President-elect Donald Trump's incoming administration is reportedly considering significant changes to the financial regulatory landscape, including the potential closure of the Federal Deposit Insurance Corporation (FDIC) and the Consumer Financial Protection Bureau (CFPB). While some experts advocate for downsizing these agencies, citing redundancies and inefficiencies, others warn that abolishing them could expose consumers to greater risk and undermine the stability of the financial system.
Among the potential changes once President-elect Donald Trump assumes office could be the closure of the Federal Deposit Insurance Corporation ( FDIC ) or the Consumer Financial Protection Bureau ( CFPB ). Some experts believe there is merit in downsizing these agencies, although abolishing either could increase consumers' vulnerability to risk.
As part of its efficiency agenda, advisors to the government-efficiency group reportedly explored the possibility of shrinking or dismantling the CFPB, another independent agency. Supporters of downsizing argue that there are too many overlapping regulatory agencies. One of the legacies of the FDIC is ensuring that most bank account holders take for granted the security of their deposits. William Isaac, who served as FDIC chairman during the banking crisis of the 1980s, stated: 'There may be great value in downsizing or eliminating overlapping agencies while still keeping key underlying functions they serve.' Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers, echoed this sentiment. 'For example, one proposal is to have the Treasury insure bank deposits rather than an additional agency such as the FDIC,' he said. 'It's important to separate what government activities are being performed from who or how many agencies are in charge. Holding constant the activities being regulated, the fewer agencies the better.'However, others strongly oppose eliminating these agencies. Isaac said of abolishing the FDIC: 'I think it's a terrible idea. The FDIC has brought about stability like we've never seen before.' Others argue that eliminating the FDIC would undermine the consumer lending system and leave some savers vulnerable. Brett House, an economics professor at Columbia Business School, stated: 'Getting rid of the FDIC would be a disaster for the U.S. economy and its preeminent status as a financial center,' adding, 'Deposits are an abundant, cheap source of capital for American financial institutions.' He further explained, 'Large banks may do fine without FDIC protections on their clients. But an end to federal insurance on them would be a serious drag on regional financial institutions that provide a major source of consumer lending and small-business financing.' The CFPB, established by Congress after the 2008 financial crisis to enforce consumer protection laws, has a shorter history than the FDIC. House commented, 'The CFPB is a recent creation and U.S. markets clearly functioned well for decades without it.' However, he acknowledged, 'Recent increases in market concentration and power for a handful of firms in several major economic sectors make the CFPB a critical force in balancing business and consumer interests.' Unlike the FDIC, the CFPB is funded by the Federal Reserve system, providing it with some insulation from political pressure. Nevertheless, the Consumer Bankers Association asserts that the agency has increasingly 'advanced ideologically-driven policies,' particularly over the last four years. The association's president and CEO, Lindsey Johnson, stated: 'The incoming administration and Congress have a unique and important opportunity to institute meaningful reforms to the CFPB, in both the immediate and long-term, that can help transform the agency into the credible and durable regulator Americans deserve.' Richard Dubois, executive director of the National Consumer Law Center, countered that the CFPB protects 'hard-working people from predatory practices and discrimination in financial services.' He warned that dismantling the CFPB could result in consumers losing these protections and left uncertainty over which government entity, if any, would take over the agency's work on new or emerging issues
DONALD TRUMP FINANCIAL REGULATORS FDIC CFPB CONSUMER PROTECTION BANKING INDUSTRY
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