Mirror Review
January 06, 2026
Recent disclosures showing JPMorgan Chase CEO Jamie Dimon earning an estimated $770 million in 2025 have brought fresh attention to the banking sector’s resurgence.
JPMorgan’s stock rose 34% last year, while peers such as Goldman Sachs (+53%) and Citigroup (+6%) also recorded sharp gains. These results coincided with a broad rollback of post-2008 financial rules and a rebound in dealmaking activity.
At the same time, the United States is carrying record levels of public debt.
These trends are connected. Together, high US debt and lighter banking regulations have created conditions that increasingly favor large banks.
To understand why, it helps to start with the scale of the government’s borrowing needs.
The Scale of the US Debt Challenge
The United States entered 2026 with national debt exceeding $38 trillion, according to Treasury data. In 2025 alone, federal debt increased by more than $2 trillion, driven by persistent budget deficits and higher interest costs.
Key features of the current debt environment include:
- More than $7 trillion in Treasury securities issued annually to fund deficits and refinance maturing debt
- Roughly 335% of publicly held debt maturing within 12 months, requiring frequent rollovers
- Nearly $1 trillion in annual interest payments, up from about $500 billion just four years earlier
As borrowing has expanded, ensuring consistent demand for U.S. Treasury bonds has become a central economic priority. Any disruption in demand could push interest rates higher and worsen fiscal pressures.
This growing dependence leads directly to the institutions best equipped to support the Treasury market.
Why the Treasury Market Depends on Large Banks
The U.S. Treasury market underpins the global financial system. It supports pensions, mortgages, foreign exchange markets, and international trade.
At today’s scale, the market relies heavily on large financial institutions such as JPMorgan Chase, Bank of America, Citigroup, Goldman Sachs, and Wells Fargo.
Large banks play several critical roles:
- Acting as primary dealers, buying Treasuries directly from the government
- Providing market liquidity through trading and financing activities
- Absorbing volatility during periods of stress or heavy issuance
Smaller banks and non-bank firms generally lack the balance sheet size and infrastructure to perform these functions at scale. As debt levels rise, systemic reliance on large banks increases.
This reliance helps explain why regulatory policy has shifted in recent years.
What Lighter Banking Regulations Changed
After the 2008 financial crisis, regulations such as Dodd-Frank imposed strict capital, leverage, and oversight requirements. These rules strengthened bank balance sheets but also limited how much capital banks could deploy.
Under the Trump administration, lighter banking regulations became a policy priority. Key changes included:
- Pausing the final phase of Basel III capital increases, which would have raised capital requirements by about 9% for large banks
- Raising the asset threshold for enhanced supervision from $50 billion to roughly $700 billion, exempting dozens of banks
- Revising leverage rules that previously penalized holdings of low-risk assets
- Reducing staffing levels at supervisory agencies and narrowing enforcement focus
While these changes applied broadly, large banks benefited most because of their scale, trading operations, and market reach.
Yet the most significant impact came through changes to capital rules.
How Capital Rules Favor Large Institutions
One of the most important regulatory shifts involved how banks hold capital against assets.
Previously:
- Banks held similar capital buffers for safe Treasuries and risky loans
- This made holding government bonds capital-intensive and less attractive
Under revised rules:
- Capital requirements are more closely tied to risk
- U.S. Treasuries receive favorable treatment
- Banks can deploy balance sheets more efficiently
This change has:
- Increased banks’ capacity to hold government debt
- Improved liquidity in Treasury and repo markets
- Strengthened large banks’ role as debt absorbers
With more flexibility and capacity, profitability followed.
Rising Profits and Executive Pay
Lighter regulation coincided with a favorable market cycle, amplifying bank earnings.
Key profit drivers included:
- Higher interest rates, improving lending margins
- A rebound in equity and bond trading activity
- A revival in mergers and acquisitions, aided by looser antitrust oversight
As a result, in 2025:
- Big bank stocks rose an average of 29%, nearly double the broader market
- Jamie Dimon earned an estimated $770 million, largely from stock appreciation and dividends
- Capital One CEO Richard Fairbank earned over $300 million, including a $30 million bonus tied to the Discover acquisition
- CEOs at Goldman Sachs and Citigroup earned more than $100 million each
Bonus pools also rose across banks, with consulting firm Johnson Associates estimating increases of 5 to 25% for many banking roles.
Another emerging factor has further strengthened the link between banks and government borrowing.
Digital Assets and New Treasury Demand
Recent policy changes extended into digital finance, particularly stablecoins. New federal rules require stablecoins to be backed by cash or short-term U.S. Treasuries.
This framework:
- Creates a new, recurring source of demand for government debt
- Positions large banks to provide custody, settlement, and compliance services
- Further ties private financial activity to public borrowing
While still developing, digital assets add another layer to banks’ growing systemic importance.
However, increased flexibility also brings new risks.
Risks in a More Permissive Environment
Lighter banking regulations support profits and liquidity but also reduce buffers against shocks.
Key risks include:
- Lower capital cushions, limiting loss absorption
- Reduced regulatory oversight, increasing blind spots
- Exposure to fast-growing sectors such as AI, private credit, and commercial real estate
- Ongoing pressure from high interest rates and fiscal deficits
If growth slows or asset values fall, vulnerabilities could surface quickly.
This leads to an important policy trade-off.
A Delicate Policy Balance
Policymakers face a clear choice:
- Tighter regulation may constrain growth and liquidity
- Lighter regulation supports borrowing and markets but raises systemic risk
The current approach favors flexibility, betting that economic growth and market discipline will offset potential downsides.
The outcome depends on whether stability holds.
Conclusion: Why Large Banks Are Benefiting
High US debt and lighter banking regulations are now closely intertwined.
Record borrowing has increased reliance on large banks to support Treasury markets, while regulatory changes have made it easier for those banks to deploy capital and earn profits.
This alignment explains why banking is being described as “great again” for major institutions.
Whether it delivers lasting stability or creates new financial vulnerabilities, it will shape the next chapter of the U.S. financial system.
Maria Isabel Rodrigues
