Treasury shift on systemic risk reignites post‑crisis regulation debate for lenders.
Treasury secretary Scott Bessent moved to reset how Washington thought about systemic risk, proposing a deregulatory turn for the Financial Stability Oversight Council (FSOC) that has been created after the 2008 crisis to police threats to the financial system.
Instead of emphasizing tighter supervision of large banks and nonbanks, Bessent’s plan recast FSOC as a forum for identifying where rules might be holding back growth.
The shift sat squarely within the administration’s broader deregulation agenda and raised fresh questions for mortgage and housing‑finance players who have built their business models around a decade of tougher oversight.
In an introductory letter to FSOC’s annual report, Bessent wrote that “too often in the past, efforts to safeguard the financial system have resulted in burdensome and often duplicative regulations.”
He said “our administration is changing that approach,” arguing the council would now “consider where aspects of the U.S. financial regulatory framework impose undue burdens and where they harm economic growth, thereby undermining financial stability.”
He also said the council would work with member agencies to examine “whether aspects of the U.S. financial regulatory framework impose undue burdens and negatively impact economic growth, thereby undermining financial stability.”
Shift from crisis‑era safeguards
FSOC was formed in 2010 under the Dodd‑Frank Act to monitor systemic risk and, if necessary, “break up banks that are considered so large as to pose systemic risk” or force higher reserves.
The law also expanded tools to curb predatory mortgage lending and required lenders to assess borrowers’ ability to repay.
Deregulation critics pointed to that history.
Sen. Elizabeth Warren said “taking this hands‑off approach to financial stability would leave our financial system and economy at greater risk in any economic environment,” calling the timing “especially reckless” as “cracks are emerging in the financial system and yellow lights are flashing across our economy.”
She cited recent bankruptcies at subprime auto lender Tricolor Holdings, auto parts company First Brands and home remodeling platform Renovo Home Partners.
AI, resilience and mortgage‑market questions
Alongside the deregulatory shift, Bessent created working groups on market resilience, household resilience and artificial intelligence, saying the AI group would “explore opportunities for [artificial intelligence] to promote the resilience of the financial system while also monitoring for potential risks to financial stability.”
He said it would also “provide a forum for public‑private dialogue to identify regulatory impediments to the responsible adoption of AI technology by entities in the financial services sector.”
For mortgage lenders, investors and servicers, the move raises familiar trade‑offs. Post‑crisis rules around capital, liquidity and consumer protection have added cost and complexity, particularly for nonbank originators, but they also aim to prevent the kind of abusive underwriting and opaque securitization that fuel the housing bust.
The core question now is whether dialing back those guardrails in the name of growth would leave the system more exposed when the next downturn arrives.
For a mortgage market still shaped by Dodd‑Frank and CFPB rules, Bessent’s FSOC reset signals that the next phase of regulation would be defined less by new consumer‑protection mandates and more by a high‑stakes argument over how much risk experienced lenders, investors and taxpayers are willing to tolerate.
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