Trump had called on companies to comply by January 20, but it is unclear whether the move can be implemented unilaterally without legislation.JPMorgan Chase shares fell 1.8%, while Citigroup lost 2.4%. Wells Fargo was last down 0.6%.
“It’s still an overhang for now, but that overhang could disappear quickly if it’s more of a call for Congress to do something rather than a specific policy action from the executive office,” Brian Jacobsen, chief economic strategist at Annex Wealth Management, told Reuters.
Investment banks Morgan Stanley and Goldman Sachs also fell by 2.2% and 1.5% respectively. The S&P 500 Banks index last fell 1.2%.
JPMorgan executives, including CEO Jamie Dimon, warned last week that the move would hurt consumers. The largest US lender also indicated that “everything is on the table” when asked whether it would take legal action. The move to cap credit card interest rates comes amid increasing pressure from the Trump administration against the banking industry, which the president says has restricted financial services for a number of controversial sectors. The government has also launched an investigation into Federal Reserve Chairman Jerome Powell.
Dimon confirmed Saturday that he had not been asked to become the next chairman of the Federal Reserve, hours after Trump disputed a report saying he had offered Dimon the role.
Trump has said he plans to sue JPMorgan sometime in the next two weeks for allegedly “debanking” him following the Jan. 6, 2021 attack on the U.S. Capitol by his supporters.
POTENTIAL COMPROMISE
Banks’ interest income, a key profit driver, will take a hit if the proposal is implemented in its current form, according to industry experts.
The American Bankers Association, citing new data from credit card issuers, said Tuesday that at least 137 million cardholders and as many as 159 million would no longer be able to use their cards if the rate cap were implemented.
US Bancorp CEO Gunjan Kedia also said the proposed 10% cap would have serious consequences for its customers. “Our estimate is that more than 90 percent of our customers would be adversely impacted if a blanket 10% rate cap were to apply to credit cards,” she said.
“We have noticed that the discussion about the interest rate cap has become more productive in recent days.”
Analysts said card providers could make conciliatory gestures with innovative offers such as lower rates for certain customers, no-frills cards that can charge 10% but have no rewards, or lower credit limits.
“We believe a political compromise is in the works to ensure the President does not pressure Congress to implement a 10% cap on credit card interest rates,” TD Cowen analysts said in a note.
White House economic adviser Kevin Hassett previously floated the idea of ”Trump cards” that banks would offer voluntarily rather than being forced to do so by a new law, without providing any details about what the card would offer.
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