Important points
Trump's team is considering restructuring financial regulators, potentially eliminating the FDIC. Significant changes to federal banking regulators require Congressional approval, which has historically been difficult to obtain.
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President-elect Donald Trump's transition team is considering a major reorganization of financial regulators, including abolishing the Federal Deposit Insurance Corporation (FDIC) and merging its functions with the Treasury Department.
President Trump's advisers are interviewing candidates for key regulatory positions, including roles at the FDIC and Office of the Comptroller of the Currency (OCC), including eliminating the FDIC and transferring its deposit insurance functions to the OCC. I asked if it was possible. Treasury Department and people familiar with the discussions told The Wall Street Journal.
The team is also considering consolidation or restructuring of other major regulatory agencies, such as the OCC and the Federal Reserve.
However, it is highly unlikely that such a move will occur. To eliminate the FDIC, Congress would have to pass legislation repealing the law that created and administers the FDIC. Additionally, although the president has the power to reorganize, consolidate, and create government agencies, there has never been a case where a major cabinet-level agency has been completely abolished.
The banking industry is expected to benefit from Trump's reelection. The incoming administration could roll back many of the regulations imposed during the Biden administration, particularly those related to capital requirements.
President Trump’s return could also lead to a shift towards less regulation of both banks and the crypto industry. This could create an environment in which banks can feel more comfortable providing services to crypto companies without fear of backlash from regulators.
FDIC Chairman Martin Gruenberg, along with several key members of the SEC and OCC, have announced an effort allegedly launched by the current administration and a number of regulators aimed at restricting the crypto industry's access to banking services. He is said to be participating in Operation Choke Point 2.0.
Venture capitalist Nick Carter previously noted that SEC Chairman Gary Gensler and Sen. Elizabeth Warren are among the regulators developing Chokepoint 2.0.
Gruenberg said in May that he was prepared to step down once a replacement was confirmed. The announcement follows an internal investigation that revealed toxic work conditions and abuse at the FDIC. He officially announced his retirement last month. His leave will take effect from January 19, 2025.
Mr. Gensler will retire from the SEC on January 20th, but Sen. Warren will continue in her post following her re-election in Massachusetts. In the election held on November 5, he defeated Republican challenger John Deaton with approximately 59.6% of the vote, securing his third term.
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