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'The Next Recession Starts Here': Trump Team Weighs Abolishing Bank Regulators
The president-elect's advisers are reportedly discussing plans to shrink or eliminate key bank watchdogs, including the Federal Deposit Insurance Corporation.
Dec 13, 2024
President-elect Donald Trump and his advisers are reportedly considering plans to weaken—or abolish altogether—top bank regulators, including the Federal Deposit Insurance Corporation and Office of the Comptroller of the Currency.
The Wall Street Journalreported Thursday that members of Trump's transition team and the new Elon Musk-led Department of Government Efficiency have asked nominees under consideration to head the FDIC and OCC if the bank watchdogs could be eliminated and have their functions absorbed by the Treasury Department, which is set to be run by a billionaire hedge fund manager and crypto enthusiast.
"Bank executives are optimistic President-elect Donald Trump will ease a host of regulations on capital cushions and consumer protections, as well as scrutiny of consolidation in the industry," the Journal reported. "But FDIC deposit insurance is considered near sacred. Any move that threatened to undermine even the perception of deposit insurance could quickly ripple through banks and in a crisis might compound customer fears."
The Trump team's internal and fluid discussions about the fate of the key bank regulators broadly aligns with Project 2025's proposal to "merge the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the National Credit Union Administration, and the Federal Reserve's non-monetary supervisory and regulatory functions."
The FDIC, which is primarily funded by bank insurance premiums, was established during the Great Depression to restore public trust in the nation's banking system, and the agency played a central role in navigating the 2023 bank failures that threatened a systemic crisis.
Observers warned that gutting the FDIC and OCC could catalyze another economic meltdown.
"The next recession starts here," tech journalist Jacob Silverman warned in response to the Journal's reporting.
Eric Rauchway, a historian of the New Deal, wrote that "even Milton Friedman appreciated the FDIC," underscoring the extreme nature of the incoming Trump administration's deregulatory ambitions.
Musk, the world's wealthiest man, is also pushing for the elimination of the Consumer Financial Protection Bureau, an agency established in the wake of the 2008 financial crisis.
The Journal noted Thursday that "Rep. Andy Barr, a Republican from Kentucky and Trump ally on the House Financial Services Committee, has backed the plan to eliminate or drastically alter the CFPB and said he wants to get rid of what he calls 'one-size-fits-all' regulation for banks."
Barr has received millions of dollars in campaign donations from the financial sector and "introduced many pieces of pro-industry legislation, including significant rollbacks of protections stemming from the 2008 financial crisis," according to the watchdog group Accountable.US.
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Bitcoin Hits New High as Crypto-Friendly Atkins Tapped to Lead SEC
"If Atkins is confirmed by the Senate, crypto grifters will surely rejoice at their newfound freedom to swindle, but most investors in the U.S. will be much less safe," wrote one researcher.
Dec 05, 2024
The price of a single Bitcoin topped $100,000 Wednesday—a major milestone for the cryptocurrency—mere hours after President-elect Donald Trump selected crypto advocate Paul Atkins to lead the Securities and Exchange Commission.
Atkins previously served as the SEC commissioner from 2002 to 2008 and then went on to found a financial consulting company, Patomak Global Partners, which included failed cryptocurrency exchange FTX among its clients, according to The Wall Street Journal. Atkins is expected to adopt a warmer approach to crypto.
On a podcast last year, Atkins noted that "if the SEC were more accommodating and would deal straightforwardly with these various [crypto] firms, I think it would be a lot better to have things happen here in the United States rather than outside," according to The Washington Post.
"[Atkins] believes in the promise of robust, innovative capital markets that are responsive to the needs of Investors, and that provide capital to make our Economy the best in the world. He also recognizes that digital assets and other innovations are crucial to Making America Greater than Ever Before," wrote Trump on Truth Social when announcing the pick.
Trump on Thursday claimed credit for Bitcoin reaching new heights: "CONGRATULATIONS BITCOINERS!!! $100,000!!! YOU'RE WELCOME!!! Together, we will Make America Great Again!"
Crypto leaders cheered the Atkins news.
"Paul Akins is an excellent choice for the new SEC chair!" wrote Brian Armstrong, the co-founder and CEO of the cryptocurrency exchange Coinbase. Brad Garlinghouse, CEO of the cryptocurrency firm Ripple, called Atkins an "outstanding choice."
Current SEC Chair Gary Gensler has pursued legal action against a number of crypto companies, including FTX, and drawn the ire of the crypto world for maintaining that by and large the crypto industry should be governed by the same SEC rules that oversee stock and bond trading.
Meanwhile, critics of the Atkins pick warned that investors could be less safe if he is confirmed to helm of the SEC.
"Donald Trump's nomination of Paul Atkins to chair the Securities and Exchange Commission is a huge gift to the crypto industry, as evidenced by the immediate jump in Bitcoin's stock price... If Atkins is confirmed by the Senate, crypto grifters will surely rejoice at their newfound freedom to swindle, but most investors in the U.S. will be much less safe," wrote Kenny Stancil, senior researcher at Revolving Door Project, a watchdog group.
Bartlett Naylor, financial policy advocate for Public Citizen, added that "any sentient being—let alone a securities markets expert—should understand that bitcoin is 'thin air,' as Trump himself once put it. That Paul Atkins has made a living promoting such a scam doesn't bode well for his reflexes as a shepherd for investor protection."
