Donald Trump’s deregulatory drive will cause another financial crisis
This time won’t be different—except that institutions will be less well placed to limit the damage, reckons Martin Gruenberg
Since World War II, America has faced three major threats to its financial system, all of which were triggered by periods of deregulation and inadequate supervision. The 1980s savings-and-loan crisis, the 2007-09 global financial crisis, and the 2023 regional bank failures all had their roots in weak oversight and lax capital requirements.
The Trump administration is not just following in the footsteps of the past; it is actively exacerbating the issue by politicizing regulation through executive orders and significantly reducing the workforce at federal financial regulators. The administration's efforts to weaken financial regulation have three main components: first, subjecting independent regulators to political influence, second, reducing the staff of agencies responsible for monitoring financial risk, and third, lowering capital standards for the largest banks.
These actions are laying the groundwork for another potential financial crisis at the end of Donald Trump's term in office.
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