Trump’s Bold Economic Gambit: Challenging the Fed, Credit Cards, and Housing Affordability

In an audacious move that underscores his populist economic agenda, President Donald Trump’s administration has launched a multi-pronged assault on key pillars of the U.S. financial system. Targeting the Federal Reserve, the credit card industry, and the housing market, these efforts are framed as a direct response to persistent inflation and the affordability crisis gripping American consumers. However, the proposed interventions have ignited a fierce debate, with experts warning of potential unintended consequences that could ripple through the economy.

The Federal Reserve’s Independence Under Siege

At the heart of Trump’s financial offensive is a direct challenge to the Federal Reserve’s cherished independence. The Department of Justice recently launched an investigation into Fed Chair Jerome Powell, a move Powell himself has described as a pretext to weaken the central bank’s autonomy in setting interest rates. This probe follows the Fed’s decision to lower its benchmark rate three times since September 2025, citing easing inflation and a slowing labor market. Powell has consistently maintained that the Fed’s decisions are based solely on economic data, free from political influence, a principle he reiterated in a statement linking the Justice Department’s actions to efforts to undermine this independence.

The implications of such an investigation extend far beyond the political arena. Wall Street analysts have warned that legal action against Powell could significantly erode investor confidence in U.S. monetary policy, potentially destabilizing the bond market and weakening the U.S. dollar’s standing as the world’s reserve currency. The future leadership of the Fed is also in play, with Powell’s term ending in May 2026. President Trump is expected to name his candidate in the coming weeks, and while economic advisor Kevin Hassett has been praised, betting markets currently favor former Fed Governor Kevin Warsh as a leading contender.

Capping Credit Card Rates: Relief or Restriction?

Another significant intervention proposed by President Trump is a one-year cap of 10% on credit card interest rates. In a social media post, Trump declared his intention to prevent the American public from being ‘ripped off’ by credit card companies. With Americans currently holding approximately $1.2 trillion in outstanding credit card debt, at an average APR of about 23.8%, such a cap could, theoretically, save consumers an estimated $100 billion in interest annually, according to Vanderbilt University researchers.

However, this seemingly consumer-friendly measure comes with considerable risks. Financial industry experts, including the Electronic Payments Coalition, predict that a 10% cap would likely lead credit card companies to drastically reduce credit availability for a vast majority of customers. They estimate that accounts for over 80% of individuals with credit scores below 740 could be closed or severely restricted to offset the reduced fees. Morgan Stanley analysts further caution that tighter credit for lower-income Americans could lead to a roughly 5% reduction in overall consumer spending, delivering a significant hit to the economy, given that credit card spending accounts for 30% to 40% of total annual consumer spending.

Addressing the Housing Crisis: Institutional Investors and Mortgage Bonds

The Trump administration is also taking aim at the housing market, seeking to tackle high mortgage rates and intense competition for homes. The proposed strategy involves directing the federal government to purchase $200 billion in mortgage bonds and, perhaps more controversially, banning institutional investors from buying single-family homes. White House spokesman Davis Ingle stated that President Trump is committed to making homeownership more affordable by ‘eliminating unnecessary red tape, increasing supply and lowering costs,’ with more details expected at the World Economic Forum in Davos.

While the goal is to ease the path to the American Dream, the effectiveness of these measures is debated. The average rate for a 30-year mortgage has already dipped below 6% by mid-January 2026, its lowest in three years, suggesting that a ban on institutional investors might not significantly ‘move the needle on affordability,’ according to some economists. Institutional investors, defined as those owning at least 100 properties, account for only about 1% of the total single-family housing stock nationally, though their presence is more pronounced in specific markets like Atlanta, where they own about 27% of single-family rental properties. The larger issue of housing supply, experts agree, is a long-term challenge that will take years to resolve.

Economic Resilience and Global Positioning

These domestic interventions occur against a backdrop of a U.S. economy that has shown remarkable resilience in Trump’s second term. Macroeconomic figures suggest the U.S. has arrested its relative decline compared to other global powers. The Federal Reserve Bank of Atlanta projects an impressive 5.3% growth in the fourth quarter of 2025. The trade deficit has plummeted to its lowest levels since 2009, suggesting that Trump’s tariffs may have rebalanced global trade without accelerating inflation or hindering GDP growth. The U.S. has also maintained its position as a net energy exporter since 2019 and continues to lead in cutting-edge technologies like artificial intelligence.

This economic strength, according to some observers like former Trump national security advisor Robert O’Brien, underpins a ‘peace through strength’ foreign policy that has seen ‘targeted ops against bad actors’ and the ‘relentless pursuit of American military and economic strength.’ While the focus of Trump’s second term has been heavily on foreign policy, with interventions in Venezuela and actions against Iran, this robust domestic economic performance provides a foundation. Geopolitical analyst John Hulsman notes that Trump’s aim is for the U.S. to be ‘chairman of the board’ of great powers, rather than an uncontested global hegemon, reflecting a modulated approach to competition with countries like China, even as tough actions are taken to contain its aggression.

President Trump’s aggressive interventions into the financial system, from challenging the Fed’s independence to capping credit card rates and altering housing market dynamics, reflect a decisive effort to directly address consumer affordability. While these measures could offer immediate relief and align with a broader narrative of American economic resurgence, they also carry significant risks. The potential for undermining critical institutions like the Federal Reserve, restricting credit access for vulnerable populations, and introducing unforeseen market distortions demands careful consideration, suggesting that the long-term efficacy and consequences of these bold policies remain a complex and uncertain equation.