Here’s some bad news for anyone who wants a sane and functional banking system. The second Trump administration is hard at work destroying every vestige of financial regulation in the United States. A meticulously built oversight infrastructure is facing an accelerated teardown after years of willful neglect.
It’s hardly news that Donald Trump has made it easier than ever to be a plunderer. This is a Golden Age for white-collar criminals at home and kleptocrats abroad. Moreover, Trump isn’t solely to blame for the sorry state of affairs. Still, it wasn’t always this way. When New Deal–era banking regulations were firmly in place, financial crises were far and few between; when such crises emerged, they were relatively contained. But the steady erosion of financial-sector guardrails since the start of the neoliberal era has coincided with more frequent and explosive meltdowns. Today, the White House is speed-running the obliteration of remaining safeguards, just as AI, crypto, and fossil fuel–related crises threaten to upend the global economy. Buckle up: It’s going to get bumpy.
Let’s begin with some history. In the pre–New Deal United States, financial crashes—brought on by poor bank management or speculative bubbles enabled by overly loose credit—were commonplace. Following the Great Depression, however, the federal government rapidly built up the foundations of our modern finance system.
In the Banking Acts of 1933 (better known as Glass-Steagall) and 1935, the Federal Deposit Insurance Corporation (along with federal deposit insurance itself) was created, commercial and investment banking were firewalled from each other, and the Federal Reserve’s power was centralized in its board of governors to improve nationwide supervision. The 1935 law also created the Federal Open Market Committee, responsible for conducting monetary policy, and strengthened the independence of the Fed. In between, the Securities and Exchange Act created the Securities and Exchange Commission and the National Housing Act created the Federal Savings and Loan Insurance Corporation.
What followed was the longest span in American history of no major financial crashes. Stability was the norm; it wasn’t until the early 1970s that the OPEC-induced oil crisis caused a stock market crash. It wasn’t until the 1980s savings and loan crisis that the U.S. experienced a financial crash originating from within the domestic financial sector. It still took several more years and the confluence of several other factors (notably very tight monetary policy and an oil shock from Saddam Hussein’s invasion of Kuwait and the resulting war in the Gulf of Persia) for it to result in an economy-wide recession, at the start of the 1990s.
Even then, a big reason why the savings and loan crisis wound up spreading beyond the financial sector was because Congress had started to deregulate the financial sector years earlier. As high interest rates undermined long-term fixed-rate mortgages, which were the centerpiece of savings and loans’ business model, lawmakers deregulated the banking activity in which thrifts and savings and loans firms were allowed to engage. Not exactly subtle, the legislation was called the Depository Institutions Deregulation and Monetary Control Act of 1980. Congress was thus knowingly incentivizing revenue-needy institutions to take on additional risk in pursuit of higher returns to salvage their businesses, helping drive speculative investment.
The episode also marked the first major rollback of financial oversight since the Great Depression. Since then, there have been a number of forays into deregulation and weakening oversight, but the regulatory system overseeing banking remained mostly intact. Notably, the 1990s saw substantial relaxation of supervision, particularly of commodity markets, which were allowed to proliferate, especially after the Commodity Futures Modernization Act. Warnings from within the Clinton administration about growing speculation, coming from people like Brooksley Born, chair of the Commodity Futures Trading Commission, and Edward Gramlich, the Federal Reserve governor, were drowned out by the voices of leading neoliberal advisers such as Robert Rubin, Larry Summers, and Alan Greenspan. Championed by Robert Rubin, the coup de grâce of this flurry of weaker financial oversight was the 1999 repeal of Glass-Steagall.
On the other hand, oversight won some scattered victories, notably the Sarbanes-Oxley Act in 2002, and was even given a boost with the post-2008 financial crisis establishment of the Consumer Financial Protection Bureau in lieu of a bevy of offices spread across numerous agencies, new capitalization standards, and more.
The regulatory system overseeing banking remained mostly intact, even as many agencies across the federal government faced major atrophy in their staffing, funding, and overall capacity. Then came the deregulatory onslaught of 2025.
