U.S. Bank Shares Slide as Uncertainty Grows Over Trump’s Proposed Credit Card Rate Cap

BY EMMANUEL OGBONNA

U.S. bank stocks fell sharply in morning trading on Tuesday, underperforming a broader market decline as investors weighed the potential impact of a looming deadline set by the Trump administration to impose a 10% cap on credit card interest rates.

The administration has said the proposed limit, which President Donald Trump has urged companies to comply with by January 20, is intended to ease financial pressure on consumers struggling with high borrowing costs. Banks and industry groups, however, have warned that such a cap could significantly restrict access to credit by preventing lenders from pricing loans according to risk, particularly for unsecured credit card balances.

Uncertainty over whether the measure can be implemented without congressional approval has added to investor anxiety. While the president has publicly pressed companies to act, it remains unclear whether the executive branch has the authority to enforce the cap unilaterally or whether legislation would be required.

Major lenders were among the day’s hardest hit. Shares of JPMorgan Chase fell 3.2%, Citigroup dropped 4.3%, and Wells Fargo slid about 2%. Investment banks also retreated, with Morgan Stanley down 3.8% and Goldman Sachs falling 1.9%. The S&P 500 Banks index was last down 2.3%, reflecting broad weakness across the sector.

“For now, it’s an overhang on the market,” said Brian Jacobsen, chief economic strategist at Annex Wealth Management. “But that overhang could clear fairly quickly if this turns out to be more of a signal to Congress rather than a concrete policy action coming directly from the executive branch.”

Senior banking executives have publicly expressed skepticism that lawmakers would back such a measure. Speaking from the World Economic Forum in Davos, Citigroup Chief Executive Jane Fraser said she does not expect Congress to approve a cap on credit card interest rates. While acknowledging that affordability is a legitimate concern, she warned that an across-the-board limit would have negative consequences for the broader economy and said she sees little bipartisan support for such legislation.

JPMorgan executives, including CEO Jamie Dimon, echoed those concerns last week, arguing that the proposal would ultimately hurt consumers by limiting credit availability. The bank also signaled that it was considering all options, including potential legal action, if the policy were to move forward.

The rate cap proposal comes amid a broader escalation in tensions between the Trump administration and the financial sector. The president has accused major banks of restricting services to certain industries and individuals for political reasons, and the administration has opened an investigation into Federal Reserve Chair Jerome Powell. Dimon confirmed over the weekend that he had not been asked to serve as the next Fed chair, shortly after Trump disputed reports suggesting such an offer had been made.

Trump has also said he plans to sue JPMorgan in the coming weeks, alleging the bank “debanked” him following the January 6, 2021, attack on the U.S. Capitol.

Industry groups have warned that a 10% cap would strike at one of banks’ most important profit centers. Interest income from credit cards is a major driver of earnings, particularly as consumers rely more heavily on revolving credit. The American Bankers Association said new data from card issuers suggest that at least 137 million cardholders—and potentially as many as 159 million—could lose access to their credit cards if the cap were implemented as proposed.

Executives at regional lenders have voiced similar concerns. U.S. Bancorp CEO Gunjan Kedia said the vast majority of her bank’s customers would be adversely affected. “Our estimate is that more than 90% of our clients would see a detrimental impact if there were an across-the-board 10% cap on credit card interest rates,” she said.

Still, some signs of potential compromise have begun to emerge. Analysts say banks may attempt to defuse political pressure by offering new products, such as lower-rate cards for certain customers, stripped-down cards with no rewards that could operate under a 10% rate, or accounts with lower credit limits.

TD Cowen analysts said they believe a political middle ground is taking shape that would avoid forcing Congress to enact a strict cap. White House economic adviser Kevin Hassett has floated the idea of voluntary “Trump cards” that banks could offer as an alternative to mandated limits, though details of such a proposal have not been made public.

As the January 20 deadline approaches, investors remain wary that policy uncertainty could continue to weigh on bank shares, even as questions persist over whether the proposed rate cap will become law or remain a negotiating tactic in a broader political battle.