Remaking the Financial System

One of the first institutions that the Trump team has set its sights on is deposit insurance. It’s hardly the most obvious challenge to take on: the scheme is funded by bank premiums, and there exists no lobby for its repeal because banks recognize that it serves to stabilize a crucial part of their funding. Until the 1930s, the US financial system was regularly roiled by panics; when depositors start to have doubts about the safety of their bank’s IOUs, they will cash out their deposits and so provoke others into doing the same, setting in motion a “bank run.” The Federal Deposit Insurance Corporation was created during the New Deal to undercut that dynamic and has since served as the backbone of the American financial system.

The purpose of targeting deposit insurance is to destabilize the existing banking system and send people scrambling for relative safety in the institutional structures of patrimonialism.

Although details are characteristically scant, the Trump team apparently plans to retain a pared-down insurance scheme and house it in the Treasury. That would make access to financial protection dependent on presidential mood and inclination, a reason for banks to join the movement of preemptive compliance that has been so visible across the corporate establishment over the past weeks. Discretionary executive control over banks’ balance sheets would also advance one of the American far right’s other interests, featured in Project 2025: challenging the autonomy of the Federal Reserve.

Those changes will make Americans reluctant to keep their money in bank accounts. They might manage that in part by shifting their money from regional banks without access to the halls of Mar-a-Lago to institutions that they expect will not be allowed to fail. But reducing people’s interest in traditional banking services altogether seems to be a key objective for the Trump team, because it views that scenario as a boost to crypto. Trump has made no secret of his desire to promote the crypto industry, which was one of the main contributors to his campaign fund. The DOGE initiative is even named after a cryptocurrency called Dogecoin (itself named after an internet meme featuring a dog).

Compared to traditional banking, the crypto industry benefits from weak and inconsistent regulation, and the new administration will no doubt further undermine the regulatory authority and enforcement capacity of agencies such as the Office of the Comptroller of the Currency and the Securities and Exchange Commission. Such enablement notwithstanding, the volatility of crypto will remain a major obstacle to its growth — for most people, it’s just too risky. Without government support, the sector is unlikely to grow much beyond its current size.

Of course, the official ideology of cryptocurrency is the libertarian dream of radical independence from the state. Central banks, regulators, and financial elites feature as the key villains in that perspective, seen to be colluding to inflate the economy, debase the currency, and defraud the public. In this dream, the decentralized issue of token assets forms the basis of a more transparent financial system that can sideline the Fed and the financiers. Bitcoin — the first cryptocurrency to start a virtual gold rush — was designed to place an absolute upper limit on its supply, a feature that is often cited as a guarantee of an inflation-free, stable, and incorruptible currency.

The dream of private money has its roots in far-right versions of neoliberal anti-statism and the technological utopianism of Silicon Valley. But it also harkens to an older, more explicitly populist tradition of financial politics that includes Andrew Jackson’s battle against central financial authority. If fighting concentrated money power was one prong of Jackson’s commitment to a yeoman republic of property-owning farmers, perpetuating slavery and freeing up lands for settlement by cleansing them of Native Americans were others. Progressive commentators often find that mix of commitments contradictory, but in the right-wing populist mindset, the internal battle against despotism and the uncompromising exclusion of outsiders appear as naturally compatible aspects of the fight for an uncorrupted herrenvolk republic.

Of course, one of the main claims often made for Bitcoin is that it is a tool for financial inclusion, offering minorities the opportunity to access the financial services that the existing industry has often denied them. Such claims have been subjected to cogent criticism, but one does not have to wade too far into the strange universe of digital tokens to encounter imagery evoking the idealized pasts and futures of white supremacy — featuring billionaires like Trump himself drawn as rugged yeoman farmers or space explorers, sporting a superman physique and other stylistic trappings of authoritarian realism.

Unlike Jackson’s, Trump’s reign will not feature any actual attempts to keep the government out of America’s business. That inevitability reflects not just his undoubted venality but also the fact that if private tokens or assets are to take on an important role in the payments system, their value needs to be stabilized by public assurances. Frequent instability will present regular opportunities for “derisking” particular assets, firms, or individuals. The stabilization of crypto will not follow the sanitized risk-management logic of last-resort lending, deposit insurance, or even quantitative easing. Instead, it will take place through executive decision, which will use public money and credit to prop up the value of portfolios considered properly aligned with the MAGA agenda.

However, all of this will still be “hard-money” politics. The king of debt himself may not be overly troubled by deficits, but the coalition that has been built around him includes a powerful group of far-right true believers who will enforce the commitment to overall austerity in the public finances — a pattern that has already become apparent in recent weeks as that hard-line faction knocked back a Trump-backed plan to raise the debt ceiling. Consequently, new bailouts and backstops will be matched by austerity elsewhere. DOGE has had no difficulty identifying the remaining large social programs funded by the American government, such as Social Security and Medicare, as rich sources of potential savings.

Democratizing or Personalizing the Bailout State

Karl Marx grasped capitalism’s paradox of abundance and scarcity in terms of the conflict between the forces and relations of production — the former making possible unprecedented economic growth, the latter ensuring the capture of that growth by a narrow social class. In our time, the paradox is explicitly distributional and increasingly political in nature.

Over the next few years, mainstream Democrats will engage Trump by calling out his corruption and authoritarianism. They will demand constraints on executive power, fiscal transparency, and central bank independence. Had Democrats been literal observers of neoliberal doctrine during the previous decades, perhaps such a strategy would make sense. But the institutions of the bailout state, how they enable the ongoing concentration of private wealth, and the bipartisan support they enjoy have all become plain to see. Progressive sanctimony will be no match for Trump’s unabashed wheeling and dealing.

An effective left-wing response to the slide into authoritarianism will need to start from an explicit acknowledgment that — entirely contrary to the official precepts of neoliberal theory — public institutions are deeply involved in the production of private asset wealth; and it will need to advocate democratizing those institutions.

When the Biden administration created an opening for such a project, establishment Democrats worked overtime to close it and to restore the status quo. But if Trump proceeds to use the dials and levers of the bailout state to support friends, family, and sundry associates, he will give rise to similar perceptions of democratic possibility. Unless the Left can exploit such tensions in the operation of an authoritarian project that is still very much driven by petty grievances, easily distracted, and prone to infighting, there is every chance that a more focused successor — such as J. D. Vance, whose path to the vice presidency was cleared by Silicon Valley oligarchs — will continue MAGA as a more effective project of technofascist transformation.