Trump administration overhauls financial watchdog created after 2008 crisis to remove ‘undue burdens’ of regulations

The Donald Trump administration is overhauling the focus of a US government watchdog that was set up following the 2008 financial crisis to maintain stability in the financial system.

In an announcement, Treasury Secretary Scott Bessent said that the watchdog, the Financial Stability Oversight Council (FSOC), would henceforth shift its focus on ways to boost economic growth and remove the "undue burdens" imposed by strict financial rules.

“FSOC is prioritizing sustainable long-term economic growth and economic security, modernizing regulations, reducing undue burdens, and fostering a financial system that supports resilience, innovation, and enduring US financial stability,” Bessent said in his announcement.

What changes for the FSOC?

Coming down heavily on "prophylactic" regulations and their impact on economic growth, Bessent said that moving forward, the FSOC would consider the cumulative burdens of regulations to ensure that they do not undermine the economy's expansion.

"Historically, financial stability analysis has centered on identifying vulnerabilities in financial institutions or markets... But monitoring and addressing these vulnerabilities, although important, is not sufficient for safeguarding financial stability," wrote Bessent, who chairs the FSOC, in a letter announcing the change of direction of the watchdog.

"Financial stability also requires and is interdependent with sustainable long-term economic growth and economic security," the Treasury Secretary added, adding that the the FSOC, going forward, would take into account both growth and economic security.

As part of that effort, Bessent said the watchdog would establish working groups focused on market and household resilience, as well as a working group to explore the opportunities and risks posed by artificial intelligence (AI) to the financial system. In addition, there will also be a workstream focused on crisis preparedness, Bessent said.

The Treasury Secretary announced the changes in the FSOC's mandates on X, ahead of a meeting of the watchdog that he is scheduled to chair Thursday afternoon.

The push towards deregulation

The announcement on the change of direction of the FSOC is in line with the Trump administration's overall push towards de-regulation to spur economic growth.

The shift at the FSOC comes as the latest step the US President's campaign to slash federal red tape, highlighted by his 10-for-1 executive order issued at the beginning of his second term, which requires federal agencies to repeal ten old rules for every new one created.

From the creation of the Department of Government Efficiency (DOGE) to the rollback of strict bank capital requirements, the Trump administration has steadily worked towards dismantling what it described as "the job killing and inflation-driving regulatory blitz of the Biden Administration".

The Trump administration has also been rolling back Biden-era electric vehicle (EV) mandates and slashing environmental regulations to try and maximize domestic oil and gas production to spur growth.

Days ago, the US President, while announcing a bailout package for row crop farmers, stated that environmental restrictions for tractor makers would be relaxed to bring down the cost of farm equipment.

"We're going to also give the tractor companies, John Deere and all of the companies that make the equipment, we're going to take off a lot of the environmental restrictions that they have on machinery. It's ridiculous," the US President had said at the White House roundtable.