Interest rate cap is explosive demand on credit card industry

President Trump on Jan. 9, told his followers on Truth Social that he would be calling for a one-year, 10 percent cap on credit card interest, beginning Jan. 20. No details were offered about who would enforce the cap or how it would be done..The banking industry trade groups quickly responded that such a cap would reduce credit availability. They said it would be “devastating for millions of American families and small businesses” that rely on credit cards for access to short-term cash. “If enacted, this cap would only drive consumers toward less regulated, more costly alternatives.”Meanwhile, the U.S. Department of Justice on Jan. 9 was delivering subpoenas to the Federal Reserve Board, elevating the feud between President Trump and Federal Reserve Board Chair Jerome Powell. The executive branch was threatening to bring a criminal indictment against the Fed for mismanaging the renovation of Federal Reserve office buildings, which have run over-budget and behind schedule.On Jan. 11, Powell issued a statement declaring the threatened legal action is a pretext for retribution against the Fed for not lowering interest rates to the extent desired by the President. Powell said he would stand firm against outside influences.Nobody in business wants to see a neutered Federal Reserve. We applaud Fed independence and encourage Chair Powell, as well as the rest of the Fed Board, to base its interest rate moves on its research and reasoned economic analysis.Obviously, if the Fed bows to the Executive Branch, investors in this country and around the world will lose confidence in our economy and we will see inflation skyrocket. The President may think the Fed controls interest rates but in fact, it only controls the Discount Rate and the Fed Funds rate. The markets determine everything else, and if the markets lose faith in the Central Bank, our country will suffer serious economic distress that makes our current situation look like a walk in the park.