Wall Street Leaders Caution Trump on Federal Reserve Independence and Credit Card Rate Cap

Financial Sector Expresses Alarm Over Administration's Policies

Leading figures from Wall Street have voiced significant concerns to President Donald Trump, cautioning against his ongoing criticisms of the Federal Reserve and his proposed intervention in the credit card industry. These warnings, delivered recently, highlight a souring relationship between the administration and the financial sector, which had largely benefited from Trump's deregulatory policies in the past. Executives fear that the President's actions could inflict substantial damage on the American economy.

Federal Reserve Independence Under Scrutiny

A primary point of contention is the administration's perceived threat to the independence of the Federal Reserve. The Department of Justice has reportedly launched an investigation into Federal Reserve Chair Jerome Powell, a move widely interpreted by financial experts as an attempt to exert political influence over monetary policy. BNY Chief Executive Officer Robin Vince stated that undermining the Fed's independence 'doesn't seem, to us, to be accomplishing the administration's primary objectives for things like affordability, reducing the cost of borrowing,' and could 'cause interest rates to actually get pushed up' due to a lack of confidence. JPMorgan Chase CEO Jamie Dimon also publicly expressed 'enormous respect for Jay Powell,' emphasizing the importance of preserving the central bank's autonomy. International central bankers have echoed these sentiments, expressing 'full solidarity' with Powell and underscoring that central bank independence is a 'cornerstone of price, financial and economic stability'. Economists warn that a politicized Fed could erode its credibility as an inflation fighter, potentially leading to higher interest rates.

Credit Card Industry Faces Proposed Rate Cap

Adding to the financial sector's unease is President Trump's proposal for a one-year, 10% cap on credit card interest rates, alongside his endorsement of the 'Credit Card Competition Act' aimed at lowering swipe fees. This move has been met with strong opposition from the industry. Jeffrey Barnum, JPMorgan's Chief Financial Officer, warned that such a cap would 'reduce the supply of credit' and prove 'bad for everyone: consumers, the broader economy, and yes, for us, also.' Researchers at Vanderbilt University estimate that a 10% cap could result in approximately $100 billion in lost annual revenue for banks. Following these announcements, shares of major credit card companies, including Synchrony Financial, Capital One, and American Express, experienced sharp declines.

Trump Doubles Down Amidst Economic Concerns

Despite the warnings from Wall Street, President Trump has shown no signs of backing down from his proposals or his criticism of the Federal Reserve. He has reiterated his desire for lower interest rates and, in a post on his social media platform Truth Social, doubled down on his attacks on the credit card industry. The financial community's concerns extend to potential broader economic ramifications, including bond market volatility, an increase in overall interest rates, a reduction in the availability of credit, and a possible erosion of confidence in the U.S. dollar's global standing.