‘fundamental Reset’: Scott Bessent Has A Plan To Free The Nation’s Banks

Treasury Secretary Scott Bessent wants to rewrite the post-financial crisis rulebook for the nation’s banks. And he’s using government regulators themselves to loosen many of the rules they put in place.

Bessent is increasingly steering independent agencies to relax oversight of lenders, usher digital assets into the banking system, and reduce costs for megabanks that trade in U.S. government debt. In doing so, he is redefining the relationship between the administration and federal agencies, which have long enjoyed significant autonomy in supervising banks.

That centralization of control is aimed at easing some of the sweeping rules enacted after the 2008 financial crisis, which subjected banks and the financial sector to broader and more intensive controls to prevent another market meltdown. The speed and success of the deregulation is sparking concern that Bessent will put Wall Street’s interests ahead of the health and stability of the financial system.

But one of Bessent’s deputies, Jonathan McKernan, said the secretary’s approach will ensure that the agencies are taking into account the broader impact of regulations on the economy, a decades-old Republican priority. The Trump administration, he said, is setting its sights on a major overhaul of the post-crisis regime.

“As the secretary has said, we need a fundamental reset of financial regulation,” McKernan, who is undersecretary for domestic finance, said in an interview. “That reset needs to be rooted in a long-term vision for the financial system. Defining that vision inevitably entails value judgments, and so it cannot be a purely technocratic exercise.”

“Treasury’s involvement helps give reform legitimacy and ensures that we’re all looking to the same true north,” he added.

Bessent’s strong hand in regulation is a notable departure from the practice of most previous Treasury secretaries, who have usually deferred to the agencies. Instead, he and his deputies regularly meet with the regulators to push his priorities.

It’s yet another area where Bessent is amassing influence over economic policy in the administration, which has included an extraordinary level of involvement in President Donald Trump’s trade agenda and taking on the direct leadership of the Internal Revenue Service, among other areas.

The deregulatory moves so far have thrilled the banking industry, which spent years bracing for tougher and more expensive regulations during both the Obama and Biden administrations. Bessent told POLITICO this week that deregulation under Trump has freed up “$2.5 trillion of extra lending capacity,” citing private-sector analysis.

Sen. Elizabeth Warren of Massachusetts is among those raising concerns about the unusual scale of involvement by the administration.

“Our financial cops on the beat are no longer independent from the White House — and they are certainly not independent from Wall Street,” Warren, the top Democrat on the Banking Committee, told POLITICO in a statement. “Secretary Bessent has spearheaded Trump’s Wall Street First agenda that is good for bank executives and billionaire hedge fund investors while leaving the economy vulnerable to another financial crash.”

Bessent and his team are pushing for changes to a number of key rules, including those designed to reduce banks’ reliance on debt, as well as guidelines governing efforts to combat money laundering. The administration is also looking to remove regulatory barriers to banks’ use of artificial intelligence in certain cases.

To be certain, it is not unusual for Treasury to consult with the agencies on regulation, particularly since the financial crisis. The department will often give input on its vision to help regulators craft rules. And the Treasury secretary chairs the Financial Stability Oversight Council, a body created by the landmark Dodd-Frank law to regularly convene agency heads to discuss stability risks. Insiders say the regulators still have the latitude to draft their own rules, and were already largely in agreement with the vision put out by Treasury.

What has changed in this administration is Bessent’s level of involvement, his prioritization of financial deregulation, and the unusually strong alignment between the administration and top regulators at the Federal Reserve, the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency.

“In general, the Treasury working with the regulatory agencies is not new at all. But what we see here is a difference in emphasis,” said Nellie Liang, senior fellow at the Brookings Institution and McKernan’s predecessor.

Bessent has made a number of speeches and proclamations that lay out what he wants to do. In April, he told the American Bankers Association that he and his team would “devote the necessary time and attention to the quite technical, substantive aspects of regulatory reform.”

At the FSOC’s final meeting in December, he took a more sweeping approach. He wrote an introductory letter to the 2025 annual report — which officials said was the first such letter since 2011 — and proclaimed that the FSOC would no longer be focused solely on “prophylactic” regulatory policies. Instead, it would emphasize economic growth.

Bessent’s critics argue that the speed at which the administration has pushed forward its deregulatory agenda, and the high degree of coordination among the various regulators, is eroding natural checks and balances within the oversight system.

“The concern here would be that agencies feel pressure to subordinate sound risk management to accommodate policies that try to solve broader economic problems through more borrowing,” said Graham Steele, former assistant secretary for domestic finance at the Treasury, now a fellow at Stanford Law School. “The administration seems to be pushing new financing for AI, crypto, and even cheaper credit as a tool to address housing affordability. This approach doesn’t actually address the underlying issues, it just piles on more leverage. That’s a dynamic that independent regulators are supposed to push against.”

Still, a lack of alignment among regulators can sink rulewriting attempts, even among officials who have the same goals — a lesson learned by Biden-era regulators when they failed to reach an agreement on revising rules aimed at making sure banks are prepared for unexpected losses.

Fierce pushback to the initial proposal — particularly from the banking industry — led to significant delays, and then-Fed Vice Chair for Supervision Michael Barr’s plan to readjust it never moved forward after the Consumer Financial Protection Bureau’s director, Rohit Chopra, objected to the process.

That type of experience has led even people who are ideologically different from the Treasury secretary to be sympathetic to his governing style.

“Bessent is interested, and he gets this stuff,” said Jeremy Kress, a professor at the University of Michigan, formerly a Biden DOJ official and a lawyer at the Fed who generally advocates for more regulation. “The problem with the prior administrations is that the Treasury Department has taken a hands-off approach to regulation, either because they did not care or because they thought that the banking agencies were independent and should not be interfered with. But with a hands-off approach, there is nobody in charge.”

According to a senior official at one of the regulators, granted anonymity to speak freely, Trump’s regulators were selected because they “sing from the same songbook” and have a track record of being in accord with the administration.

Comptroller of the Currency Jonathan Gould served as the agency’s top lawyer during the first Trump administration, while FDIC Chair Travis Hill and McKernan were on the FDIC board during former President Joe Biden’s term. Fed Vice Chair for Supervision Michelle Bowman was appointed to the board of governors by Trump in the first administration, and had given multiple speeches arguing for a more streamlined regulatory approach.

The FDIC and the Fed declined to comment. The OCC pointed POLITICO to its statutory authority, which outlines its autonomy from the Treasury.

“The statute that governs my relationship with the Treasury secretary is unchanged,” Gould said in an interview, adding that he’s working closely with both the department and his fellow regulators.

The FDIC board, which usually has two out of its five appointees from outside the president’s party, is currently made up of three Republicans. The Trump administration has not announced plans to appoint any Democrats. The White House declined to comment.

McKernan told POLITICO that the Treasury is looking to build upon its early momentum to push through more changes.

“This regulatory reset isn’t reactionary or isolated measures,” he said. “Treasury’s plan is rooted in a blueprint for innovation, economic growth, safety and soundness, and financial stability. That means revisiting the very specific calibration of some very granular requirements to ensure an appropriate balance across these objectives.”

That includes looking at rules that govern banks’ easy access to cash and their financial buffers against unexpected losses.

“We have to revisit the entire post-crisis regulatory framework,” McKernan said. “Post-crisis regulation has entrenched the big banks, suffocated community banks, and stifled growth and innovation. About the only winners have been the Washington bureaucrats.”