Y'all Street, Charleston
- Stephen H Akin
- 1 day ago
- 9 min read
“For too long, financial policy has served large financial institutions at the expense of smaller ones— no more.”
Main Street America will now take priority
U.S. Secretary of the Treasury Scott Bessent laid out President Trump’s financial policy priorities for the American Bankers Association (ABA)
on Wednesday, saying that Main Street America will now take priority.
Bessent speaking at the ABA’s Washington Summit, said, “For too long, financial policy has served large financial institutions at the expense of smaller ones— no more.”
President Trump’s end goal is bringing jobs and manufacturing back to the United States, raising wages, increasing revenues and reviving the American Dream. I’m proud to be working alongside him on behalf of the American people as we right the wrongs of longstanding global trade imbalances.
Here is the Full Text of his Presentation:
Treasury Secretary Scott Bessent Remarks before the American Bankers Association
April 9, 2025
As prepared for delivery.
Thank you. It’s an honor to be with you this morning.
Let me begin by conveying the best wishes of our President. President Trump understands that national strength comes from the ground up—not the top down. This concept applies to good government just as much as it does to banking and capital formation. Yet for too long, financial policy has served large institutions, sometimes at the expense of smaller ones.
No more.
This administration aims to give all banks the chance to succeed—whether it’s JP Morgan or your local mortgage and loan. It aims to get capital to Americans who need it most by getting bureaucracy out of the way.
For the last four decades, Wall Street has grown wealthier than ever before. And it can continue to grow and do well. But for the next four years, it’s Main Street’s turn.
It’s Main Street’s turn to hire workers. It’s Main Street’s turn to drive investment. And it’s Main Street’s turn to restore the American Dream.
And who will lead this revival? The men and women in this room.
As community bankers, you know the needs of small-town America better than anyone.
You know the concern of a young couple saving for their first home; the worried look of a single mother just scraping by; and the stress of a father trying to pay for his daughter’s education.
You know these people personally. You know how best to help them—and you know it far better than any regulator in Washington. This is the animating belief behind the Trump administration’s approach to small banking policy.
Bureaucratic hubris has escaped the Beltway. Our goal is to put it back in its cage.
Community bankers can make America great again—if the government will let you. My job is to make sure it lets you. This morning, I will talk about how.
In the past, bank regulators have exercised vast powers on almost every aspect of daily life—but without meaningful accountability to the American people. Most glaringly, regulation through supervision has too often taken place behind a veil of secrecy that precludes scrutiny by the public and their elected officials.
President Trump is correcting this. He has tasked the Treasury Department with ensuring that the financial services regulators fulfill their statutory mandates consistent with his priorities.
To that end, the Treasury Department intends to play a greater role in bank regulation. The Financial Stability Oversight Council is one potential forum. The President’s Working Group on Financial Markets is another option. We also regularly engage with each federal bank regulator.
Our guiding principles are rooted in President Trump’s focus on restoring common sense to government.
First, regulation should derive from a clear statutory mandate. That includes safety and soundness, mitigating risk to financial stability, and consumer protection.
Second, regulation should be efficient. That means regulations should strike an appropriate balance between costs and benefits.
Third, regulation should be fair. That means the rules of the road should be clearly stated and consistently applied across entities and across time.
Last, the regulators themselves should be efficient. Fulfilling their statutory mandates does not require ever-increasing budgets and employee counts.
These commonsense principles have important practical implications. For example, striking a balance between costs and benefits requires tailoring regulatory actions to the risk profiles of different business models. In assessing the costs of a regulatory action, we should be attentive to the potential burdens arising from unintended consequences. In assessing the benefits of a regulatory action, we should remember the tremendous economic and human cost of a financial crisis.
As we apply these principles, a particular focus of mine will be the effects on Main Street. In the past, some regulatory actions have unduly burdened community banks or erected barriers to entry. Other regulatory actions have entrenched the dominant position of the largest banks. More generally, bank regulation has not taken effects on economic growth into account. That in turn has meant less lending, slower wage growth, more inflation, and fewer opportunities for American families.
To ensure that Main Street matters more in bank regulation, I and the rest of the Treasury team will devote the necessary time and attention to the quite technical, substantive aspects of regulatory reform. In that spirit, I would like to preview my thinking on a few specific issues.
I will start with community banks.
Community banks help ensure that the benefits of economic growth reach all Americans across this large and diverse country. They make many of our small business and agriculture loans, especially in small towns and rural areas. They are also at the center of their communities’ civic life, cutting the check for the new playground, teaching financial literacy in schools, and employing some of the local leaders.
Our Nation’s community banks, however, face many challenges, including from existing and new competitors and rising costs for compliance, technology, and personnel. In particular, I am concerned that community banks’ vital work is undermined by undue compliance burdens.
The cost of investments in technology to comply with new reporting and other requirements, the difficulty, time, and expense of recruiting specialists for compliance roles, the expense of third-party loan file reviews at the suggestion of examiners, the lending forgone to avoid undue supervisory scrutiny of relationship banking, and so on . . . these all add up.
The cumulative effect is a significant drain on the resources, time, and attention of management away from serving customers. For many community banks, even a single new compliance staff member is a significant increase in expenses.
Applying our commonsense principles here, the Treasury Department intends to drive more tailored regulation to the community bank model. There might be strong cases for categorical exemptions of community banks from some regulations. In particular, we will be taking a close look at the CFPB’s recent rules and the bank regulators’ expectations relating to internal controls.
This will include, for example, third-party risk management and information security.
