Treasury Secretary Scott Bessent is wasting no time making his priorities clear: loosening regulations on the U.S. financial system. In his first major policy statement, the former hedge fund manager called for rolling back oversight measures, signaling a return to the lighter-touch regulatory approach that Wall Street has long sought.
The timing is striking. As layoffs spike to financial crisis levels and economic uncertainty rises, Bessent is proposing to reduce guardrails on the banking system. It's a bet that deregulation will spur growth and lending—or it's a gift to the industry he came from.
Bessent's background matters here. Before taking the Treasury helm, he managed money for some of the world's wealthiest investors and institutions. He knows Wall Street's playbook intimately, and he's clearly sympathetic to the industry's complaints about post-2008 regulations that, in their view, constrain lending and innovation.
The question is cui bono—who benefits? Banks have been pressing for regulatory relief since the Dodd-Frank Act passed in 2010. The law imposed stricter capital requirements, stress tests, and consumer protections after the financial crisis that required taxpayer bailouts. Loosening those rules would certainly boost bank profitability by freeing up capital for dividends and buybacks.
Proponents argue that lighter regulation will increase lending to businesses and consumers, stimulating economic activity. They point to community banks that claim compliance costs are burdensome, and to larger institutions that say rules designed for crisis-era risks are no longer necessary.
But critics see a different picture: deregulation while economic storm clouds gather. The last time Washington significantly rolled back financial oversight was in the years leading up to 2008. Banks took on excessive risk, financial products became opaque and complex, and when the music stopped, taxpayers paid the bill.
The current economic environment makes the timing particularly questionable. With layoffs accelerating, consumer debt levels elevated, and geopolitical tensions affecting trade, this is arguably when financial system safeguards matter most—not when they should be weakened.
Bessent's move also highlights a fundamental tension in economic policy. The same administration facing pressure to explain why workers are losing jobs is simultaneously proposing to make it easier for banks to take risks that could destabilize the economy. It's unclear how reducing banking oversight helps laid-off factory workers or struggling small businesses.
Wall Street is betting on a return to the pre-crisis regulatory environment. Bank stocks have already rallied on expectations of lighter oversight. But for everyone who isn't trading financial stocks, the calculus is different. Deregulation might boost quarterly earnings, but it also increases systemic risk.
The numbers don't lie, but executives sometimes do. Bessent's pitch is that deregulation will fuel growth. What it will certainly do is boost bank profits. Whether those gains flow to the broader economy or simply to shareholders is the $64,000 question—and history suggests we should be skeptical.
