President-elect Donald Trump’s transition team is reportedly considering dramatic changes to the structure of federal bank regulation. According to the Wall Street Journal, advisers are discussing options to merge, significantly reduce, or even eliminate top regulators such as the Federal Deposit Insurance Corporation (FDIC) and the Office of the Comptroller of the Currency (OCC). These moves are part of a broader effort to streamline the federal government and reduce costs.
The Key Players: Musk and Ramaswamy Lead Restructuring Efforts
Trump has appointed two high-profile figures to spearhead his administration’s government efficiency drive: billionaire entrepreneur Elon Musk and conservative thought leader Vivek Ramaswamy. Together, they will co-lead the newly formed Department of Government Efficiency (DOGE), an external advisory panel tasked with reshaping federal agencies.
Musk, known for his bold, sometimes controversial approach to business and innovation, has already suggested eliminating the Consumer Financial Protection Bureau (CFPB). This aligns with the administration’s goals of reducing federal spending and regulatory reach.
Meanwhile, Ramaswamy, a vocal advocate for reducing government intervention, has supported exploring whether agencies like the FDIC and OCC can be restructured or absorbed into other departments, such as the Treasury.
What’s at Stake for the FDIC and OCC?
The FDIC, established in 1933 during the Great Depression, plays a critical role in maintaining public confidence in the banking system by insuring deposits and overseeing financial institutions. Similarly, the OCC, a Treasury Department bureau, regulates and supervises national banks and federal savings associations.
Under the proposals being discussed:
- FDIC Functions Absorbed by the Treasury: Advisers have reportedly asked whether deposit insurance responsibilities could be transferred to the Treasury Department.
- Merging Agencies: The FDIC, OCC, and parts of the Federal Reserve may be combined into a single regulatory entity.
- Eliminating Regulatory Roles: In one floated plan, only one agency would remain as the primary bank regulator, while the others would retain non-regulatory functions.
Such restructuring would require congressional approval, making it a complex and politically charged endeavor.
Broader Implications for Federal Workers and Policies
The proposed changes go beyond banking regulation and reflect a wider push to overhaul the federal workforce. The Trump administration is considering reinstating Schedule F, an executive order from Trump’s first term that made it easier to dismiss federal workers in policy-making roles.
Additionally, stricter return-to-office policies are under discussion, potentially forcing many employees to resign. These measures are expected to lead to significant job cuts across affected agencies, further reducing government size.
The Role of DOGE in Government Restructuring
The Department of Government Efficiency (DOGE), created as part of Trump’s transition plan, will operate outside the traditional government structure to analyze and recommend cost-saving measures.
Musk and Ramaswamy’s influence within DOGE will likely drive its agenda, focusing on:
- Cutting “redundant” federal programs and positions.
- Streamlining overlapping agency functions.
- Challenging long-standing regulatory frameworks.
Critics of DOGE argue that its external nature could limit oversight and accountability, while supporters hail it as a bold step toward fiscal responsibility.
Criticism of the Plan
The proposals to overhaul or eliminate bank regulators have drawn sharp criticism from financial experts and consumer advocates.
Dennis Kelleher, CEO of Better Markets, warned that such changes could destabilize the U.S. financial system.
“Eliminating or merging the FDIC and other bank regulators is reckless and shortsighted,” Kelleher said. “These institutions play vital roles in protecting depositors, ensuring financial stability, and maintaining trust in the banking system.”
Consumer advocates have also expressed concern about Musk’s call to eliminate the CFPB. They argue that the agency has been instrumental in holding financial institutions accountable and protecting consumers from predatory practices.
Potential Benefits of Restructuring
Proponents of the restructuring argue that consolidating regulatory agencies could improve efficiency, reduce bureaucratic red tape, and save taxpayer dollars.
“By merging overlapping responsibilities, we can create a more streamlined and effective government,” a Trump adviser said. “These changes will ensure that federal agencies focus on their core missions without unnecessary duplication.”
Additionally, supporters claim that placing deposit insurance under the Treasury Department could enhance fiscal oversight and accountability.
Challenges to Implementation
Despite the potential benefits, the proposed changes face significant hurdles:
- Congressional Approval: Any move to eliminate or restructure agencies like the FDIC or OCC would require bipartisan support in Congress—a challenging prospect given the polarized political climate.
- Legal and Regulatory Risks: Critics warn that drastic changes could introduce regulatory gaps, leaving financial markets vulnerable.
- Public Backlash: Consumer advocates and financial watchdog groups are expected to strongly oppose measures perceived as weakening protections for depositors and borrowers.
A New Era for Federal Banking Regulation?
The Trump administration’s plans to overhaul banking regulators represent a seismic shift in how the federal government oversees the financial industry. Whether these proposals succeed will depend on the administration’s ability to navigate legal, political, and public opposition.
For now, the FDIC, OCC, and Federal Reserve remain central to the regulatory framework that has governed U.S. banking for decades. However, their roles—and even their existence—may look very different in the years to come.