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Wall Street Cheers Trump's Treasury Pick, Corporate Tax Cut Proponent Scott Bessent
"For all his talk of looking out for working class Americans, President-elect Trump's choice of a billionaire hedge fund manager to lead the Treasury Department shows he just wants to keep a rigged system," said one critic.
Nov 25, 2024
With the stock market surging Monday morning after U.S. President-elect Donald Trump's nomination of hedge fund manager Scott Bessent to be treasury secretary, some Wall Street executives said they were celebrating a "reasonable" pick who would moderate some of Trump's most extreme proposals.
But economic justice advocates and experts said the jubilation was likely over expectations that Bessent will deliver "trillions in tax cuts to the ultra-wealthy."
Jeffrey Sonnenfeld, founder and president of the Yale Chief Executive Institute, toldCNN that the billionaire Key Square Group executive is a "pragmatic" choice who supports only "selective tariffs" and could dial back Trump's plan to introduce across-the-board tariffs of up to 20% on imported goods—a plan that economists say would raise prices for U.S. households.
But Bessent himself told radio host Larry Kudlow on Saturday that tariffs "can't be inflationary."
David Kass, executive director of the economic justice group Americans for Fair Taxation (ATF), said that during Bessent's confirmation process, the organization will work to ensure lawmakers get answers to questions about whether the Wall Street billionaire plans to use tariffs to fund another Trump plan Bessent has endorsed: the renewal of the 2017 tax cuts.
"As income inequality is soaring and Americans are being crushed by the rising costs of living, we have to ask why billionaire Scott Bessent supports renewing the Trump tax bill, which gives trillions in tax cuts to the ultra-wealthy and mega-corporations," Kass said. "Moreover, we also need to know how Mr. Bessent would fund this massive tax giveaway. Will he make working and middle-class Americans foot the bill by enacting wide-ranging cuts to vital government programs like Social Security and Medicare? Will he squeeze Main Street by raising prices on essential goods through tariffs?"
The government watchdog Accountable.US noted that Bessent has defended Trump's tariff plan, which analysts found would raise annual household costs by an average of $3,900, while backing the extension of Trump's tax plan, which overwhelmingly benefited the wealthy and corporations.
"For all his talk of looking out for working-class Americans, President-elect Trump's choice of a billionaire hedge fund manager to lead the Treasury Department shows he just wants to keep a rigged system that only works for big corporations and the very wealthy," said Accountable.US executive director Tony Carrk. "If confirmed, Scott Bessent's first order of business will be to push trillions of dollars in more tax giveaways to the very well-off and at the same time essentially enact a $3,900 tax increase for the typical American family."
"This is yet another disastrous cabinet nomination by Donald Trump, and a further indication of the administration's plans for massive giveaways to the superrich and slashing of regulatory safeguards that guarantee the well-being of the American people."
As the Dow Jones Industrial Average surged by 500 points on Monday, National Association of Manufacturers CEO Jay Timmons told CNN that Bessent is likely to try to rein in what he called President Joe Biden's "out-of-control government spending." Republican leaders have signaled that with the GOP set to control both chambers of Congress as well as the White House starting in January, the party is likely to try to make cuts to Medicare and Social Security—long derided by the right as too expensive and wasteful.
"Wall Street may be breathing a sigh of relief at Scott Bessent's nomination, but working people see no help coming their way," Sen. Elizabeth Warren (D-Mass.), who is set to be the highest-ranking Democrat on the Senate Banking Committee, said Monday. "Mr. Bessent's expertise is helping rich investors make more money, not cutting costs for families squeezed by corporate profiteering."
Earlier this year, Bessent told his clients at Key Square Group that a second Trump turn would mean an "economic lollapalooza" for them, with the Republican lowering taxes for his wealthy investors and bringing about an era of deregulation.
The Republican megadonor has proposed a "3-3-3" policy approach to Trump, which would include cutting the budget deficit by 3% by 2028, boosting GDP growth by 3%, and urging Big Oil to produce another 3 million barrels of crude oil per day.
Bessent has also expressed support for Trump's embrace of the cryptocurrency industry, which poured more than $110 million into federal election spending this year and spent an all-time high of $24.7 million on anti-regulatory lobbying in 2023.
Brad Garlinghouse, CEO of financial tech firm Ripple, said Friday that he expects Bessent to be "the most pro-innovation, pro-crypto treasury secretary we've ever seen." Critics have warned that the unregulated and highly speculative crypto industry has little to offer working people.
"America doesn't need a hedge fund executive to lead its economic policymaking, least of all one under the delusion that tax cuts for the rich, rollbacks of public regulatory protections, and an increase in oil drilling is somehow the way to strengthen the nation's economy," said Robert Weissman, co-president of consumer advocacy group Public Citizen. "This is yet another disastrous cabinet nomination by Donald Trump, and a further indication of the administration's plans for massive giveaways to the superrich and slashing of regulatory safeguards that guarantee the well-being of the American people."
Despite some proponents' claims that Bessent is a more mainstream pick than some other names that were floated for treasury secretary, Carrk said the nomination is from "the same old playbook, and it will have the same results of an economy that only works for a select few, not everyone."
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