Jan 14th 2026|4 min read
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KING HAMMURABI of Babylon, Oliver Cromwell and Donald Trump have little in common. But when it comes to loans, the American president is of one mind with the other two: high interest rates are evil and must be exorcised. Having long badgered the Federal Reserve to cut them, America’s lord consumer-protector is increasingly going after supposed usurers in the private sector.
On January 11th Mr Trump declared that from January 20th firms charging annual interest of more than 10% on credit-card loans would be in for “very severe things”. Days later he urged Congress to curb fees merchants pay to card-payment processors such as Visa and MasterCard.
Chart: The Economist
No law relating to the matter has a chance of passing soon, and Mr Trump seems to lack the legal authority to impose an interest-rate cap on his own. But that has not stopped financial firms from taking a hit. Share prices of Visa, Mastercard and American Express have fallen by 5-6% since the announcement; those of Bread Financial, which caters to sub-prime borrowers, have slumped by 14% (see chart). For big banks, which issue lots of cards, the 10% limit would compound problems in other parts of their business. JPMorgan Chase, Bank of America, Wells Fargo and Citigroup all presented disappointing fourth-quarter results this week. On January 13th JPMorgan’s finance chief, Jeremy Barnum, said that “everything is on the table” to fight Mr Trump’s edict.
No wonder. The average American credit-card interest rate is 22%, according to the Federal Reserve. Even when interest rates on cards hit rock bottom in the aftermath of the global financial crisis of 2007-09, the average rate exceeded 10%. Yet Wall Street would not be the only victim of Mr Trump’s policies. So would consumers. “We’ll simply reduce the supply of credit,” Mr Barnum summed up.
This would be especially unhelpful for low-earners with patchy credit histories—precisely the group whom the president ostensibly wants to support. Mr Barnum’s opposite number at Citigroup, Mark Mason, goes further. On January 14th he warned the cap could cause “a significant slowdown in the economy”. Analysts at UBS, another bank, reckon that around $63bn in American credit-card spending, a quarter of the total, could be at risk.
The card kerfuffle is the latest battle in Mr Trump’s crusade against high rates. On January 8th he instructed Fannie Mae and Freddie Mac, two government-backed giants of housing finance, to buy $200bn in mortgage-backed securities (MBSs). Since then rates on new 30-year mortgages have edged down by 0.2 percentage points, while Treasury yields have barely moved. This leaves them at around 6%, the lowest in more than three years, and translates to annual savings of around $700 to a borrower buying a typical American home.
It leaves a few companies better off, too. The share price of Rocket Companies, the parent company of Rocket Mortgage, rose by 10% on January 9th. Those of Lennar and D.R. Horton, two large listed builders, went up by 9% and 8%, respectively. That of Opendoor, a property-listing platform, surged by 13%.
Yet as with credit cards, presidential meddling in the $13trn American mortgage market carries risks. The new purchases by Fannie Mae and Freddie Mac are a $200bn bet that the Federal Reserve will not raise interest rates, which would reduce the value of the MBSs. Since other Trumpian policies, such as tariffs and mass deportations, are inflationary, this is far from assured. If rates rise, this could cost Fannie and Freddie—and the taxpayers who implicitly back them—billions of dollars in losses. Even if they stay where they are, the MBS purchases will make the housing duo harder to privatise, another of Mr Trump’s stated goals. If they became private institutions and lost their implicit guarantee, they would require thicker capital buffers to set against their swelling assets. These would take years to accumulate.
Another big category of consumer credit, cars, may be next. With $1.7trn in outstanding loans, it is second only to mortgages and ahead of credit cards. Mr Trump’s sprawling tax law from last year includes a provision that lets buyers write off up to $10,000 in interest payments a year against taxes, so long as the financed vehicles are made in America. A juicy carrot. But don’t be surprised if it is supplemented soon with a presidential stick. ■
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This article appeared in the Finance & economics section of the print edition under the headline “The new war on usury”
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