Fiery Senate clash on US economy, banks

Washington, Feb 6 (IANS) A sharp partisan clash over inflation, bank regulation and financial stability dominated a Senate Banking Committee hearing on as Treasury Secretary Scott Bessent defended the administration’s economic record and the Financial Stability Oversight Council’s 2025 annual report.

Stressing growth and affordability, Committee Chairman Tim Scott warned against policies that burden households. “A system that slows growth, limits opportunity or prices families out of basic financial services is not a stable system,” Scott said.

Bessent told lawmakers the FSOC has changed course. He said it has moved away from what he called “regulation by reflex.” The council is now focused on growth and economic security. “Promoting economic growth and economic security is essential to ensuring financial stability,” he said.

He said the 2025 report highlights four priorities. They are Treasury markets, cybersecurity, regulatory modernization and artificial intelligence. “The council is prioritizing the responsible use of artificial intelligence to strengthen financial stability,” Bessent said.

Ranking Member Elizabeth Warren strongly disagreed. She accused the administration of weakening safeguards and failing to lower costs. “Donald Trump campaigned on lowering costs on day one,” she said. “But 381 days into his term, Trump’s economic policies have driven prices up.”

Warren said families are paying more for groceries, electricity, health care and housing. She said Wall Street is benefiting while households struggle. She also warned of overlooked risks. “The private credit market looks like a ticking time bomb,” she said.

Bessent rejected those claims. He blamed inflation on policies under the previous administration. “There was a loss of real purchasing power for working families,” he said. He said conditions are improving. “CPI for 2025 was 2.7 per cent and we have seen it fall for the past three months to 2.1,” he said.

The hearing showed deep divisions over regulation. Scott said reviewing bank rules is meant to remove unnecessary burdens, not weaken oversight. “Coordination matters,” he said. He warned that overlapping rules raise costs and limit access to credit.

Warren countered that easing guardrails could invite another crisis. She said Congress created FSOC after the 2008 financial crash to protect families from risky behavior by large financial institutions.

Bessent said the goal is not to eliminate risk. “Federal agencies must avoid the temptation to create a zero-risk financial system,” he said. He called that “the stability of the graveyard.”

The hearing also touched on tariffs, digital assets and manufacturing. Bessent said the United States is “at the beginning of a manufacturing boom.” Democrats pointed to recent job losses and rising costs for small businesses.

Bessent said FSOC has stopped labeling “nearly every major market and financial sector” as a threat. “We are tuning out the white noise to concentrate on the issues that matter most,” he said.

FSOC was created after the 2008 global financial crisis to monitor risks across the financial system. It brings together regulators from the Treasury Department, the Federal Reserve and other agencies.