Treasury Department Deregulation Agenda Raises Concerns About Financial Stability

Treasury Secretary Scott Bessent is pushing forward with a significant financial deregulation agenda that marks a substantial shift in how the federal government approaches banking oversight. According to reporting from Politico, Bessent has unveiled what he calls a fundamental reset of the post-financial crisis rulebook that governed the nation's banks.

The Treasury Department under Bessent's leadership is advancing changes to multiple key regulations. These modifications target rules designed to reduce banks' reliance on debt, update guidelines for combating money laundering, and remove regulatory barriers to banks' use of artificial intelligence in certain operations. What sets this current effort apart from previous administrations is the unusually strong coordination between the Treasury Department and top regulators at the Federal Reserve, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency.

Bessent has been explicit about his intentions. In April, he told the American Bankers Association that he and his team would devote necessary time and attention to the technical and substantive aspects of regulatory reform. At the Financial Stability Oversight Council's final meeting in December, Bessent took an even broader approach by writing an introductory letter to the 2025 annual report, marking the first such letter since 2011. In that letter, he declared that the council would no longer focus solely on prophylactic regulatory policies but would instead emphasize economic growth.

However, this aggressive deregulation push has drawn criticism from financial experts. Graham Steele, a former assistant secretary for domestic finance at the Treasury and now a fellow at Stanford Law School, warned that the administration appears to be pushing new financing for artificial intelligence, cryptocurrency, and cheaper credit as tools to address broader economic issues like housing affordability. Steele contends that this approach simply adds more financial leverage without addressing underlying problems. He expressed concern that independent regulators may feel pressure to subordinate sound risk management to accommodate policies favoring increased borrowing.

The high degree of coordination among regulators and the speed of the deregulation initiative have raised questions about the erosion of natural checks and balances within the oversight system. Observers note that such alignment among regulators is unusual, as disagreement among agencies frequently derails regulatory efforts, even when officials share common goals.

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