Dem
47
GOP
53
After the 2008 financial crisis, Congress passed laws in an attempt to prevent another meltdown. Among other things, Congress passed the 848-page Dodd-Frank Act, which created the since-gutted Consumer Financial Protection Bureau and did many other things to reduce the rampant speculation the banks had been doing until it all fell apart. The banks didn't like Dodd-Frank at all. It required them to maintain large cash reserves and liquid assets (like T-bills) that could be used in an emergency. This was money that they couldn't loan out at high interest rates. The laws also blocked many risky practices the banks engaged in because they led to large profits—if everything went well (which it didn't in 2008).
Treasury Secretary Scott Bessent knows all this very well. He has a long history in the financial world, including starting and running a billion-dollar hedge fund, initially with George Soros' money back when Bessent was a Democrat.
However, it looks like Bessent either has a very short memory or some very greedy friends. He is now in the process of quietly dismantling as many of the Dodd-Frank and other 2008 regulations as quickly as he can. Bank executives will no doubt be very pleased, knowing that if all goes well they can make huge profits and if it does not go well, the taxpayers will bail them out. Just as one example, banks are now allowed to own cryptocurrencies themselves. If there is a sudden drop in crypto, having a large cash buffer could help them weather the storm. However, if that buffer is too small, a bank could find itself insolvent and that could lead to a bank run and other problems. Will we get a new financial crisis as a result? We don't know, but Bessent is paving the road for it.
In particular, previous Treasury secretaries left regulation to the judgments of the various agencies in the department. Bessent is centralizing that and amassing all the power in his own hands. This way, people who still remember 2008 and don't want a repeat will be sidelined and not get in his way.
Sen. Elizabeth Warren, the ranking member of the Senate Banking Committee and a fierce opponent of the banks, is very upset about Bessent giving the banks free rein. She said: "Our financial cops on the beat are no longer independent from the White House—and they are certainly not independent from Wall Street. 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." Specifically, Bessent wants to give the banks more leverage and that is precisely what Warren thinks is dangerous. (V)