The Shocking Truth About DC Spending & Corruption - Scott Bessent
Speakers
Scott Bessent
— Treasury Secretary
Chamath Palihapitiya
— CEO, Social Capital
David Friedberg
— CEO, The Production Board
Summary
Chamath Palihapitiya and David Friedberg interview Treasury Secretary Scott Bessent at the White House about the debt, the deficit and the administration's economic plan. Bessent lays out a three-part program: deleverage the federal government through spending cuts toward a 3 to 3.5 percent deficit to GDP by 2028, deregulate the financial system so the private sector can re-lever, and reorder the trading system with tariffs alongside low taxes and cheap energy. The market-relevant specifics include capital relief for small and community banks, possible removal of the supplementary leverage ratio which he says could cut Treasury bill yields by 30 to 70 basis points, an explicit statement that the US is not revaluing its gold, and a sovereign wealth fund study group. The back half covers DOGE and contractor grift, the IRS, Social Security, nuclear timelines and housing affordability.
- Bessent's stated goal is cutting the deficit to about 3 to 3.5 percent of GDP by 2028 without causing a recession.
- Core framework is government deleveraging paired with private sector re-leveraging through financial deregulation.
- Small community and regional banks are singled out as over-regulated; their lending recovery is the stated test of success.
- Removing the supplementary leverage ratio could pull Treasury bill yields down 30 to 70 basis points, worth about a billion dollars a year per basis point.
- Spending cuts, deregulation and cheap energy are aimed at bringing inflation and rates down; the 10-year was at 4.28 percent at taping.
- No revaluation of US gold; the sovereign wealth fund will instead mobilize energy leases and federal land.
- DOGE savings are expected to come largely from contractors, with Booz Allen cited as drawing about 98 percent of revenue from the federal government.
- Nuclear is central to the energy plan but blocked by supply chain and regulation, while housing affordability may be attacked through factory-built modular construction.
Ideas
Deregulation revives small and community bank lending
Bessent says the regulated banking system has been run inside what he calls a regulatory corset, and that Treasury is now re-examining every bank rule through FSOC and the President's Working Group, which he chairs. His specific complaint is capital treatment: a community bank with 183 million dollars in deposits is forced to hold the same capital as JP Morgan, Wells Fargo and Citi even though it carries none of their complexity, and the Basel frameworks spawned an industry of consultants that simply lowers economic activity. Because small regional and community banks make roughly 70 percent of agricultural loans and 40 percent of small business loans, he argues this over-regulation is exactly what has stifled Main Street, and he names recovering lending at those banks as the test of whether the deregulation program worked.
Policy mix pushes 10-year yields lower
Bessent states directly that if the administration does all the things he has described - deregulate, deliver cheap energy, shed excess federal labor and get government spending down toward a 3 to 3.5 percent deficit to GDP by 2028 - then inflation should come down and rates should come down. He adds that he has deliberately maintained Janet Yellen's front-end-weighted issuance schedule rather than terming out, because the market has not yet given the administration credit for the spending cuts and he wants that recognition first. He then points at the 10-year Treasury trading at 4.28 percent, says it is responding well, and asks whether they can do better than 4.28.
Treasury welcomes private credit's continued growth
Asked how he would measure the undoing of the financial corset, Bessent says he has no problem with private credit, that he actually finds it exciting and dynamic, and that it meets the business where it is. He argues the strength of the US financial system is now its breadth as well as its depth, and that the sheer volume of lending pushed outside the regulated banking system is itself the evidence that banks are over-regulated. Coming from the chair of FSOC, the body that would designate the sector as systemic, this is a supportive rather than a threatening stance toward private credit.
Scrapping SLR could cut bill yields
Bessent points out that banks face a capital charge for buying Treasury bills and that the supplementary leverage ratio has become a binding constraint on them. He says there is a real chance the administration takes that ratio away, and that doing so could pull Treasury bill yields down by 30 to 70 basis points. He frames the stakes in budget terms as well: every basis point is worth about a billion dollars a year of federal interest cost, so the rule change is both a bank-capital fix and a debt-service saving.
DOGE cuts threaten government-dependent Booz Allen
Relaying a statistic Elon Musk had given the hosts earlier that afternoon, the host names Booz Allen as the firm that draws roughly 98 percent of its revenue from the federal government. Bessent has just said that one of the two big savings from DOGE will come from contractors, and the host treats the revenue concentration as a failure of risk management by a firm that assumed its position was permanently entrenched, adding that the numbers on the other government-dependent consulting firms look similar. The implication for the stock is that the single customer being cut is the whole business.
Invest Social Security in the S&P
Chamath argues that Social Security's 2.7 trillion dollar balance is effectively an untradeable Treasury IOU that earns the government's own borrowing rate, and asks why it was not invested in the S&P 500 or broad equities instead. He cites his own analysis running back to 1971 showing the fund would be worth roughly 15 to 16 trillion dollars today, a number Bessent confirms he has seen and calls substantial, and proposes converting Social Security into a sovereign wealth fund so that Americans participate in the American economy rather than lending their retirement money to the federal government to spend.
Treasury rules out revaluing US gold
Addressing the widespread speculation that followed the sovereign wealth fund announcement, Bessent says the gold bugs all assumed the president was going to revalue the US gold reserve to market, and he states explicitly that as of today they are not revaluing the gold. What they will do instead is mobilize the rest of the asset side of the balance sheet: Doug Burgum at Interior and every other department head are being told to find assets that can be monetized, such as federal energy leases and federally owned land in urban and suburban areas. For gold this removes a specific, widely traded policy catalyst.
Nuclear matters but needs supply-chain fixes
Bessent says nuclear is going to be a big part of the administration's cheap energy program but that it is not going to happen tomorrow: the supply chain and the regulatory regime both have to be fixed first, the country still has to decide which reactor model to back, and with smaller plants you need someone willing to cluster them. He connects this to the broader problem he sees across energy, which is that private capital will not lock in projects whose payoff is five to ten years out while administrations keep reversing direction, and says government has to bridge that time arbitrage.
Federal push toward factory-built modular housing
Bessent, who says he has been involved in the housebuilding business, argues housing affordability is partly a construction-technology problem: there has been no real technological change in homebuilding in 50 or 60 years, and contiguous neighborhoods in different municipalities carry different building codes, some tracing back to the Chicago fire. He asks whether the category between stick-built and modular, prefab, can be opened up, and floats federal window guidance to push housing toward factory production on the logic that the more that comes out of a factory and is standardized, the cheaper and faster housing gets.
Up Next
This All-In Podcast video, published March 19, 2025, features Scott Bessent, Chamath Palihapitiya discussing KRE, IEF, BIZD, US Treasury Bills, BAH, SPY, GLD, URA, Modular housing. 9 trade ideas extracted by AI with direction and confidence scoring.
Speakers: Scott Bessent, Chamath Palihapitiya · Tickers: KRE, IEF, BIZD, US Treasury Bills, BAH, SPY, GLD, URA, Modular housing