Secretary of the Treasury Scott Bessent appeared before the United States House Financial Services Committee to discuss the Financial Stability Oversight Council’s (FSOC) 2025 annual report. In his opening remarks, Bessent acknowledged the collaborative efforts of FSOC members and highlighted their role in advancing what he described as “the President’s bold vision for a better America.”
Bessent emphasized that since the beginning of President Trump’s administration, there has been a focus on building what he called “Parallel Prosperity,” aiming for economic growth that benefits both Wall Street and Main Street. He stated, “Treasury has tirelessly pursued pro-growth policies to unlock the potential available to all Americans when they are free to save, invest, build businesses, and drive their own economic destinies. The Financial Stability Oversight Council plays an important role in delivering on this agenda.”
He criticized past regulatory approaches, saying, “Too often in the past, we have seen regulation by reflex. Rather than preempting crises, regulators have frequently reacted to them after the fact. They have played the role of a hazmat cleanup team instead of preventing dangerous spillovers in the first place.” Bessent argued that such approaches led to regulatory short-sightedness and undermined safety and soundness within financial institutions.
Bessent also pointed out shortcomings under previous leadership: “Under President Biden, the bank regulators preoccupied themselves with ‘reputation risk,’ ‘climate-related financial risks,’ and other risks with no clear nexus to safety and soundness. At the same time, they centered supervision on management and other governance matters that distracted examiners and banks’ risk managers from the real risks to safety and soundness. The result, predictably, was the second, third, and fourth largest bank failures in U.S. history in 2023.”
He warned against excessive regulation leading to economic stagnation: “Besides undermining safety and soundness, regulation by reflex has driven excessive regulation. That can lead to economic stagnation. And economic stagnation is, itself, a threat to financial stability.” He advised federal agencies not to aim for a zero-risk system but rather identify vulnerabilities before recommending further regulation.
According to Bessent, FSOC’s current priorities include supporting growth while addressing key areas such as Treasury markets' resilience, cybersecurity threats—particularly those posed by nation-state actors—and modernization of supervisory frameworks for banks and credit unions. He noted efforts like expanded information sharing on cyber threats and reforms aimed at reducing unnecessary burdens on community banks.
Artificial intelligence was also cited as an area of focus: “The Council is prioritizing the responsible use of artificial intelligence to strengthen financial stability. The Council is working with public- and private-sector partners, including international counterparts, to enhance system resilience while closely monitoring emerging risks.”
Bessent concluded by highlighting changes made in this year’s FSOC annual report: “In this year’s report, FSOC shifted away from its past approach where nearly every major market and financial sector was described as a financial stability vulnerability. By introducing a new structure centered on fostering economic growth and security, we are tuning out the white noise to concentrate on the issues that matter most for U.S. financial stability.”
He ended his statement by expressing readiness for questions from committee members.
