The Wall Street Journal reported today (13th) citing insiders that Trump's transition team is exploring ways to significantly reduce, merge, or even directly eliminate top Wall Street banking regulators, including the U.S. Federal Deposit Insurance Corporation (FDIC).
Insiders say that during recent interviews with potential nominees to lead banking regulatory agencies such as the FDIC and the Office of the Comptroller of the Currency (OCC), advisors to Trump and the Department of Government Efficiency (DOGE) led by Musk have inquired whether Trump could abolish the FDIC or merge federal deposit insurance into the Treasury Department.
Last month, Musk also called for the elimination of the Consumer Financial Protection Bureau (CFPB), which has long been criticized by Republicans. Insiders pointed out that Trump’s advisors and potential nominees are also discussing plans to merge or otherwise restructure 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 of the agencies would continue to regulate banks, while the other agencies would retain non-regulatory personnel. In the CFPB, consumer education efforts might replace regulatory functions.
Trump's desire to abolish the FDIC has divided opinions in the banking industry.
The WSJ pointed out that any proposal to eliminate the FDIC or other banking regulatory agencies would require action in Congress. While past presidents have restructured and renamed government departments, Washington has never closed a major cabinet-level agency, nor has it often closed 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 could undermine the perception of deposit insurance could quickly affect banks, shake the stability of the U.S. financial system, and exacerbate 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 retention buffers and consumer protection, as well as scrutiny of industry consolidation.
However, some banking professionals prefer to maintain contact with multiple regulators, as this allows them to weigh options among different regulatory bodies. Republican FDIC former chair Sheila Bair stated in an interview that the proposal to directly eliminate banking regulatory agencies would be difficult to gain support from Congress and the banking industry.
"Banks may complain, but ultimately, they want their own regulatory body and to establish a relationship with it. They like the status quo."
Collaboration between crypto companies and banks may be relaxed.
Notably, last Friday, Coinbase's Chief Legal Officer Paul Grewal publicly released legal documents revealing that the Federal Deposit Insurance Corporation (FDIC) had sent letters to several U.S. banks more than 20 times in 2022, discouraging them from providing financial services to the crypto industry.
Now that the FDIC has become a target for the Trump administration's downsizing or even abolition, it may greatly remove regulatory barriers to future cooperation between the cryptocurrency world and U.S. banks, as well as interactions with the fiat currency world. A crypto spring in the U.S. seems promising, as the current administration's "Stifling Action 2.0" against cryptocurrencies has failed.