JPMorgan Chase CEO Jamie Dimon warned on Wednesday that a proposal to cap credit card interest rates would amount to economic disaster, while U.S. President Donald Trump doubled down on the idea and said he was asking Congress to approve the move. Trump, under pressure to address voters’ cost-of-living concerns ahead of this year’s congressional elections, called for the cap earlier this month, without detailing how the plan would be implemented.
“It would remove credit from 80% of Americans, and that is their back-up credit,” Dimon, longtime chief of JPMorgan and Wall Street’s most influential banker, said at the World Economic Forum in Davos. Trump reiterated his call to cap interest rates in a separate address on Wednesday at the WEF, an annual gathering of global political and business leaders. “I am asking Congress to cap credit card interest rates at 10% for one year,” Trump said. “One of the biggest barriers to saving for a down payment has been surging credit card debt. The profit margin for credit card companies now exceeds 50%, one of the biggest.”
Banking industry bodies have pushed back strongly against the move, arguing it would limit credit access for everyday consumers. Meanwhile, Wall Street analysts said such a measure would require legislation and has slim odds of passage, with Democrats and Republicans divided over supporting it. “I think we should test it,” Dimon said. “The government can do it; they should force all the banks to do it in two states – Vermont and Massachusetts – and see what happens. “Though Dimon did not explain why he picked those two states, the idea drew laughs from the crowd. Left-leaning Senators Bernie Sanders and Elizabeth Warren, who represent Vermont and Massachusetts, respectively, have both advocated for legislation that would cap credit card interest rates. “People crying the most will not be the credit card companies. It will be the restaurants, retailers, travel companies, the schools, the municipalities, because people will miss their water payments, this payment and that payment,” Dimon said.
