Trump's interest rate raid hits financial stocks, Wall Street executives face questioning in earnings season.

President Trump unexpectedly called for credit card companies to set a cap on interest rates at 10% within the next year last Friday - this is only half of the average current outstanding balance interest rate, and set a deadline of January 20. This move could wipe out billions of dollars in profits from one of the industry's most important businesses, causing financial stocks to plummet this week as Wall Street's top bank executives faced a barrage of inquiries during quarterly performance conference calls. Just days before many large banks were set to release their earnings reports, investors quickly reacted. The stock price of the largest credit card issuing bank in the US, First Capital, Inc. (COF.US), saw its largest single-day drop in nine months on Monday; second-ranked companies like JPMorgan Chase (JPM.US), American Express Company (AXP.US), and Synchrony Financial (SYF.US) also saw a simultaneous decline in their stock prices. Considering the limited lobbying ability of the banking industry in Congress and limited legislative momentum, although some analysts question whether this proposal can be implemented, it has already cast a shadow over the outlook for the financial sector. Previously, market expectations of widespread regulatory easing had driven up bank stocks, but this event serves as a reminder: there is almost no market corner immune to unexpected White House policy initiatives. KBW analysts Sanjiv Saksena and Chris McGratty pointed out, "If this policy is implemented, it will significantly weaken the profitability of card issuers and could trigger economic repercussions." Legislative games intensify On Tuesday, Trump further pressed for congressional support for the Credit Card Competition Act. This bipartisan bill targets the nearly $200 billion in annual card transaction fees that banks and payment companies collect from merchants, leading to declines in the stock prices of Visa (V.US) and Mastercard (MA.US). At the same time, some analysts have questioned the possibility of the interest rate cap policy being passed. Trump did not explain how lenders that do not set an upper limit would violate the law, and the requirement lacks legislative support. Compass Point analyst Ed Groshans believes, "The probability of credit card rates being restricted to 10% at any given time is less than 20%. The president does not have the authority to unilaterally set an interest rate cap, and Congress has never pushed any consumer interest rate cap legislation through the relevant committees in both houses." Industry ripple effects As the banking earnings season kicks off, bank executives have been busy in the past week responding to analysts and media inquiries. Citigroup CFO Mark Mason warned that an interest rate cap could lead to "a significant economic slowdown"; Bank of America Corp CEO Brian Moynihan noted that this move would force people to turn to payday lenders and other non-regulated credit channels. JPMorgan Chase CFO Jeremy Barnum admitted on Tuesday, "All possibilities are under discussion. If the interest rate cap takes effect, it will cause serious harm to consumers and the economy." Market volatility has spread beyond the financial sector: airlines and retail companies also feel the chain impacts. Trump's demands could severely impact the airline industry - which earns substantial profits through partnerships with credit card companies and has a cascading effect on retailers with substantial credit card assets. After Trump's comments, stock prices for Delta Air Lines, Inc. (DAL.US), United Airlines Holdings (UAL.US), and Southwest Airlines Co. (LUV.US) all fell together; retailers like Macy's, Inc. (M.US) and Kohl's Corporation (KSS.US) also experienced simultaneous declines. The analyst team at Bernstein pointed out that American Airlines Group Inc. earns over $30 billion annually by selling mileage to credit card partners, "Proposals such as an interest rate cap or the Credit Card Competition Act will have a profound impact on the investment logic of the airline industry."