Washington Policy Pulse: Fed Independence, Credit Card Caps, and Crypto Markups

Federal Reserve Independence Under Scrutiny

• 🏛️ Subpoenas issued to the Federal Reserve by the Justice Department are seen as part of President Trump's efforts to control the Fed, potentially related to Jerome Powell's testimony on building renovations.
• ⚖️ Analyst Elliott Stein believes it will be difficult to establish that Powell intended to mislead Congress, suggesting explanations for renovation discrepancies may not rise to a federal crime.
• ⚠️ Unintended consequences could include bolstering Lisa Cook's Supreme Court case on Fed independence and potentially motivating Powell to stay on as Fed governor beyond his term as chair.
• 🚫 Senator Tom Tillis has stated he would be reluctant to confirm any Fed nominee until the investigation is resolved, potentially holding up Trump's efforts for a new Fed chair.

Credit Card Interest Rate Cap Unlikely

• 💳 President Trump's stated intention to institute a 10% cap on credit card interest for one year is viewed as unlikely to be implemented due to state law governance and lack of presidential authority.
• 📉 Such a cap could lead to significant revenue losses for credit card issuers (estimated at $121 billion) and potentially tighten credit availability and impact reward programs.
• 🗳️ While affordability is an election-year focus, bipartisan legislative efforts for a cap have failed, and key committee chairs in Congress are not expected to support a presidential decree.

Housing Purchases and Cryptocurrency Markups

• 🏠 President Trump plans to ban corporate purchases of single-family homes, a move that has some bipartisan support but faces silent Republican opposition and is unlikely to pass quickly.
• 📈 Companies like Invitation Homes and AMH face real business model risks if such legislation passes, while firms like Blackstone may be less exposed.
• 📊 There is a 70% chance of a crypto bill passing in the first half of the year, contingent on the upcoming Senate Banking Committee and Senate committee markups.
• 🎢 The passage of crypto legislation hinges on avoiding partisan divides during markups, particularly concerning stablecoin yield provisions.

Government Funding and Tariffs

• 🗓️ A government shutdown is still at a 30% chance, with Congress likely to pass a mini-omnibus or kick the can to March via a continuing resolution.
• ⚖️ The Supreme Court's decision on President Trump's tariffs is anticipated, with key questions being whether refunds will be involved and if Trump will pursue other tariff avenues post-decision.
• 📉 The timing of any new tariff investigations, potentially occurring closer to an election, makes their re-implementation uncertain.