Bad things happen when you mess with banks ability to price in risk, says Argus' Biggar

Summary

Stephen Biggar of Argus discusses President Trump's proposed 10% cap on credit card interest rates and its potential impact on banking and credit card stocks. He argues that interfering with risk-based pricing could reduce credit availability and create system risk, and says card issuers with the most exposure still face headline risk. The conversation also covers possible industry pushback, rewards programs, and the market reaction in Capital One, American Express, and Visa.

• Trump proposed a 10% cap on credit card interest rates.
• Capital One, American Express, and Visa traded lower after the proposal.
• Stephen Biggar says the proposal is not entirely surprising, citing earlier campaign and Senate proposals.
• He warns that limiting banks' ability to price risk can reduce credit availability and push lending to less-regulated areas.
• He says Capital One and Synchrony are most affected, with American Express exposed to some extent.
• He does not think the market fully overreacted because headline risk remains until timing and industry pushback are clear.
• He notes rewards programs are important to consumers and could be pulled back if card economics worsen.
• He says banks and card companies may try to become more efficient and improve risk-based pricing.