Treasury Secretary Scott Bessent Monday said the rapid growth of private credit signals that traditional banks are being too tightly constrained, reinforcing his push to ease regulatory limits on the financial system.
Speaking to a crowd at the Milken Institute's Global Conference in Los Angeles Monday morning, Bessent cast private credit as a valuable addition to U.S. capital markets, while also noting, "the growth of private credit tells [him] that the regulated banking system has been too tightly constrained."
Unlike banks, which are heavily regulated, nonbank lenders operate with less federal oversight, which has raised concerns about the stability of the system sometimes dubbed the "shadow banking" system. Former regulators
Bessent also touched on an ongoing coordinated reshuffling of leadership across key financial regulatory agencies that will facilitate his deregulatory push, noting recent leadership changes at the
"President Trump tasked me with helping him choose the leaders for the financial regulators," Bessent said. "So we have installed a new vice chair for supervision at the Fed — Miki Bowman — we are going to have a new OCC head … Paul Atkins has just taken over the SEC, Brian Quinn is at CFTC, so the regulators are aligned and we're going to be … safe, sound and smart and redoing regulated financial entities."
Jonathan Gould has already been
On the policy front, Bessent cast artificial intelligence as an existential race the U.S. can't afford to lose, emphasizing the need to maintain the nation's lead. His focus, he said, wasn't on picking winners but on expanding access and addressing IP theft.
"If the United States doesn't take the lead, if we don't win — everything else doesn't matter," Bessent said. "I think China's catching up, which is natural, but I think we will maintain our leadership on that. We are just trying to set the environment for the best opportunity for our entrepreneurs to succeed, stop intellectual property theft and in terms of making it accessible to all Americans."
With regard to interest rates, Bessent avoided discussing Fed moves but emphasized the importance of the 10-year Treasury as a barometer of public appetite for government debt. Bessent invoked economist Hyman Minsky's theory that "stability leads to instability" to explain the April bond market volatility, blaming overleveraged players reacting to uncertainty shocks after a prolonged stable period. His broader vision is what he described as a reprivatizing of the U.S. economy — gradually reducing deficits and government borrowing while "re-leveraging the private sector" through deregulation.
"On one side, we want to bring down government borrowing slowly, maybe decrease the deficit by 1% a year, so by time President Trump leaves office, we're back at the long-term average of about 3.5% deficit-to-GDP [ratio] and the denominator grows faster than the numerator — debt-to-GDP goes down," Bessent said. "So we're decreasing the government in the economy. At the same time, we are rightsizing government spending and government employment, and then on the other side, through financial deregulation, we're re-leveraging the private sector, and then the excess employment that was shed in the government economy can go to the private sector."
Ongoing trade tensions, Bessent said, are sometimes necessary to secure stronger long-term deals, likening them to Trump-era NATO policy. Citing Germany's
"Getting better terms of trade is not always a straight line — it's not always a pleasant process, but I think at the end, the trading relationships will be stronger, our security and values ties will still be there," Bessent said. "President Trump — not in a straight line, not in what anyone would call a diplomatic manner — has gotten NATO countries to step up and meet their spending requirements … so can we do the same thing on trade? I think so."
