R.I.P. CFPB?

Summary

The Journal Podcast Summary: "R.I.P. CFPB?"

Release Date: February 11, 2025

Hosts: Kate Linebaugh, Ryan Knutson, with Jessica Mendoza
Produced by: The Wall Street Journal & Gimlet, in collaboration with Spotify

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Introduction

In the February 11, 2025 episode of The Journal, hosts Ryan Knutson and Brian Schwartz delve into the recent developments surrounding the Consumer Financial Protection Bureau (CFPB). The episode, titled "R.I.P. CFPB?", explores the Trump administration's aggressive moves to dismantle federal agencies, specifically focusing on the CFPB—a cornerstone institution established post-2008 financial crisis to safeguard consumers against financial malpractices.

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Background on the CFPB

Ryan Knutson opens the discussion by highlighting the Trump administration's continued efforts to reduce the federal government's footprint. Following the significant dismantling of USAID, a $40 billion foreign aid agency, the administration has now turned its attention to the CFPB.

[00:05] Ryan Knudsen: "Over the weekend, the Trump administration continued taking a buzz saw to the federal government."

Brian Schwartz explains the CFPB's original mission:

[00:30] Brian Schwartz: "The CFPB is supposed to be this kind of oversight agency over financial institutions across the country... being a consumer advocacy agency... monitoring and supervising the financial firms for any sort of scams or anything of the like."

Established in 2011, the CFPB was a direct response to the 2008 financial meltdown, aiming to provide robust oversight over major banks like Bank of America and JP Morgan to protect consumers from unethical practices.

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Republican Criticism and Legislative Actions

Since its inception, the CFPB has been a focal point of Republican opposition. Brian Schwartz notes that Republicans have long criticized the agency for its perceived overreach and lack of congressional oversight.

[05:00] Brian Schwartz: "That there is not enough congressional oversight of that agency... [Republicans] think that the federal bureaucracy really needs to kind of be broken down."

Republican Senator Tim Scott encapsulates the criticism during a 2023 hearing:

[05:22] Tim Scott: "The abuse of enforcement powers, rulemakings driven by politics instead of policy, and a lack of oversight... have become hallmarks under your leadership."

Despite numerous attempts to curb its powers through legislation, the CFPB remained intact until the recent actions taken by the Trump administration.

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The Shutdown of the CFPB

The episode's core focuses on the abrupt halt of the CFPB's operations initiated by the appointment of Russell Vogt as the acting director. Ryan Knudsen details the sequence of events leading to the shutdown:

[10:12] Ryan Knudsen: "When Russellville became acting head of the CFPB on Friday, employees there had already received a memo ordering them to pause ongoing investigations, litigation, and the implementation of new rules."

Russell Vogt, a staunch Trump ally and former head of the Office of Management and Budget (OMB), has a history of advocating for reduced federal spending and deregulation. His appointment signals a strategic move to undermine the CFPB's effectiveness.

Brian Schwartz provides insight into Vogt's background and motivations:

[06:33] Brian Schwartz: "Russell Vogt has been a longtime budget hawk in the Republican Party for years."

Vogt's alignment with Elon Musk and their collaborative efforts to dismantle federal agencies further exacerbate concerns about the future of regulatory bodies like the CFPB.

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Reactions and Implications

The shutdown has elicited strong reactions from Democrats and consumer protection advocates. Elizabeth Warren vocally condemned the actions:

[12:24] Elizabeth Warren: "Trump campaigned on helping working people, but now that he's in charge, this is the payoff to the rich guys who invested in his campaign and who want to cheat families and not have anybody around to stop them."

Conversely, Republican lawmakers, including Ted Cruz, have shown support for defunding the CFPB, arguing that existing agencies are sufficient for financial oversight.

Brian Schwartz discusses the potential impact on consumers:

[13:17] Brian Schwartz: "If Vote goes ahead and whittles this thing down, the supporters of the CFPB would say, 'there goes an institution that was really meant to help the little guy.' But Republicans would argue they have other entities to handle this."

The National Treasury Employees Union has taken legal action to prevent the shutdown, asserting that only Congress has the authority to eliminate executive branch agencies.

[16:02] Brian Schwartz: "The National Treasury Employees Union filed a lawsuit against Vogt aiming to prevent the shutdown of the CFPB."

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The Role of Project 2025

Russell Vogt's involvement in Project 2025, a conservative initiative aimed at restructuring federal agencies, underscores the coordinated effort to reshape the federal landscape. Despite initial attempts by the Trump administration to distance itself from the project, elements of its agenda have permeated the current administration's policies.

[07:35] Ryan Knudsen: "Boat was also one of the co-authors of Project 2025... the Office of Management and Budget should have much more authority to control federal spending."

Brian Schwartz emphasizes the seamless integration of Project 2025's principles into the administration's actions:

[15:31] Brian Schwartz: "There are elements of Project 2025 in Trump's government."

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Potential Future of the CFPB

As the CFPB stands on "total lockdown," questions arise about its future and the broader implications for consumer protection. Brian Schwartz opines that while complete dismantling may face legal hurdles, incremental erosion of the agency's powers is feasible.

[16:42] Brian Schwartz: "Russell Vogt can go in and he can systematically break down different pieces of the CFPB."

The episode concludes with uncertainties surrounding the CFPB's fate, highlighting the ongoing tug-of-war between regulatory oversight and deregulatory ambitions within the federal government.

