The Wall Street Journal reported today (13th) citing informed sources that Trump's transition team is exploring ways to significantly reduce, merge, or even outright eliminate top Wall Street banking regulatory agencies, including the Federal Deposit Insurance Corporation (FDIC).
Insiders say that during recent interviews with potential nominees to lead banking regulatory agencies such as the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC), advisors to Trump and the Department of Government Efficiency led by Musk (DOGE) have inquired about whether Trump could abolish the FDIC or merge federal deposit insurance into the Treasury.
Last month, Musk also called for the removal of the Consumer Financial Protection Bureau (CFPB), which has long been criticized by Republicans. Insiders noted that Trump's advisors and potential nominees also discussed plans to merge or otherwise reorganize parts of the FDIC, OCC, and the Federal Reserve.
Additionally, an insider also indicated that in another plan of the transition team, parts of the FDIC, OCC, and the Federal Reserve would not be merged, but only one agency would continue to regulate banks, while the others would retain only non-regulatory personnel. In the CFPB, consumer education efforts might replace regulatory functions.
Trump's desire to abolish the FDIC has led to differing views in the banking industry.
The WSJ pointed out that any proposal to eliminate the FDIC or other banking regulatory agencies would need to be acted upon by Congress. Although past presidents have reorganized and renamed government departments, Washington has never closed a major cabinet-level agency and rarely shuts down top agencies like the FDIC.
Especially since the FDIC's deposit insurance is considered nearly sacred in the U.S., any threats or actions that undermine the perception of deposit insurance could quickly ripple through banks, shaking the stability of the U.S. financial system and intensifying customer panic during a banking crisis.
However, some banking executives are optimistically believing that Trump's streamlining of banking regulatory agencies will relax a series of regulations concerning capital reserve buffers and consumer protection, as well as reviews of industry consolidation.
However, some banking professionals prefer to maintain contact with multiple regulatory agencies, as this allows them to balance between different regulators. Former Republican FDIC Chair Sheila Bair stated in an interview that a direct proposal to eliminate bank regulatory agencies would find it difficult to gain support from Congress and the banking industry.
"Banks might complain, but in the end, they want their own regulatory agency and to establish connections with it. They like the status quo."
Collaboration between cryptocurrency companies and banks may be loosened.
It is noteworthy that last Friday, Coinbase's Chief Legal Officer Paul Grewal publicly disclosed legal documents revealing that the Federal Deposit Insurance Corporation (FDIC) had sent letters to several U.S. banks more than 20 times in 2022, urging them to refrain from providing financial services to the cryptocurrency industry.
Now that the FDIC has become a target for reduction or even abolition by the Trump administration, it may significantly remove regulatory obstacles for future cooperation between the cryptocurrency world and U.S. banks, as well as interactions with the fiat world. A spring for cryptocurrency in the U.S. seems promising, as the current government's 'Stifling Action 2.0' against cryptocurrencies has ended in failure.