U.S. Treasury Secretary Janet Yellen has a message for President-elect Donald Trump: back off from meddling in the regulation of the American banking system.
She called out Trump’s transition team for reportedly eyeing drastic cuts or mergers in Washington’s top financial oversight agencies. Naturally, his return to power has raised questions about how far his administration might go to upend financial regulations built over decades.
Yellen, speaking as she prepares to hand over the Treasury keys to Trump’s nominee Scott Bessent, made it clear she’s not against change, but radical interference? That’s a no-go.
Banking regulations under the microscope
“Bankers always complain about over-regulation,” Yellen said. She admitted it’s fair to look at cutting red tape where costs outweigh benefits. But she defended core regulations on banks’ capital, liquidity, and risk-taking. “These are essential for a stable banking system and economy,” she emphasized.
Yellen’s concerns aren’t baseless. She pointed to the sudden collapses of Silicon Valley Bank and Signature Bank in March 2023. These failures, she said, were stark reminders of what happens when banks aren’t properly supervised.
With a century of history as proof, Yellen argued that bank oversight and deposit insurance are non-negotiable to avoid another financial meltdown.
She also hinted at rumors about Trump’s team exploring ways to shrink or even eliminate key regulatory bodies. While she didn’t have specifics, she made her opinion known: less oversight is a recipe for chaos.
Financial stability or political games?
The Dodd-Frank Act is a post-2008 financial crisis legislation designed to prevent systemic risks. This law gave birth to the Financial Stability Oversight Council, the Federal Reserve’s financial stability division, and the Treasury’s Office of Financial Research.
Critics said it would strangle banks, but Yellen countered that U.S. banks are thriving despite initial complaints. “U.S. banks are doing exceptionally well,” she said, dismissing early fears that Dodd-Frank would ruin their competitiveness.
For Yellen, the system isn’t perfect, but it works. And while she acknowledged ongoing debates about merging some agencies, she made it clear that dismantling safeguards isn’t the way forward.
The elimination of the Office of Thrift Supervision post-2008, for example, happened without causing harm, but further consolidation hasn’t been her focus.
Trump’s approach to financial oversight could go hand-in-hand with his broader economic goals. His administration is expected to revisit his hallmark 2017 Tax Cuts and Jobs Act (TCJA), which delivered sweeping changes for businesses and individuals.
During his campaign, Trump promised to extend those tax cuts and proposed new policies like eliminating taxes on tips, scrapping Social Security taxes for seniors, and lifting the $10,000 SALT deduction cap.
Tax battles brewing
With 2025 approaching, uncertainty looms over Trump’s tax policies. The TCJA was a game-changer in 2017, slashing corporate tax rates and providing temporary benefits for individuals.
Financial advisors have been urging wealthy clients to plan for estate tax changes, with the current $13.99 million exemption per person set to revert to 2017 levels if Congress doesn’t extend it.
Trump’s past legislative surprises, like the last-minute passage of the TCJA in December 2017, left little time for analysis before major changes kicked in.
Tax advisors remember the confusion surrounding the qualified business income deduction, which gave a 20% tax break to pass-through businesses but came with a complicated multi-step calculation.
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