Besides better tailoring of regulation, perhaps the single most important reform will be to re-focus bank supervision on material financial risks. Regulators should keep the main thing the main thing.
Supervision has an important role in ensuring banks’ safety and soundness. But as we saw with the bank failures in spring 2023, unduly centering supervision on management and other governance matters can distract examiners and banks’ risk managers from the real risks to safety and soundness. The associated mission drift can lend itself to political ends, as we saw with the focus on climate risk and the debanking of disfavored industries. All of this drives up distractions and compliance costs while impeding responsible lending and risk-taking.
To make matters worse, the banks have no meaningful recourse. Concern about retaliation makes the existing supervisory appeals options more theoretical than real. Regulators even limit banks’ ability to share the specifics of their concerns with policymakers, including me, by prohibiting disclosures of confidential supervisory information.
The Treasury Department intends to drive a change in the culture of supervision through improvements to examination procedures, enhanced monitoring of examiners’ compliance with those procedures, and more realistic processes for appealing supervisory findings. Perhaps the most consequential step would be to define “unsafe and unsound” by rule using more objective measures rooted in financial risk.
In the meantime, I have previously asked each of the bank regulators to consider removing reputational risk as a basis for supervisory criticism, and that effort is well underway.
When considering the effects of bank regulation on community banks, we should ask ourselves why so much financial activity has moved out of the regulated banking system. For example, the shift of mortgage lending to nonbanks has undercut an important line of business for community banks.
It is clear this shift out of the banking system is to some degree driven by regulation—and in particular by outdated capital requirements on some exposures that are well in excess of the latest evidence on the actual risk of those exposures.
Modernizing regulatory capital could reduce risk to financial stability by leveling the playing field across banks and nonbanks. Modernization also could enhance banks’ ability to support innovation and economic growth and improve their safety and soundness.
Modernization was purportedly even the original intent of the Basel Committee’s Endgame standards. However, the July 2023 proposal under the Biden Administration to implement those Endgame standards is not, in my opinion, the right starting point for our modernization effort. Important aspects of the Endgame standards cannot be explained or even understood because the Basel Committee offered little rationale. Despite that, somehow the only time the U.S. bank regulators found cause to deviate from the Basel Committee’s standards was to reverse engineer increases in capital.
We need to take a different approach. We should not outsource decision making for the United States to international bodies. Instead, we should conduct our own analysis from the ground up to determine a regulatory framework that is in the interests of the United States. To the extent that the Endgame standards can provide inspiration, we could borrow selectively from them. But this should only be done to the extent that we can independently validate the underlying rationale and then make that rationale available for public comment.
A significant open question would be how to foster competitive parity across large and small banks and nonbank lenders. Modernizing regulatory capital likely would mean reduced capital requirements for mortgage loans and some other exposures that are core to the community bank model.
Giving only large banks the benefit of the reduced requirements for those exposures, as actually contemplated under the Biden Administration, would entrench their already dominant position. One possible solution would be to give each bank that is not mandatorily subject to the modernized requirements the option, in its discretion, to opt in. This is what I mean by ensuring Main Street matters more.
While we’re on capital, I should briefly acknowledge that we will also look at the capital buffer framework that applies to the largest banks. The process for sizing each large bank’s stress capital buffer, for example, should be consistent with the law and otherwise provide appropriate transparency and opportunity for comment. That is especially important here given the role that the associated stress-testing indirectly plays in the pricing and allocation of financing.
I have previously raised concerns about whether the leverage capital restrictions are too frequently binding. The bank regulators are now hard at work to develop a proposal to ensure that leverage capital functions as an appropriate backstop.
The post-2008 reforms required large increases in banks’ investments in central bank reserves, Treasuries, and other high-quality assets that can be liquidated during a stress event. More than one-fourth of banks’ balance sheets is now allocated to these assets, more than double the share before the 2008 crisis.
While strengthening liquidity, the shift to safe assets has meant less funding available for loans and other productive assets.
Some of that shift was driven by the increase in reserves created by the Federal Reserve’s quantitative easing. Abundant reserves might have prompted some examiners to ratchet up their expectations as to minimum reserves without any formal change in regulation, essentially establishing a de facto reserve requirement through supervision.
It is time that we step back and re-assess these and other costs and benefits of the liquidity framework. This assessment should identify opportunities to expand the role of loans and other productive assets as collateral for funding during a period of stress, and thereby help get banks back into the business of lending.
For example, we will revisit the role of the discount window and the Federal Home Loan Banks, including whether there are opportunities to clarify the role of these funding sources in internal liquidity stress testing and the supervision of banks’ contingency funding plans.
Our assessment will also consider whether examiners have developed a bias toward reserves over other liquidity sources and how we can better ensure that liquidity buffers are indeed buffers, not regulatory minimums, that banks can draw down during a period of stress.
This is only the beginning. The Treasury Department plans to revisit the other aspects of prudential regulation.
We will advocate for changes to the AML/CFT framework to truly focus on national security priorities and higher-risk areas and explicitly permit financial institutions to de-prioritize lower risks.
We will work with Congress to consider reforms to deposit insurance, including potentially higher limits for business payment accounts.
We will consider enhancements to failed bank resolution to incorporate the lessons learned from the bank failures of 2023, including efforts to reduce the FDIC’s losses in auctions of failed banks.
We will take a close look at regulatory impediments to blockchain, stablecoins, and new payment systems.
And we will consider reforms to unleash the awesome power of the American capital markets.
Americans deserve a financial services industry that works for all Americans, including Main Street. Under President Trump’s leadership, the Treasury Department will deliver that.
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