It isn’t one of the marquee storylines of our current hellscape, but Trump 2.0 has ended an era of carefully built-up economic and financial institutions in remarkably short order. Consumer protection is practically nonexistent at this point. Investor protection is being rolled back. Capitalization, risk management, and stress-testing requirements have been weakened. Bank examinations must now ignore the fallout from worsening, accelerating climate change and the disasters it brings in tow. The Trump administration is leveling entire institutions as it cans thousands of white-collar cops.
Trump’s vice chair for supervision at the Fed, Michelle Bowman, moved to cut supervision staff by 30 percent. The Office of the Comptroller of the Currency has shed 28 percent of its staff since fiscal year 2024, the FDIC 22 percent, the Commodity Futures Trading Commission 20 percent (even as its remit has expanded dramatically to be the primary crypto regulator), the SEC 20 percent, the National Credit Union Administration 15 percent, and the CFPB has lost a third of its workforce. The administration is reportedly aiming to continue reducing headcount until it has only 556 staff, which would be a drop of 68 percent (and this is less dramatic than the earlier target of a 90 percent drop).
Most famously, the Consumer Financial Protection Bureau has been at death’s door for well over a year now, kept on life support only by court intervention. This situation is even more dire because, as part of the Dodd-Frank overhaul in 2010, most financial consumer protection regulations from across federal agencies were rolled into the new bureau. Even if other regulators were willing and able to step up and step in, much of the pre–Great Recession authority they would have had to do so is no longer on their books. Instead, those regulations are collecting dust at the CFPB, as Office of Management and Budget Director Russell Vought continues to try to pull the plug on the agency.
At the same time, the regulations that other agencies do still have within their remits are being eviscerated as part of conservative culture-war malarky. Climate risk is off-limits now. So too is reputational risk, so financial institution examiners can no longer flag damage to banks’ brands that would materially impact the bottom line. Pair that with aggressive cuts across the FDIC, the Fed, the NCUA, and the OCC, and we’re left with the major consumer protection watchdog paralyzed while its reinforcements lack both the numbers and the pretense to fill the ever-widening gap.
Understaffing isn’t just a problem at the rank-and-file staff level, either. The FDIC has two of its three non-ex-officio board seats empty (the two other seats are filled by the director of the OCC and the director of the CFPB). The CFPB has been transformed into merely an appendage of the White House rather than an independent regulator, with acting leadership first from Trump’s governing mastermind Vought and now Mark Paoletta. The Commodity Futures Trading Commission, normally managed by five commissioners, currently has only its chair. Unlike many independent agencies, the CFTC does not have a statutory quorum requirement. The NCUA also has only its chair, rather than a full complement of three commissioners. (The NCUA does have a statutory quorum requirement for “a majority of the board,” but the agency issued an opinion basically arguing that this only means a majority of current board members, not of the positions themselves.)
The erosion of public oversight of one of the most foundational elements of the modern economy, and with it a century’s worth of institutional knowledge and expertise, is alarming in its own right. But it is doubly so when put in context.
Everyone is waiting for the chickens of the speculative financing of the rapid AI buildout to come home to roost. Cryptocurrency, with all its myriad risks, is both getting its preferred regulatory framework and being allowed—in fact, encouraged—to commingle with traditional finance more and more. Private credit has been on a speculative investment adventure in recent years, although there are some signs it is now trimming sails. Oh, and to top it all off, there is a slow-motion fossil fuel supply shock that will continue to ripple through the global economy because of refining bottlenecks even after the Strait of Hormuz reopens.
This is the backdrop against which the administration has chosen to radically weaken every single step of the traditional banking safeguards. The OCC has relaxed its rules for granting “bank trust” charters, notably giving one to the Trump family’s World Liberty Financial in recent weeks. A bank trust is basically a bank that does not take deposits or issue standard commercial loans. But it still gets the right to a master account at the Federal Reserve.
In other words, it’s easier to set up a bank. And once you do, you only have to face toothless regulators that have been pared down to the point you can drown them in a bathtub. That charter will let you plug into the main financial sector more easily. Plus, there’s much less oversight of investing and asset trading. And consumer protection is reduced to a slogan. What could possibly go wrong? We will soon find out.
