Donald Trump has rattled the banking industry with his claim that current credit card interest rates amount to “extortion.” In a Truth Social post announcing a 10% rate cap, the former president used harsh language to describe the practices of financial institutions. He promised to stop the “ripping off” of the public starting January 20, setting the stage for a major conflict with Wall Street.
The use of the word “extortion” (implied by his rhetoric and explicit in the Sanders/Hawley bill he is copying) criminalizes standard banking practices in the eyes of his supporters. Trump is effectively declaring war on the business model of credit card issuers. With debt levels at a record $1.17 trillion, his message is finding a receptive audience.
The banking industry has responded with a mix of fear and defiance. Major financial associations issued a statement defending their rates as necessary to cover risk. They warned that a 10% cap would force them to stop lending to millions of Americans, creating a credit crunch. The banks argued that Trump’s rhetoric is dangerous and irresponsible.
Senator Elizabeth Warren also criticized the president, though she focused on his lack of action. She called the announcement a “joke,” arguing that Trump is all talk and no action. Warren challenged him to pass a law if he truly believes that banks are extorting the public.
Despite the criticism, the move has been cheered by Senator Josh Hawley. His support suggests that the Republican party is increasingly willing to take on big business in the name of populism. As January 20 approaches, the battle between Trump and the bankers is just beginning.