Instead, banks are proposing alternatives such as encouraging more retirement savings and earlier transfer of wealth from parents to children, the sources said.However, none of the ideas are likely to have a substantial impact on affordability, which has become a hot-button issue for voters ahead of the November election, added the sources, who discussed the talks on condition of anonymity.
The sources told Reuters on the sidelines of the World Economic Forum’s annual meeting in Davos, Switzerland, that they are in talks with Trump administration officials and are waiting for clarity on policy before taking any action.
“We say, ‘What are you trying to accomplish? Let’s figure out ways to help you,'” said a top U.S. banking executive.
Economic problems, such as the rising cost of living for Americans, helped Trump win the 2024 presidential election. Although inflation has fallen from its peak following the COVID-19 pandemic, prices of necessities such as housing and groceries remain high, threatening Republicans’ prospects in midterm elections.
Trump has made a series of proposals to lower the cost of living. These include a call to lower credit card rates and plans to allow investors to use some of their retirement funds to make a down payment on a home.
He is expected to discuss the issue in Davos on Wednesday.
The White House and the U.S. Treasury Department did not immediately respond to requests for comment on the bank talks.
RIGHT TO FOCUS ON AFFORDABILITY
Some bank CEOs have publicly supported the focus on affordability, even if they disagree with caps on credit card fees. Investors have also questioned the effectiveness of letting people borrow from their retirement accounts to make down payments, saying the bigger problem was housing supply.
Citigroup CEO Jane Fraser said Tuesday that she does not expect Congress to approve caps on credit card interest rates.
“The president is right to focus on affordability,” Fraser said in an interview with CNBC from Davos. “But capping interest rates would not be good for the U.S. economy,” she added.
The sources said price caps affect the availability and prices of credit cards. One way banks could respond if this were introduced would be to substantially reduce the size of the credit line they offer to customers to limit losses, one person said.
US Treasury Secretary Scott Bessent said on Tuesday that it was not unreasonable to have a discussion about the practices of credit card companies and that a number of issues could be taken into consideration.
The Trump administration has been in contact with banks to shape the policy, the sources said.
One of them said an effective way to tweak the proposal to let Americans borrow from their $401k retirement savings for down payments on their homes would be to let parents and grandparents do so for their children.
The logic is that they probably have more money in their retirement plans than someone just starting their career.
One problem, however, is that without additional supply of homes, this could put further pressure on prices. According to this person, an idea to increase the housing supply would be to give elderly people the opportunity to sell their home tax-free.
But changing the housing situation would “take patience that no one has,” the source said.
When asked how the Trump administration had responded to some of these ideas, the source said: “They are listening. There are smart people working hard on this.”
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