What's happened
President Trump has proposed a 10% cap on credit card interest rates and launched an investigation into Federal Reserve Chair Jerome Powell, signaling a shift from previous deregulatory policies and raising concerns among banks about economic stability and independence.
What's behind the headline?
The White House's recent actions reveal a strategic shift in economic policy, moving from deregulatory efforts to direct intervention. The proposal for a 10% credit interest rate cap threatens to reduce bank revenues by approximately $100 billion annually, prompting fierce industry opposition. Meanwhile, the investigation into Fed Chair Jerome Powell, including subpoenas related to the Fed's building renovations, signals an unprecedented attempt to undermine the Fed's independence. This move risks destabilizing the bond market and eroding confidence in the Federal Reserve, which is crucial for maintaining economic stability. The timing suggests political motives ahead of midterm elections, aiming to appeal to populist sentiments by framing the administration as protecting consumers, despite the potential economic fallout. The resistance from bank CEOs and economists underscores the threat to the integrity of U.S. monetary policy and the broader financial system, with long-term implications for market stability and the rule of law.
What the papers say
The Independent reports that bank CEOs warn Trump’s actions could harm the economy by undermining the Fed's independence and reducing credit supply. AP News highlights the legal and political tensions, including subpoenas targeting the Fed’s building renovations and the White House’s efforts to influence monetary policy. Both sources emphasize the unprecedented nature of the investigations and the potential risks to market stability, with industry leaders and economists warning that these moves could backfire, leading to higher interest rates and reduced credit availability. The articles collectively portray a White House increasingly willing to challenge established financial institutions, risking long-term damage to the U.S. economic framework.
How we got here
Since July, Trump signed the One Big Beautiful Bill, which included tax cuts and reduced the Consumer Financial Protection Bureau's budget. His administration has pursued deregulation, but recent proposals to cap credit card interest rates and investigations into the Fed mark a notable shift, reflecting tensions over economic control and policy independence.
Go deeper
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Jerome Hayden "Jay" Powell is the 16th Chair of the Federal Reserve, serving in that office since February 2018. He was nominated to the Fed Chair position by President Donald Trump, and confirmed by the United States Senate.
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