AYESHA RASCOE, HOST:
Speaking before some of the wealthiest people in the world, President Trump took a minute at the World Economic Forum in Davos, Switzerland, last week to talk about affordability. He called on Congress to pass two laws to save Americans money on housing and credit cards, but any actual legislation is still a long way from being sent to his desk. We're joined now by NPR's personal finance reporter Stephan Bisaha. Good to have you.
STEPHAN BISAHA, BYLINE: Hey. Good to be with you, Ayesha.
RASCOE: So let's start with housing. President Trump says he wants Congress to ban Wall Street investors from buying up single-family homes and crowding families out of the market.
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PRESIDENT DONALD TRUMP: But homes are built for people, not for corporations, and America will not become a nation of renters. We're not going to do that.
RASCOE: So what has the president done on this so far?
BISAHA: Well, the night before Trump spoke at Davos, he did sign an executive order meant to limit the sale of single-family homes to large investors. It says federal agencies have 60 days to stop supporting these sales. But, you know, that's pretty far from a ban on the sales, so Trump has also ordered his staff to start writing recommendations for legislation for Congress. But, you know, there's no new bill yet.
RASCOE: So how big of a shadow do those Wall Street investors cast over the housing market?
BISAHA: Yeah. So if you're a potential homebuyer going up against, like, a deep-pocketed corporation, that can be really scary. They can pay in cash. They can outbid you. They can close the deal a lot faster. And that does happen, but actually, most of these investors are not Wall Street corporations. That's according to Kate Wood. She's with the financial advice website NerdWallet. She says it's like at the end of an episode of "Scooby-Doo," when they finally capture and unmask the monster and it turns out to be someone who's not all that scary.
KATE WOOD: So you have this, you know, monster - right? - the idea of this hedge fund investor, the monster. But it's actually someone you already met. It's actually a regular person that you know who is more likely to be the investor.
BISAHA: Yeah. Investors own about 20% of the market, but most of them are neighbors buying up just a couple of homes. Those big Wall Street guys who can afford thousands of properties - they're just 3% of the market.
RASCOE: So would going after only those large investors affect home prices that much?
BISAHA: The people I spoke to said no, at least not nationally. But our colleague Jennifer Ludden has reported that in some cities, large investors own a big part of the market, like in Atlanta and parts of Indianapolis. That city passed its own ban that started this month.
RASCOE: OK. Well, we'll have to see if Congress does take this idea on. But President Trump also addressed another affordability issue at Davos - credit cards.
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TRUMP: I'm asking Congress to cap credit card interest rates at 10% for one year.
RASCOE: So why is he pushing for this cap?
BISAHA: Well, it's because interest rates are really high right now - like, around 22% on average. So a 10% cap - that would be a huge drop, and that would make a big difference for the 60% of credit card holders who carry a balance month to month. Now, there was legislation introduced last year, and both the House and the Senate meant to do this exact same thing. But it has not gone anywhere yet.
RASCOE: I would imagine that the banks are not big fans of this idea.
BISAHA: No, they are not. I mean, credit cards are risky for banks because they are basically unsecured loans. If someone can't pay them back, banks often just take that loss, and they make up for that with higher interest rates. The American Bankers Association says the cap could lead to as many as 85% of all open credit cards either being closed or having their limits lowered. Here's Capital One CEO Richard Fairbanks on a recent earnings call, making a pretty dramatic prediction.
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RICHARD FAIRBANK: The lack of credit would result in greatly reduced consumer spending and would likely bring on a recession.
RASCOE: A recession is definitely dramatic.
BISAHA: Yeah.
RASCOE: How could a credit card cap cause a recession?
BISAHA: Well, the argument from Fairbanks and others in the banking industry is that so much of this economy is propped up by consumer spending that if you cut off the main way a lot of that spending happens, which is credit cards, that could be devastating. 70% of GDP is consumer spending. But not everyone agrees that the banks would pull back this much. I spoke with a researcher at Vanderbilt University who argued banks could absorb a lot of that loss without significantly harming consumers. Now, this idea of a cap has been floating around Congress for a while, so we'll see if Trump's call for action will make a difference.
RASCOE: That was NPR's personal finance reporter Stephan Bisaha. Thank you so much for speaking with us today.
BISAHA: Thank you. Transcript provided by NPR, Copyright NPR.
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