Banking giant JPMorgan Chase is issuing a warning to Americans, saying that many of them could lose access to credit under Trump’s new proposed rate cap.
In a recent earnings call, JPMorgan Chase executive vice president and chief financial officer Jeremy Barnum says he believes Trump’s proposed plan would be dire for consumers and the economy as a whole.
“Just assume for the sake of argument that something in the general mode of price controls on credit card interest rates goes through, what would be the consequences of that…
The right assumption about what the response of the system is going to be to the imposition of price controls is not that you will simply compress the profit margins, which are already at their sort of competitively optimal level, and thereby pass on benefits to consumers.
What’s actually simply going to happen is that the provision of the service will change dramatically. Specifically, people will lose access to credit, like on a very, very extensive and broad basis, especially the people who need it the most, honestly.
And so that’s a pretty severely negative consequence for consumers and frankly, probably also a negative consequence for the economy as a whole right now.”
Earlier this month, Trump announced that he wants credit card interest rates capped at 10% for one year, causing the stock prices of major banks to dip.
Trump is working with an unlikely Ally, Democrat Senator Elizabeth Warren, who addressed the issue in an interview with CNBC.
“I also just want to start with the big picture here. Is there anybody defending 36% interest rate on credit cards or 28% interest on credit cards? Anybody out there who isn’t paid by the industry that’s putting out those credit cards?…
They say, oh no, you can’t touch credit card interest rates. No matter what, it will be the end of the world. We will shut down credit cards. They go on and on and on. And basically it’s the same song they sang over what would happen if the CFPB put some caps on overdraft fees. What would happen if the cfpb put caps on fees on credit cards?
You know, the the credit card companies literally make billions of dollars. Last year they made $150 billion in profits off the credit cards that american families are holding. So we have some choices to make. Do the investors and the corporate executives keep that $150 billion, or does some chunk of that go back to hardworking families who are just trying to pay their mortgage, just trying to pay for groceries every month?”
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