FOR IMMEDIATE RELEASE: Mar. 27, 2026
CONTACT: Jarice Thompson, jarice@ourfinancialsecurity.org
Oscar Valdés Viera, Senior Policy Analyst of Private Equity & Capital Markets at Americans for Financial Reform statement on administration’s proposal to weaken oversight of shadow banks:
The Trump administration announced that it will weaken one of the most important post 2008 financial crisis tools designed to stop shadow banks from capsizing the financial system. An important lesson of the 2008 financial crisis is that distress at large nonbank financial firms, like Lehman Brothers and AIG, can undermine the stability of the U.S. and global financial system.
Congress created the Financial Stability Oversight Council (FSOC) after 2008 to unite federal financial regulators to identify emerging financial threats and respond before those threats spiral out of control. The new proposal transforms FSOC from a watchdog into a lapdog whose goal is to free risky shadow banks from undue regulatory burdens. The proposal would create oversight hurdles that would make it almost impossible for FSOC to subject large, risky, and deeply interconnected nonbank firms to consolidated supervision and enhanced prudential standards. This will make it easier for large shadow banks to become threats to U.S. financial stability.
It is an especially perilous moment to handcuff oversight of shadow banks that are posing increasing risks to the financial system and real economy. A full-fledged meltdown in private credit markets, a sudden deflation of the AI bubble, or another crypto winter could be right around the corner, but the administration is making it harder to spot and address these growing threats to the U.S. economy. With Trump’s regulators asleep at the switch, it is becoming more likely that the public will once again be forced to clean up after the mess when too big to fail speculators demand bailouts.
Congress explicitly mandated FSOC to monitor large and interconnected nonbank financial companies to reduce the likelihood and severity of the next financial crisis. This move makes the next crisis more likely and potentially more devastating to the economy and the public.
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