Bessent Targets Post-Crisis Rules In Major FSOC Overhaul

In a letter to be sent to council members on Thursday, reported by CNBC, Bessent argues that the regulatory framework established after the 2008 financial crisis has become "overly burdensome." He says that these constraints are now a liability, potentially stifling the US economy to the point where they "impair financial stability" rather than protect it.

This directive marks a stark ideological shift for the FSOC. Created under the Dodd-Frank Act, the council has historically held the power to designate non-bank institutions as "systemically important," subjecting them to Federal Reserve supervision and strict capital controls. Bessent’s proposal effectively seeks to unwind this defensive posture.

Growth as stability

The core of Bessent’s argument is that a stagnant economy is a greater systemic risk than a volatile one. He intends for the council to "partner with member agencies" to review and dismantle regulations that hamper competitiveness.

For the broader financial sector, including crypto and fintech, this signals the potential end of the "Chokepoint" era, where stability concerns were often used to restrict banking access for emerging industries. By framing deregulation as a stability measure, the Treasury is clearing the path for easier capital formation.

The AI working group

The overhaul also addresses the modernization of market infrastructure. Bessent will announce the formation of a working group dedicated to AI, tasked with identifying "opportunities" for the technology to enhance financial resilience.

While the group will monitor risks associated with algorithmic trading and AI deployment, the language suggests a supportive stance toward fintech integration, moving away from the precautionary principle that has defined the last decade of US financial policy.