Wall Street seeks to shape Trump affordability ideas, sources say

• Banks oppose credit card rate caps, warning they would reduce credit availability and force lenders to cut credit lines to limit losses
• Alternative proposals include letting parents use 401(k) funds for children's home purchases and allowing tax-free home sales for older Americans, though housing supply remains the core issue
• Citigroup CEO Jane Fraser publicly stated that while Trump is 'right in focusing on affordability,' capping credit card rates 'would not be good for the U.S. economy'

Wall Street Pushes Back on Trump Affordability Proposals

Major Wall Street banks are challenging some of President Donald Trump's affordability initiatives while proposing alternatives, as the administration seeks solutions ahead of November mid-term elections, sources told Reuters at the World Economic Forum in Davos.

Key Developments

Banks are expressing skepticism about Trump's proposals to address high living costs, particularly credit card interest rate caps, which would directly impact major financial institutions. Instead, they're suggesting alternatives including encouraging increased retirement savings and earlier wealth transfers from parents to children.

However, sources indicated none of these ideas would substantially impact affordability before the mid-term elections.

Executive Perspectives

Citigroup CEO Jane Fraser publicly acknowledged the importance of addressing affordability while opposing rate caps. "The President is right in focusing on affordability, but capping rates would not be good for the U.S. economy," she told CNBC from Davos. Fraser stated she doesn't expect Congress to approve credit card interest rate caps.

Industry sources warned that price caps could reduce credit availability, with banks potentially responding by substantially cutting credit lines to limit losses.

Alternative Proposals

Banks suggested modifying Trump's proposal to allow Americans to borrow from 401(k) retirement accounts for housing down payments. They recommend allowing parents and grandparents to access their larger pension balances for their children instead.

To address housing supply issues, sources proposed allowing older Americans to sell homes tax-free. However, one source noted that improving housing affordability would require "patience that no one has."

Political Context

Economic issues, particularly high costs for housing and groceries, helped Trump win the 2024 presidential election. Despite inflation declining from post-COVID peaks, elevated prices threaten Republican prospects in upcoming mid-terms.

The White House and Treasury did not immediately comment on the bank discussions.