Trump’s financial deregulation risks another US financial crisis, warns Martin Gruenberg

Former Federal Deposit Insurance Corporation (FDIC) chairman Martin J. Gruenberg warns that the United States risks another major financial crisis by the end of President Donald Trump's second term if the government continues to weaken financial regulation and supervision. In his latest opinion piece for The Economist, Gruenberg highlights three major threats to the US financial system since World War II: the savings-and-loan crisis of the 1980s, the global financial crisis of 2007-2009, and the regional banking crisis of 2023.

Each of these crises was preceded by periods of deregulation, weak supervision, and inadequate safeguards, according to Gruenberg, who led the FDIC during the 2023 regional bank failures.

Gruenberg argues that the Trump administration is repeating past mistakes by politicizing financial regulation, reducing the workforce of agencies responsible for monitoring risks, and proposing reductions in capital requirements for major banks. He accuses the administration of increasing White House control over federal financial regulators, including the Federal Reserve, and of planning further cuts to the Fed's supervision and regulation division, which includes a 10% workforce reduction in 2025.

Gruenberg also criticizes the proposed reduction in capital requirements for the largest, most systemically important banks, stating that these changes would weaken their ability to withstand financial stress.

Gruenberg emphasizes that during periods of financial stability, regulators and policymakers should strengthen safeguards rather than weaken them. He warns that if the deregulatory agenda and undermining of supervisory institutions are not reversed, another financial crisis will occur sooner rather than later. The institutions responsible for responding to such crises will lack the necessary people, experience, and resources to limit the costs, he concludes.