Trump Administration's Plans for Financial Regulatory Agencies

According to the Wall Street Journal, the Trump transition team is exploring ways to reduce or eliminate key financial regulatory agencies in Washington.

Advisers and officials from the new Department of Government Efficiency have suggested abolishing the Federal Deposit Insurance Corporation (FDIC) during interviews with potential banking oversight nominees, citing sources familiar with the matter.

During these discussions, candidates for positions at the FDIC and the Office of the Comptroller of the Currency (OCC) were asked about the possibility of transferring deposit insurance responsibilities to the Treasury Department, which would require congressional approval.

While previous administrations have restructured government bodies, shutting down significant agencies like the FDIC remains unprecedented.

Banking executives hope the Trump administration will ease regulatory burdens, including capital requirements, consumer protections, and industry merger oversight. However, FDIC deposit insurance is deemed essential, and any policy that might shake confidence could worsen crises for banks.

Concerns over last year’s bank failures prompted customers to shift funds to larger banks, leading to calls for expanded deposit insurance for smaller institutions.

Discussions highlight Trump’s dramatic overhaul plans, including potential nominees meeting with Scott Bessent, Trump's Treasury Secretary nominee, and leaders from the Department of Government Efficiency, co-chaired by Elon Musk and Vivek Ramaswamy. Musk advocates for eliminating the Consumer Financial Protection Bureau, citing duplicated regulatory efforts.

There are suggestions for restructuring bank oversight by merging or reorganizing the FDIC, OCC, and some parts of the Federal Reserve. One proposal involves retaining regulatory authority for only one agency, while the others would shift focus to non-regulatory roles.

Additionally, the Consumer Financial Protection Bureau may replace regulatory roles with consumer-education positions. Any restructuring is expected to result in significant job cuts, with plans to reinstate the Schedule F executive order for easier employee dismissal and stricter return-to-office policies, further leading to workforce reductions.