From "Trump QE" to Credit Card Price Limits: When the White House Begins to Set Interest Rates Personally

After utilizing the "Two Giants" to purchase MBS in the mortgage market, which the market refers to as "Trump QE," Trump has once again reached into a more politically sensitive area—credit card interest rates.

From attempting to lower mortgage costs to proposing a forced cap on credit card interest rates at 10%, the Trump administration is continuously intervening in the interest rate formation mechanism that should be led by the market and the Federal Reserve using executive power.

This is no longer a series of scattered policy trials but a clear main line: When the Federal Reserve is unwilling or unable to quickly cooperate with interest rate cuts, the White House is bypassing the central bank to directly intervene in the "interest rates most perceptible to voters."

The Essence of the Interest Rate Dispute: Not Inflation, but Voter Monthly Payments and Bills

From a political economy perspective, Trump's actions are not difficult to understand.

In a high-interest-rate environment, the real source of sustained political pressure is not the abstract "federal funds rate," but two indicators that directly enter household balance sheets: mortgage rates and credit card rates.

• The 30-year mortgage rate determines "whether one can buy a house."

• The credit card APR directly determines the financing cost of household short-term cash flow.

For ordinary voters, these two are far more intuitive and painful than CPI or core inflation.

After multiple public pressures on the Federal Reserve to cut interest rates without success, the Trump administration has clearly reached a judgment: If it cannot change the policy interest rate, then it will directly change the endpoint of interest rate transmission.

Mortgage Intervention: An Administrative Experiment of "Quasi-QE"

In the mortgage market, the Trump administration chose a relatively "technical" path.

By instructing Fannie Mae and Freddie Mac to purchase MBS, the White House's goal is not to directly lower the risk-free rate but to hedge against the demand gap for MBS caused by the Federal Reserve's balance sheet reduction, compressing the spread between mortgage loans and government bonds.

Mechanically, this approach has three main characteristics:

1. Achieved through market transactions, rather than direct pricing.

2. Affects the spread rather than the benchmark rate.

3. Historically has precedents in QE.

Because of this, although this policy clearly carries the "shadow of monetary policy," the market still reluctantly views it as an unconventional administrative intervention aimed at housing affordability, rather than a direct disruption of the financial pricing system.

Credit Card Price Cap: A Leap from Market Intervention to Price Control

What truly alarms the market is the proposal for a "10% cap" on credit card interest rates.

Unlike mortgages, credit card rates are not simply the cost of funds plus a margin, but rather a highly risk-adjusted pricing result:

• Unsecured

• High default rates

• Strong counter-cyclical attributes

• Interest income itself serves as a bad debt buffer

In the current environment, the average APR for credit cards in the U.S. generally falls within the 20%-25% range. Forcing it down to 10% is equivalent to directly cutting off the risk pricing mechanism without providing any fiscal subsidies or risk backstops. This is also why even Bill Ackman, who has publicly supported Trump, bluntly stated that this policy is "wrong." From the market's perspective, the consequences are not complicated:

If interest rates are insufficient to cover losses and capital returns, the only rational choice for banks is to retreat.

Withdrawing cards, tightening credit, and excluding suboptimal borrowers from the formal financial system, which in turn turns to higher-cost informal lending channels—this is an outcome that has repeatedly appeared in history.

Bypassing the Federal Reserve: Executive Power is Reshaping the Boundaries of Interest Rates

The deeper controversy lies not in whether a specific policy is effective, but in the institutional precedent it establishes.

Under the traditional framework, the division of U.S. economic policy is clear:

• Federal Reserve: Decides the "price of money"

• Executive Branch and Congress: Decide the "use and redistribution of money"

Now, the White House is directly intervening through executive means, attempting to rewrite the "reasonable range" of certain interest rates.

This is not a formal takeover of the Federal Reserve, but it is eroding the central bank's factual dominance over interest rates at a functional level.

If this logic is accepted, then the issues will no longer be limited to credit cards:

• Are auto loans also "too high"?

• Do student loans also need a cap?

• Are small business financing rates "unacceptable"?

What financial markets fear most is precisely this uncertainty.

Conclusion: The Real Risk is Not a Drop in Interest Rates, but the Transfer of Pricing Power

From "Trump QE" to credit card price caps, this series of actions points to a reality: When monetary policy cannot quickly serve political goals, executive power is seeking alternative paths.

In the short term, mortgage rates may indeed decline by a few basis points due to MBS purchases; but in the long term, the fundamental question that the market really needs to assess is:

If interest rates are no longer primarily determined by risk and capital, but increasingly defined by political judgment, how will the financial system reprice?

This may be a variable that is more concerning than whether interest rates will be lowered or not