Wells Fargo CFO Warns Trump's Credit Card Interest Rate Cap Will Affect Credit Availability and Economic Growth

Summary

On a Wednesday earnings call, Wells Fargo CFO Mike Santomassimo warned that former President Trump’s proposed 10% cap on credit card interest rates would have a “significant negative impact” on credit availability for a wide range of consumers and would hurt overall economic growth.Reuters This sentiment echoes broader industry concerns that such a cap would disrupt risk-based pricing, potentially forcing banks to cancel cards for higher-risk customers and pushing millions toward higher-cost, unregulated lenders.Stheadline+ 2

Impact Analysis

This is the banking industry going on the offensive against a direct threat to their business model. By framing the issue as a risk to ‘credit availability’ and ‘economic growth’ on an earnings call, the CFO is sending a clear signal to investors and policymakers: this isn’t just about our profits, it’s about a potential consumer credit crunch.Reuters They can’t price for risk with a 10% cap, so they’ll just stop lending to a huge part of the population.Stheadline+ 2 The second-order effect is a slowdown in consumer spending.

The market has already sold off bank stocks on the headline, but the real story is the potential for a pre-emptive tightening of lending standards even if the policy doesn’t pass. This creates a headwind for the card-heavy issuers like Capital One and Discover, and to a lesser extent the universal banks. I see this as a clear negative catalyst. The trade is to stay underweight the card issuers until this political noise subsides.