The US ended fiscal year 2025 with a lower deficit-to-GDP ratio, improving from the previous year. Treasury Secretary Scott Bessent expressed optimism for 2026, citing a reduction in deficits without causing a recession. He expects a decline in the deficit as a percentage of GDP from 6.5% to 5.9%.

Bessent highlighted the impact of the tax bill and anticipated substantial tax refunds for lower-income consumers in 2026. He emphasized the importance of changing withholding schedules to increase take-home pay. Bessent also mentioned full expensing for businesses and expressed optimism for a strong economy in 2026.

Discussing banking industry priorities, Bessent emphasized the need to lower capital requirements on mortgages and corporate credit. He aims to shift lending back to banks from non-banks by modernizing the capital framework and reducing capital requirements for large bank loans.

Bessent addressed the threat to the community bank model posed by the Dodd-Frank regulatory framework. He highlighted a decrease in community banks and outlined reforms including changes to the rating system, new monitoring processes, and coordination to avoid duplicative examinations. Bessent also emphasized the need to preserve equal access for small lenders in any changes to Fannie Mae and Freddie Mac.

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