Investing.com -- According to the Wall Street Journal, the Trump transition team is exploring measures to significantly reduce, consolidate, or even eliminate key financial regulatory agencies in Washington.
Trump advisers and officials from the newly created Department of Government Efficiency have raised the possibility of abolishing the Federal Deposit Insurance Corp. (FDIC) in interviews with potential nominees for banking oversight roles, the report said, citing sources familiar with the matter.
During these interviews, candidates for positions at the FDIC and the Office of the Comptroller of the Currency (OCC) were asked whether deposit insurance responsibilities could be transferred to the Treasury Department. Such a proposal would require congressional approval.
While past administrations have restructured and renamed government departments, shutting down major agencies like the FDIC remains an unprecedented and rare move.
Banking executives are hopeful that the incoming Trump administration will ease regulatory burdens, including rules on capital requirements and consumer protections, as well as oversight of industry mergers.
However, FDIC deposit insurance is widely regarded as untouchable. Any policy that might undermine confidence in deposit insurance “could quickly ripple through banks and in a crisis might compound customer fears,” the report says.
Last year’s bank failures sparked customer concerns about the safety of their deposits, particularly at smaller institutions. This led to a flight of funds to large banks considered too big to fail. Since then, banks have called for expanded deposit insurance to help smaller institutions compete.
The discussions highlight the dramatic steps Trump may take to downsize government and reduce regulatory oversight, particularly in the financial sector.
Potential nominees for regulatory roles have reportedly met with Scott Bessent, Trump’s Treasury Secretary nominee, and members of the Department of Government Efficiency, which is co-chaired by Elon Musk and Vivek Ramaswamy.
Musk, in particular, has called for eliminating the Consumer Financial Protection Bureau, stating, “There are too many duplicative regulatory agencies.”
Advisers and nominees have also discussed restructuring federal bank oversight by merging or reorganizing the FDIC, OCC, and Federal Reserve, per the report.
One proposal discussed with the transition team reportedly suggests that while the FDIC, OCC, and parts of the Federal Reserve would not merge, only one would retain authority to regulate banks, according to a source. The remaining agencies would focus solely on nonregulatory roles.
At the Consumer Financial Protection Bureau, another source indicated that regulatory and supervisory positions could be replaced with consumer-education roles, the report said.
Any restructuring is expected to involve significant job cuts. Trump is likely to reinstate the Schedule F executive order, which makes it easier to dismiss certain federal employees. Moreover, stricter return-to-office requirements are being considered, potentially encouraging further workforce reductions.