Trump team weighs options to eliminate key financial oversight regulator

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Key Takeaways

Trump’s team is considering restructuring financial regulatory bodies, potentially eliminating the FDIC.
Major changes to federal bank regulators would require congressional approval, which is historically difficult to obtain.

President-elect Donald Trump’s transition team is exploring a major restructuring of financial regulatory agencies, including potentially abolishing the Federal Deposit Insurance Corporation (FDIC) and merging its functions with the Treasury Department.

Trump’s advisors have been interviewing candidates for major regulatory positions, including roles at the FDIC and the Office of the Comptroller of the Currency (OCC), during which they have asked if it is feasible to abolish the FDIC and transfer its deposit insurance functions to the Treasury Department, people familiar with the discussions told The Wall Street Journal.

The team is also considering combining or restructuring other key regulators, including the OCC and the Federal Reserve.

However, such a move would be highly unlikely. To remove the FDIC, Congress would need to pass legislation repealing the laws that established and govern the agency. And while presidents have the authority to reorganize, consolidate, or create agencies, there has never been a case of fully abolishing a major cabinet-level agency.

The banking industry is expected to benefit from Trump’s reelection. The incoming administration may roll back many of the regulations imposed during the Biden era, particularly those related to capital requirements.

Trump’s return could also bring a shift towards less stringent regulations for both banks and the crypto industry. This could lead to an environment where banks feel more secure in offering services to crypto firms without fear of regulatory backlash.

FDIC Chair Martin Gruenberg, along with several key members of the SEC and the OCC, is allegedly part of Operation Choke Point 2.0, a purported initiative launched by the current administration and many regulators aimed at limiting the crypto industry’s access to banking services.

Venture capitalist Nic Carter pointed out previously that SEC Chair Gary Gensler and Senator Elizabeth Warren are also among regulators architecting Choke Point 2.0.

Gruenberg said in May that he would be prepared to step down once a successor was confirmed. The announcement followed an internal investigation that revealed a toxic work environment and abuse at the FDIC. He officially announced his retirement last month; his leave will be effective January 19, 2025.

Gensler will depart from the SEC on January 20, while Senator Warren will continue in her role after winning reelection in Massachusetts. She successfully secured a third term by defeating Republican challenger John Deaton with approximately 59.6% of the vote in the election held on November 5.