Billionaire investor Bill Ackman found himself in a public flip-flop following Donald Trump’s announcement of a 10% credit card interest rate cap. Ackman initially posted, then deleted, a tweet calling the move “a mistake.” He later clarified his position, acknowledging that Trump’s goal of reducing rates is “worthy and important,” but warning that the specific mechanism of a 10% cap is flawed.
Ackman’s concern lies in the math of subprime lending. He argued that if banks are forced to cap rates at 10%, they will not be able to cover the losses associated with riskier borrowers. As a result, he predicted that credit card companies would cancel millions of cards to avoid losing money. This “credit crunch” would disproportionately hurt the very people Trump intends to help.
Trump’s announcement, made on Truth Social with a January 20 start date, has rattled the financial world. The president accused companies of “ripping off” the public with rates of 20-30%, blaming the Biden administration for the status quo. The move is a populist appeal to voters struggling with $1.17 trillion in debt, but it faces stiff resistance from the people who actually run the financial system.
The banking industry issued a joint statement echoing Ackman’s fears. They warned that the cap would “reduce credit availability” and drive consumers toward predatory lenders. Senator Elizabeth Warren also criticized the move, calling it a “joke” without legislative backing. She argued that Trump is engaging in political theater rather than serious governance.
Despite the warnings from Wall Street, the policy has found support among populist Republicans like Senator Josh Hawley. The divergence between Trump’s political allies and his financial backers highlights the complex dynamics of his economic agenda.