The efforts, announced separately over the past week, are tied to President Trump’s push to lower borrowing costs as consumers grapple with inflation and affordability pressures. Specifically, Mr. Trump has floated a ban on institutional investors buying single-family homes, and also capping credit card interest rates at 10% for one year. The Department of Justice launched an investigation into Federal Reserve Chair Jerome Powell, a probe that Powell said is a pretext for weakening the Fed’s independence in setting interest rates.
Although experts note that such measures could reduce borrowing costs for everything from mortgages to credit cards, economists warn they also risk backfiring — potentially reigniting inflation, restricting access to credit and undermining confidence in the U.S. financial system.
“Increasing affordability is a worthy goal of this administration, but none of the policies on the table are going to achieve that,” said Nick Anthony, a policy analyst at the nonpartisan Cato Institute, where he focuses on monetary policy.
He added, “In fact, most of them are likely to hurt consumers more than they will help them, whether it be price controls, intervening in the Federal Reserve, or intervening in the housing market. All of these interventions are more likely to distort the market than actually help it.”
In a statement to CBS News, White House spokesman Davis Ingle said Mr. Trump will unveil more details about his plans for making homes more affordable at the annual World Economic Forum in Davos, Switzerland, which starts on January 19.
“President Trump is committed to making it easier and more affordable to achieve the American Dream of homeownership by eliminating unnecessary red tape, increasing supply and lowering costs. President Trump is working tirelessly to undo the severe damage the Biden Administration inflicted on the American people through high prices,” Ingle said.
The White House referred questions about the Powell investigation to the Justice Department, which didn’t respond to a request for comment.
Risks of targeting Powell
President Trump has grown increasingly critical of Powell, regularly pressing him to lower interest rates and questioning his economic judgment.
Powell does not set rates alone. As a member of the Federal Open Market Committee, he is one of 12 officials whose majority vote determines whether the Fed cuts, raises or holds interest rates steady.
The latest effort by the Trump administration to target Powell comes after the Fed lowered its benchmark rate three times since September, with Powell citing easing inflation and a slowing labor market as justification for the cuts. Powell has long stressed that the Fed bases its rate decisions on economic data, emphasizing the central bank’s traditional independence from political influence.
On Sunday, Powell linked the Justice Department to efforts to undermine the Fed’s independence when setting interest rates.
“The threat of criminal charges is a consequence of the Federal Reserve setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the President,” Powell said in a statement.
Research has found that countries where central banks are more vulnerable to political influence have suffered from economic problems such as runaway inflation.
It’s important that “the Federal Reserve can act as it sees fit, and it can make the decisions that it believes to be right without fearing repercussions,” Cato’s Anthony said. “And when you do fear those repercussions, that’s when we see situations where there’s hyperinflation abroad, because the only concern was making sure that the leader, whether elected or authoritarian, was presented in the best light possible.”
Borrowing costs could decline if the White House is successful in pressuring Fed officials to lower interest rates, but the flip side could be surging inflation, noted Nigel Green of investment advisory firm deVere Group.
Any legal action against Powell also could undermine investor confidence in U.S. monetary policy, weakening the U.S. dollar as the world’s reserve currency and destabilizing the bond market, Wall Street analysts said.
“The Fed must remain independent in order for the central bank to remain effective and — this is important — for the integrity of the U.S. dollar and the all-important Treasury markets to remain the world’s benchmarks,” said Mark Malek, CIO at Siebert Financial, in an email.
Unintended consequences?
Americans have about $1.2 trillion in outstanding credit card debt, with lenders charging an average APR of about 23.8%, according to LendingTree.
On Friday, Mr. Trump called for a one-year cap of 10% on credit card rates, writing in a social media post that he “will no longer let the American Public be ‘ripped off’ by Credit Card Companies.”
Cutting credit card rates by more than half could save Americans $100 billion in interest annually, Vanderbilt University researchers said in a September report.
But a 10% cap could also have adverse consequences, experts added. Credit card companies would likely reduce credit for more than 80% of customers, with almost every account for people with credit scores below 740 closed or severely restricted to offset the reduced fees from a 10% cap, according to an analysis from the Electronic Payments Coalition, a financial industry trade group.
Credit card spending also accounts for 30% to 40% of total annual consumer spending, so tighter credit for lower-income Americans could reduce overall consumer spending by roughly 5% — a significant economic hit, according to Morgan Stanley analysts.
Housing’s biggest problem
Lastly, Mr. Trump is tackling housing affordability at a time when homeownership is increasingly out of reach for many Americans.
His approach aims to tackle two core issues with the housing market — higher mortgage rates and competition for homes — by directing the federal government to purchase $200 billion in mortgage bonds and banning institutional investors from buying single-family homes.
On Friday, the average rate for a 30-year mortgage dipped below 6%, its lowest level in three years. But experts said the strategies fail to address the housing market’s biggest problem — a lack of available homes that stems from underbuilding after the Great Recession.
“The affordability crisis is fundamentally a supply problem, and meaningful relief requires adding homes, both through new construction or through inventory gains in chronically constrained markets, particularly in the Northeast and Midwest,” said Realtor.com senior economist Jake Krimmel in an email.
For that reason, banning institutional investors from single-family home purchases “is unlikely to move the needle on affordability,” he concluded.
The lack of supply to meet demand from buyers is an issue that will take years to resolve, experts say.
“The administration is working to boost economic activity by the midterms, and easier monetary policy in the second half of the year would come too late to help Republican candidates,” noted Tim Duy of SGH Macro Advisors in a research note.