Scott Bessent hasn't even moved into his Treasury office yet, but Trump's pick is already rattling the cage of financial regulation. In what amounts to a love letter to Wall Street, the incoming Treasury Secretary has taken aim at what he calls the "overlapping capital regimes" strangling America's banks.
I've watched financial regulation evolve for years, and Bessent's complaint isn't entirely off-base. Our banking giants live in a strange regulatory twilight zone—forced to comply with both international Basel standards and our homegrown stress tests simultaneously. It's regulation with a belt, suspenders, and maybe a rope for good measure.
"The financial equivalent of wearing both a belt and suspenders," Bessent told a room full of nodding financial executives last week. "And then adding another belt, just to be sure."
Here's the rub: European banks don't face this double-whammy of capital requirements. They're playing by one rulebook while our institutions juggle two. The competitive disadvantage is real—though whether it justifies regulatory rollbacks is another question entirely.
Is this about streamlining bureaucracy or something else? Regulatory "rationalization" sounds reasonable enough until you remember we're barely a decade past a financial crisis that nearly tanked the global economy. The pattern is painfully predictable: crisis, regulation, gradual erosion, crisis again. Wash, rinse, repeat.
Jamie Dimon must be grinning ear to ear. JPMorgan's chief has been grousing about regulatory "gold-plating" for years. (One imagines him doing a celebratory jig in his corner office—dignified, of course, as befits his position.)
But let's get real. Those stress tests weren't implemented on a whim. They force banks to prove they can weather financial storms that traditional capital formulas don't capture. Remember 2008? I do. I remember the panicked faces of regulators who discovered too late that banks' risk models were fantasy fiction.
Curious, isn't it, that bank capital requirements—hardly kitchen table conversation for most Americans—would be Bessent's opening salvo? It speaks volumes about who he considers his primary constituency. The revolving door between Wall Street and Washington spins so fast you could power a small city with it.
Look, nobody loves bureaucratic redundancy. Efficiency matters. But in financial regulation, "efficiency" often translates to "leniency" when it reaches bankers' ears.
Warren Buffett once observed that "you only find out who's swimming naked when the tide goes out." Our current regulatory regime might be clunky, but it ensures our banks are wearing at least two swimsuits. Given the consequences of financial skinny-dipping, that's not necessarily a bad thing.
The last experiment with letting banks manage their own risks cost taxpayers trillions. So maybe—just maybe—before we start snipping regulatory threads, we should consider whether keeping the financial system's pants firmly secured is worth a little redundancy.
After all, when those pants fall down, it's never the bankers who end up truly exposed.
