullying the credit card industry into capping interest rates voluntarily or through some form of executive action.
The average interest rate on credit cards is between 19.65% and 21.5%, according to the Federal Reserve and other industry tracking sources. A 10% cap would likely cost banks about $100 billion in lost revenue per year, Vanderbilt University researchers found. Shares of credit card companies such as American Express, JPMorgan, Citigroup, Capital One and others fell sharply on Monday as investors worried about the potential hit to profits these banks could face if a cap on interest rates were implemented.
In a call with reporters, JPMorgan Chief Financial Officer Jeffrey Barnum indicated that the industry was willing to fight with all the resources at its disposal to prevent the Trump administration from capping those rates. JPMorgan is one of the largest credit card companies in the country, and its customers collectively hold $239.4 billion in balances with the bank and have major co-branding partnerships with companies like United Airlines and Amazon. JPMorgan also recently acquired Goldman Sachs’ Apple Card credit card portfolio.
“We believe actions like this will have exactly the opposite consequence of what the administration wants in terms of helping consumers,” Barnum said. “Instead of lowering the price of credit, it will simply reduce the supply of credit, and that will be bad for everyone: consumers, the broader economy and, yes, for us too.”
Even major airline and hotel partners that partner with banks to issue their cards were also unhappy with the White House’s push to cap interest rates.
“I think one of the big issues and challenges with (a potential cap) is the fact that it would actually restrict the end consumer’s access to any credit, not just the interest rate they’re paying, which would disrupt the entire credit card industry,” Ed Bastion, chief executive of Delta Air Lines, told analysts Tuesday. Delta has a major partnership with American Express and its co-branded credit card generates billions of dollars in revenue for Delta.
Trump appeared to double down on his attacks on the credit card industry overnight. In a post on his social media platform Truth Social, he said he supported a bill introduced by Sen. Roger Marshall, R-Kan., that would likely reduce the revenue banks earn from merchants every time they accept a credit card at the point of sale.
“Everyone should support great Republican Senator Roger Marshall’s Credit Card Competition Act to stop the out-of-control Swipe Fee scam,” Trump wrote.
Trump told reporters Tuesday that he was not going to back down on the issue of credit card interest rates.
“We should have lower rates. Jamie Dimon probably wants higher rates. Maybe he’ll make more money that way,” Trump said.
The comments from Wall Street come as major banks report their quarterly results. JPMorgan, the nation’s largest consumer and investment bank, and The Bank of New York Mellon Corp., one of the world’s largest custodian banks, reported results Tuesday, and Citigroup, Bank of America, Wells Fargo and others will do so later this week.
