Trump's team weighs options to eliminate top financial regulator

Key Takeaways

Trump's team is considering restructuring financial regulatory agencies, which could eliminate the FDIC.
Major changes to federal bank regulators would require approval from Congress, which is historically difficult to obtain.

President Donald Trump's transition team is exploring a major restructuring of financial regulatory agencies, including potentially eliminating the Federal Deposit Insurance Corporation (FDIC) and consolidating its responsibilities by the Treasury Department.

Trump advisers have been interviewing candidates for top regulatory positions, including positions at the FDIC and the Office of the Comptroller of the Currency (OCC), when they asked whether eliminating the FDIC is possible and transfer their deposit insurance functions to the FDIC. Department of Finance, people familiar with the negotiations told The Wall Street Journal.

The team is also considering merging or restructuring other major regulators, including the OCC and the Federal Reserve.

However, such a move would be highly unlikely. To abolish the FDIC, Congress would have to pass legislation repealing the laws that established and governs the agency. And while presidents have the authority to reorganize, consolidate or create agencies, there has never been an issue of eliminating a major agency at cabinet level.

The banking industry is expected to benefit from Trump's re-election. The incoming administration may roll back many of the regulations put in place during the Biden era, particularly those related to capital requirements.

Trump's return could also lead to less stringent regulations for both banks and the crypto industry. This could lead to an environment where banks feel more secure in offering services to crypto companies without fear of regulatory backlash.

FDIC Chairman Martin Gruenberg, along with several key members of the SEC and the OCC, are said to be part of Operation Choke Point 2.0, an initiative said to have been launched by the current administration and many regulators who aimed at restricting the crypto industry's access to banking services.

Venture capitalist Nic Carter previously pointed out that SEC Chairman Gary Gensler and Senator Elizabeth Warren are also among the executives building Choke Point 2.0.

Gruenberg said in May that he would be willing to step down once a replacement is confirmed. The announcement followed an internal investigation that revealed a toxic work environment and abuse at the FDIC. He officially announced his retirement last month; his leave will be effective on January 19, 2025.

Gensler will leave the SEC on January 20, while Senator Warren will continue in office thereafter successful re-election in Massachusetts. She successfully secured a third term by defeating Republican challenger John Deaton with approximately 59.6% of the vote in the election held on November 5.