WASHINGTON—Treasury Secretary Scott Bessent used his first public session of the year with the Financial Stability Oversight Council to warn that economic stagnation poses as great a threat to financial stability as any external shock—and to call for a renewed focus on growth as the antidote.
Bessent told the Council that periods of weak or stagnant growth have historically triggered major crises, from Latin America’s debt meltdown in the 1980s to Japan’s “lost decades,” and cautioned regulators not to overlook the risks.
By contrast, he said, a dynamic, innovative economy creates the resilience that banks, markets, and households need to withstand disruptions.
Bessent said FSOC’s work in the year ahead will emphasize supporting economic growth, bolstering critical market infrastructure, and revisiting its supervisory framework to ensure financial institutions can both foster innovation and remain secure against emerging risks.
“A dynamic, innovative, and entrepreneurial economy is better able to withstand shocks. Growth is the antidote to stagnation,” Bessent said. “Which is why expanding economic growth must be among FSOC’s top priorities. Wage gains, increasing business earnings, higher tax revenues, reduced fiscal demands, and lower risk premiums all create buffers—both economic and psychological—that support a resilient financial system.
“With a focus on economic growth, in the coming year, the Council will consider ways to enhance the member agencies’ supervisory and regulatory frameworks, as well as other efforts to position banks and other regulated entities to foster innovation and further support economic growth,” Bessent continued. “Our financial system must also be secure against internal disruptions and external threats. The Council’s work on economic security will include a focus on the resilience of our critical financial markets, including the Treasury, fixed-income, and equity markets, and the resilience of our critical market infrastructure. To this end, the Council will develop an interpretation of financial stability that will incorporate economic growth and security as key pillars.”