Bank of America CEO Brian Moynihan hit back at President Trump’s proposal to slap a 10% cap on credit card interest rates for a year, becoming the latest Wall Street banker to warn that the policy could choke off credit access for millions and hurt the ordinary Americans it is supposed to help.
“We’re all in for affordability,” Moynihan declared Wednesday during his bank’s earnings call — but he cautioned that slashing rates would trigger a credit crunch.
“You’re going to get restricted credit, meaning less people will get credit cards, and the balance available to them on those credit cards will also be restricted,” he asserted.
Trump’s proposal on a credit card interest rate cap came Friday in a bombshell Truth Social post in which he vowed to crack down on what he called sky-high charges squeezing American wallets.
The announcement blindsided the industry, sending banking shares down between 5% and 8% across Wall Street in recent days as investors tried to figure out what the impact would be on US financial giants.
Citigroup’s outgoing Chief Financial Officer Mark Mason warned of the proposed cap’s potential “unintended consequences” on regular consumers.
“It would have likely derivative impacts on other sectors and industries, and likely result in a significant slowdown in the economy,” he told journalists Wednesday after unveiling the Jane Fraser-led lender’s fourth-quarter results.
“I get that the headlines, you know, may have some appeal to some, but it is worth being very thoughtful about what the unintended impacts would be,” Mason added.
Mason’s counterpart at Wells Fargo, Mike Santomassimo, said a cap could hurt economic growth and create “a negative impact on credit availability.”
“We certainly share concerns about affordability issues that many families are having across the country,” Santomassimo said during a call with reporters on Wednesday.
“I think it’s also important that many people need access to credit from regulated banks. As others have pointed out, there would be a significant impact on credit availability for a wide spectrum of people,” he added.
New York-based start-up Bilt, which offers perks on rent payments, seized on Trump’s announcement to launch a string of credit cards that offer a 10% APR for all customers over the next 12 months.
Credit cards generate strong returns for banks, which charge high rates to compensate for the greater risk of default on unsecured card loans. The average interest rate in November stood at 20.97%, according to the Federal Reserve.
A 10% cap would save Americans $100 billion annually with only a modest impact on rewards and accounts, research published by Vanderbilt University last year.
“You would have to adjust your model for the added risk by this and ongoing price controls,” JPMorgan CEO Jamie Dimon said in a call with analysts on Tuesday. “It would be dramatic.”
It is not clear how the Trump administration could enforce the Republican president’s proposed cap, whether it comes through an executive order, voluntary buy-in from banks or striking a deal in Congress.
House Speaker Mike Johnson, a Louisiana Republican, said Tuesday that members should explore the idea of a cap, but warned of “negative secondary effects.”
Such policies have traditionally been pushed by hard-left lawmakers like Sens. Elizabeth Warren, a Massachusetts Dem, and Vermont socialist Bernie Sanders, who argue credit card rates are exploitative.
This story originally appeared on NYPost
