#Bessent

There are two ways to consolidate federal bank regulation.  First, you can change the law and, as detailed in my memo a few weeks back, transform agency responsibilities to reduce duplication and regulatory arbitrage.  The other way is for one federal entity to assert all the power it has under law and maybe more simply to take de facto charge of significant Fed, OCC, and FDIC supervisory and regulatory policy.  Secretary Bessent has now made it clear that the Trump Administration will open Door Number Two, setting key policy goals and “coordinating” among the agencies.  Will Treasury keep banking within essential guardrails?  Mr. Bessent might just pull this off, at least for as long as he’s Treasury Secretary in this super-volatile Administration.

Just weeks ago, I would have said a Treasury putsch was impossible because of the Fed’s inviolable status as an independent agency that, even under a more Trump-ready vice chair, would avoid the appearance of taking Treasury’s orders less this subservience spill over to monetary policymaking.  Now, though, the President has claimed via executive order that there are no more independent agencies exempt from Executive Branch control.  This covers the OCC and FDIC, which were in any case sure to do what was asked of them in this Administration, but it also covers Fed supervisory and regulatory responsibilities.  The Fed’s express statutory independence does not cover these activities, making it likely now that the Fed will concede on most sup-and-reg points to defend the fragile barricades surrounding monetary-policy …