The potential downfall of the FDIC and CFPB during Trump's second term could have significant implications for consumers.

• The closure of the Federal Deposit Insurance Corporation or the Consumer Financial Protection Bureau may occur once President-elect Donald Trump assumes office.
• Some experts suggest that downsizing these agencies could be beneficial, although abolishing either could potentially increase consumers' exposure to risk.

Once President-elect Donald Trump assumes office, sweeping changes may occur, including the possible shutdown of multiple federal agencies and regulators.

Trump will be inaugurated for a second non-consecutive term in the White House on January 20th, and he has already proposed significant reductions to federal expenditures.

Elon Musk and Vivek Ramaswamy were appointed as co-chairs of a new advisory board called the Department of Government Efficiency, or DOGE, by Trump.

The FDIC and the Consumer Financial Protection Bureau are two independent agencies that have been targeted for possible elimination or reduction by government advisors and Elon Musk, respectively.

Trump's transition team did not respond to a request for comment.

The future of the FDIC

Many people assume that their bank deposits are automatically protected.

Over the past century, the FDIC has guaranteed up to $250,000 per depositor, per bank, in every account category, and no depositor has ever lost FDIC-insured funds due to a bank failure.

William Isaac, who was appointed chairman of the FDIC by former President Ronald Reagan and led the agency during the 1980s banking crisis, stated that it is one of its legacies.

The Treasury Department could be tasked with overseeing deposit insurance by the Trump administration, according to reports.

"According to Tomas Philipson, a professor of public policy studies at the University of Chicago and former acting chair of the White House Council of Economic Advisers, there may be great value in downsizing or eliminating overlapping agencies while still maintaining key underlying functions they serve. One proposal, for instance, is to have Treasury insure bank-deposits instead of an additional agency such as FDIC."

"Philipson emphasized the importance of distinguishing between government activities and the number of agencies responsible for them. He argued that, while keeping the regulated activities constant, having fewer agencies in charge is preferable."

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"Isaac stated that abolishing the FDIC would be a terrible idea, as it has brought stability to the financial industry like never before."

Some argue that removing the FDIC would harm the consumer lending system and expose some savers to risk.

"The removal of the FDIC would be detrimental to the U.S. economy and its position as a leading financial hub, according to Brett House, an economics professor at Columbia Business School. "FDIC-insured deposits are a plentiful and inexpensive source of funding for American financial institutions.""

The absence of FDIC protections on large banks would negatively impact regional financial institutions that are significant providers of consumer lending and small-business financing, according to House.

Any proposal to eliminate the FDIC or any other agency would necessitate congressional action since Congress has control over the allocation of federal funds.

The future of the CFPB

The FDIC has a longer track record than the Consumer Financial Protection Bureau, which was established in 2010 to oversee consumer protection laws.

The CFPB has issued about 35 regulatory reports, including a 2024 initiative to protect Americans from credit card late fees.

"Columbia's House stated that the CFPB was recently established and the U.S. markets functioned effectively for many years without it. However, the recent rise in market concentration and the increased power of a few dominant firms in several major economic sectors make the CFPB a vital player in reconciling business and consumer interests."

Unlike the FDIC, the CFPB receives funding from the Federal Reserve system, which means it is not subject to annual appropriations from Congress, making it less vulnerable to political influence.

The Consumer Bankers Association claims that the agency has been pushing ideologically-driven policies more aggressively in recent years.

Lindsey Johnson, CBA President and CEO, stated in an email that the new administration and Congress have a significant chance to implement significant reforms to the CFPB, which can help turn the agency into a trustworthy and enduring regulator.

The CBA released a white paper on Tuesday proposing changes to the CFPB, including repealing or rescinding recent rules and guidance.

Advocates claim that consumers generally support the CFPB's actions, as the agency safeguards consumers from exploitative financial practices and discrimination. Richard Dubois, executive director of the National Consumer Law Center, stated in a statement, "The CFPB protects hard-working people from predatory practices and discrimination in financial services."

If the CFPB is abolished, consumers may lose certain protections, and it is uncertain which government agency, if any, would take on the CFPB's responsibilities for new or emerging issues, such as digital payment apps and buy now, pay later services.

But there may still be room for streamlining, Isaac said.

"Certainly, we are wasting a significant amount of money. Any non-essential expenses that can be eliminated — that is, the excess — must be eliminated," he stated.