NEW YORK — A proposed credit card rate cap and the Justice Department’s criminal probe of Federal Reserve Chair Jerome Powell weighed on bank and card-issuer stocks Monday, even as the Dow Jones Industrial Average and S&P 500 finished at record highs. Investors weighed whether Washington can curb borrowing costs without choking off credit — and whether the Powell investigation signals a deeper threat to Fed independence, Jan. 12, 2026.
credit card rate cap shakes lenders and raises questions about access
President Donald Trump has called for a one-year, 10% credit card rate cap starting Jan. 20, a move that would hit one of the banking industry’s most profitable businesses and could push lenders to trim credit lines for riskier borrowers, according to a Reuters report on the market reaction. Wall Street analysts have also questioned whether the administration can impose such a cap without Congress, given expected legal challenges.
Credit cards remain among the costliest ways to borrow. The Federal Reserve’s latest consumer credit release shows the average interest rate on credit card plans was 20.97% in November, underscoring how far a 10% cap would cut from prevailing rates (see the Fed’s current G.19 consumer credit data).
Bank trade groups said they support lower-cost credit in principle but warned a blanket cap could backfire. In a joint statement, industry associations said “evidence shows” a 10% cap would reduce credit availability and steer some borrowers to “less regulated, more costly alternatives,” according to the American Bankers Association’s release.
DOJ probe of Powell heightens Fed independence fears
Markets opened weaker after Powell said the Justice Department served subpoenas tied to his congressional testimony about cost overruns and design elements of a roughly $2.5 billion renovation of Fed buildings, a case that has drawn bipartisan concern about political pressure on monetary policy. Several Republican senators and former Fed officials publicly defended the central bank’s independence, according to an Associated Press account of the investigation and backlash.
Dow and S&P 500 end at record highs despite the crosscurrents
By the close, stocks had largely recovered, with investors instead looking ahead to bank earnings and upcoming inflation data. The Dow rose 86.13 points to 49,590.20, and the S&P 500 gained 10.99 points to 6,977.27 — both record closes — while the Nasdaq added 62.56 points to 23,733.90, AP reported in its market wrap. Financial stocks lagged even as the broader market climbed.
Rate-cap politics has a long runway
The latest credit card rate cap push builds on years of proposals aimed at curbing consumer borrowing costs. In 2019, Sen. Bernie Sanders and Rep. Alexandria Ocasio-Cortez proposed legislation to cap interest rates on credit cards and other consumer loans at 15%, Reuters reported at the time. In 2023, Sen. Josh Hawley introduced a separate plan to bar credit card rates above 18%, CBS News reported.
For now, the market’s message was mixed: investors appear willing to buy dips in the broader indexes, while treating the credit card rate cap talk — and the Powell probe — as risks that could reshape banking profits, credit availability and the Fed’s room to maneuver in 2026.
