The Trump administration accelerated its deregulatory push on Thursday by asking the Financial Oversight Stability Council, a financial crisis-era government panel that monitors threats to the financial system, to take steps to ease regulations that they claim are strangling economic growth.
The focus on deregulation comes as President Trump looks to jump-start economic output ahead of midterm elections next year. Republicans are hopeful that Americans will see benefits from the tax legislation that they passed earlier this year and the fruits of new foreign investments that have been pledged as part of trade agreements.
The loosening of regulations has been described by Mr. Trump’s advisers as the third pillar of his plan to unleash the nation’s economic potential.
Mr. Bessent argued in a letter accompanying the annual FSOC report that financial stability is best achieved through faster economic growth, which is constrained by unnecessary regulations. He is directing the FSOC to create working groups that will focus on Treasury market resilience, the resilience of household finances, opportunities for artificial intelligence to help safeguard the financial system and preparation for cyberattacks.
“The Council will work with and support member agencies in considering whether aspects of the U.S. financial regulatory framework impose undue burdens and negatively impact economic growth, thereby undermining financial stability,” Mr. Bessent wrote.
The Trump administration has been rolling back regulations around the country. This week, Mr. Trump said that he would issue an executive order to curb state laws on artificial intelligence.
Mr. Bessent has also been working on regulatory changes that would give the Treasury Department’s Financial Crimes Enforcement Network more power to oversee anti-money-laundering and terrorist-financing rules that have posed compliance challenges for banks.
“This will be a significant departure from the past, with its zero-tolerance focus on process and documentation and wide latitude for supervisory expectations and judgments that are not always consistent with the law or our national security priorities,” Mr. Bessent said at a Federal Reserve community banking conference in October.
Mr. Bessent’s deregulatory push mirrors shifts underway at the country’s top banking watchdogs. In October, Michelle W. Bowman, the Fed’s vice chair for supervision, launched an overhaul of the way the central bank monitored and addressed risks in the financial system. That included directing the 12 regional reserve banks, whose staff examine banks across the country, to focus on activities that posed a “material financial risk” either to a lender’s “safety and soundness” or the financial system more broadly.
In a memo, her department stipulated that supervisors should not become “distracted” from that priority by “devoting excessive attention to processes, procedures and documentation” of activities that did not reach that threshold. Nor should they devote as many resources to “smaller, less complex and less systemic organizations.”
Around the same time, Ms. Bowman said she would be slashing 30 percent of the Fed’s supervision and regulation staff in Washington. Earlier this year, she spearheaded regulatory changes including loosening a rule dictating how much easy-to-access money lenders need to set aside against their leverage and making annual tests gauging banks’ ability to withstand shocks less onerous.
Ms. Bowman said her goal was to build a “more effective supervisory framework that truly promotes safety and soundness across our financial system, which is the Federal Reserve’s core supervisory responsibility.”
The new direction for FSOC represents a departure from the Biden administration, which sought to bolster regulations and focus on longer term risks such as climate change, which Democrats believe poses a threat to financial stability.
Democrats have criticized the Trump administration’s focus on relaxing regulations for Wall Street banks when corporate bankruptcies have been rising.
“Taking this hands-off approach to financial stability would leave our financial system and economy at greater risk in any economic environment,” said Senator Elizabeth Warren of Massachusetts, the top Democrat on the banking, committee.
Dennis Kelleher, the chief executive of Better Markets, a nonprofit that promotes stricter financial regulations, said that Mr. Bessent’s deregulation efforts would benefit the wealthiest Americans. He also argued that a well-regulated financial industry was necessary for economic growth.
“This administration is gutting the FSOC and turning it into a vehicle for recklessly pursuing a deregulatory agenda that will only result in the type of bubble growth that inevitably leads to more financial crashes and needless economic harm,” Mr. Kelleher said.
Alan Rappeport is an economic policy reporter for The Times, based in Washington. He covers the Treasury Department and writes about taxes, trade and fiscal matters.
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