Scott Bessent Treasury Secretary confirmation hearing: Live coverage

Speaking during his confirmation hearing in the Senate Finance Committee Thursday, Treasury Secretary-designate Scott Bessent said excessive regulation of the banking industry has "perhaps over-capitalized" the sector, particularly for smaller institutions.

Responding to a question from Senate Banking Committee Chair Tim Scott, R-S.C., Bessent said the strength of the U.S. economy is attributable to the "depth and breadth" of its financial markets, and that the best way to support economic growth in the country would be to support smaller financial institutions. Excessive regulations, he said, has resulted in a larger market share for the largest banks and nonbank financial firms.

"I believe we have likely seen the top five banks become too big a share of banking assets," Bessent said. "We have seen, because of undue regulation, the shadow banking system get larger and larger, and to the detriment of community banks, small banks, and small regional banks. So I think we have to take a look at both regulatory and supervisory conditions in those [sectors]."

Bessent added that the regulatory policy "pendulum" has a tendency to overshoot its mark, noting that the regulatory regime between the passage of Gramm-Leach-Bliley in 1999 and the Great Financial Crisis of 2008 was likely too lax, whereas the regime that ensued since the passage of Dodd-Frank in 2010 has been too constructive.

"I think the banking system is well-capitalized — perhaps over-capitalized — and this comes from someone [who] is a financial institutions analyst," Bessent said. "Since [2008] … our banking system has been constrained, and if we are going to have the kind of generalized Main Street prosperity that I would like to see over the next few years, it is going to be driven by community, small banks and small regionals."

Bessent also lauded the advent of opportunity zones, a program introduced after the 2017 Tax law went into effect, which provides tax benefits for investments made in low- and moderate-income communities. Bessent said the program has been an unqualified success in the metropolitan areas in which it has been introduced to date, and believes the expansion of the program into rural areas could go a long way to addressing the affordable housing shortage Americans are experiencing nationwide.

"In terms of affordable housing, the opportunity zones have created more affordable housing in the zones than any other federal government program since the opportunity zones were created," Bessent said. "I think it's a fantastic way to address the housing crisis [and] inner-city redevelopment. I think we could think about opportunity zones more in rural areas. So I look forward to expanding and continuing the discussion."

Treasury Secretary-designate Scott Bessent said he would support efforts to repeal the federal debt limit if President-elect Donald Trump supports its repeal.

Sen. Elizabeth Warren, D-Mass., asked Bessent about his stance on eliminating the U.S. debt ceiling — something Trump called for in December — referencing projections from the Congressional Budget Office indicating a debt limit breach would be catastrophic. Bessent acknowledged the nuance of the debt limit issue and promised to consult market participants before fully responding. 

"The debt limit is a very nuanced convention," he said. "What I would like to do is get back to you and President Trump and I'd like to do a survey of market participants."

He said that the U.S. would not default on its debt on his watch, but compared the debt limit to a car's handbrake, saying that removing it would eliminate an important safety feature. Warren highlighted the CBO's estimate that breaching the debt limit could cost the U.S. economy $12 trillion and lead to 6 million job losses. Bessent indicated that if President-elect Trump seeks to eliminate the debt limit once in office, he would support it.

"Once President Trump takes office, and if I'm confirmed, if he wants to eliminate the debt limit, I will work with him and you on that," Bessent said.

Sen. Marsha Blackburn, R-Tenn., asked Treasury Secretary-designate Scott Bessent about his stance on Central Bank Digital Currencies, known as CBDCs — an innovation that has gained interest from some in the Biden administration. 

The Biden Administration had previously directed the U.S. Government to explore a potential U.S. CBDC. Many Republicans have voiced strong opposition to the creation of a CBDC and the GOP-led House passed a bill that would prevent the Federal Reserve from launching a CBDC in May 2024.

Bessent stated he saw no reason for the U.S. to adopt a CBDC, asserting that such currencies are typically used by nations with limited investment alternatives. He pointed to countries like Saudi Arabia and Singapore, which manage large surpluses, as examples of nations more likely to need a digital currency. 

"In my mind, a central bank digital currency is for countries who have no other investment alternatives," he said. "I view that many of these countries are doing it out of necessity, whereas the U.S., if you hold U.S. dollars, could hold very secure U.S. assets."

Federal Reserve Chair Jerome Powell said in July that the central bank is not taking any action on CBDCs, adding that the Fed does not have the power to offer a CBDC to the public and is not seeking that authority from Congress.

Senator Bernie Sanders I-Vt. — who caucuses with Democrats — pressed Treasury Secretary-designate Scott Bessent on whether he is committed to President-elect Trump's campaign promise to cap credit card interest rates at 10% during Thursday's confirmation hearing. 

Sanders says he supports Trump's stated policy, adding that a rate cap could ease the financial burden on millions of working-class Americans. Sanders highlighted that over half of new credit card holders face interest rates above 24%. 

Bessent acknowledged there have been "bad actors" among credit card companies and vowing to further discuss the issue.as his nomination continues in consultation with the President-elect.

"When President Trump takes office, and if I am confirmed," he said. "I will follow what President Trump wants to do."