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Conclusion

The February 11 episode of The Journal, "R.I.P. CFPB?", provides a comprehensive analysis of the Trump administration's strategic move to incapacitate the Consumer Financial Protection Bureau. Through incisive discussions and expert insights, hosts Ryan Knudson and Brian Schwartz illuminate the potential ramifications for consumer protection and the broader regulatory environment. As the situation unfolds, the episode underscores the critical balance between government oversight and industry autonomy in shaping the financial landscape.

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For more in-depth analyses and updates on this developing story, subscribe to The Journal on Spotify and other platforms.

Transcript

[Ryan Knudsen]

Over the weekend, the Trump administration continued taking a buzz saw to the federal government. After largely dismantling USAID, a $40 billion agency focused on delivering foreign aid, President Trump's sights are now set on the Consumer Financial Protection Bureau, or cfpb. It's an agency that was created in the wake of the 2008 financial crisis.

[Brian Schwartz]

The CFPB, it' supposed to be this kind of oversight agency over financial institutions across the country. Bank of America, JP Morgan, and you name it. And what they're supposed to be doing is really being a consumer advocacy agency. They're supposed to be monitoring and supervising the financial firms for any sort of scams or anything of the like.

[Ryan Knudsen]

That's our colleague Brian Schwartz. He says Republicans have been railing against the agency for years.

[Brian Schwartz]

So this is clearly a big target, not just for the Trump administration, but for the banking industry at large.

[Ryan Knudsen]

And over the past few days, the agency ground to a halt.

[Russell Vogt]

The Trump administration has ordered the Commercial Financial Protection Bureau to stop working, effective immediately.

[Tim Scott]

The Consumer Financial Protection Bureau is closing its headquarters.

[Elizabeth Warren]

This week, employees received an email from President Donald Trump's budget chief to stop all work.

[Brian Schwartz]

There is no word of how long this is going to last outside of this idea that the offices are only supposed to be closed for this week, but I'm highly skeptical of that. They say that it's just for this week. Okay, great. What happens on Friday? We don't know.

[Ryan Knudsen]

Welcome to the Journal, our show about money, business and power. I'm Ryan KNUDSEN. It's Tuesday, February 11th. Coming up on the show, is this the end of the Consumer Financial Protection Bureau?

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[Ryan Knudsen]

After the 2008 financial crisis. Now Democratic Senator Elizabeth Warren, who back then was a law professor at Harvard, led a push to create an agency that would serve as a consumer watchdog on financial institutions.

[Brian Schwartz]

In her view, there had to be some major regulator of the banks that specifically Represented the consumer.

[Elizabeth Warren]

You know, I say to the banking industry, if you're not making your profits on tricks and traps, you have nothing to fear. If you are, you probably really won't like this agency.

[Ryan Knudsen]

In 2010, Democrats in Congress passed a suite of new regulations on the banking industry without much Republican support. That included Warren's CFPB idea. And in 2011, the Consumer Financial Protection Bureau got up and running. So what has it been doing over the course of its life? How has it been regulating the banks?

[Brian Schwartz]

Well, it's become this investigative body. So if a set of consumers, whether through the court system or through just tips to the cfpb, a consumer can say, I feel like I'm getting squeezed here by this financial institution and here's why. And then the CFPB can go about investigating this, Right? And eventually in some cases they would. The CFPB says that they've gone and found out various forms of malfeasance.

[Ryan Knudsen]

Over its roughly 14 year lifespan, the agency has passed a number of regulations aimed at protecting consumers and issued billions of dollars in fines. For instance, in 2022, the CFPB reached a settlement with Wells Fargo that included a $1.7 billion fine, and that required the bank to give $2 billion back to consumers after the agency said the bank wrongfully foreclosed on homes, illegally repossessed vehicles, and incorrectly charged fees and interest. The CFPB says It's returned nearly $20 billion to consumers through things like principal reductions, canceled debts, and direct compensation to. But pretty much ever since its founding, Republican lawmakers have expressed concerns about the agency and tried to get rid of it. What has been the criticism of the cfpb?

[Brian Schwartz]

That there is not enough congressional oversight of that agency. That is a big one. There was supposed to be this kind of independent arm of the, of the federal government and they are going to go off and they're going to do their thing. And that's been the. The moves of that.

[Ryan Knudsen]

Here's Republican Senator Tim Scott grilling the former head of the CFPB at a hearing in 2023.

[Tim Scott]

And yet the CFPB is no more accountable today than it was at its inception. And I fear under your leadership, the agency is straying even further from its mandated mission. The abuse of enforcement powers, rulemakings driven by politics instead of policy, and a lack of oversight, which only leads to less economic opportunity, have become hallmarks under your leadership.

[Brian Schwartz]

And so Republicans in particular have thought, wait a minute here, if these guys are going to go after the big banks, if these guys are going to go after various firms. We should have some sort of oversight over that.

[Ryan Knudsen]

The CFPB doesn't get its funding from Congress. Its money comes from the Federal Reserve, meaning lawmakers aren't as easily able to influence it. Its critics have also said that it relies too heavily on enforcement actions rather than setting regulations, which creates uncertainty for the banking industry. Over the years, Republicans have introduced bills to limit the CFPB's power, but the agency has so far remained intact until Trump appointed a man named Russell Vogt as acting director of the agency. Tell me about Russell Vogt. What's his background?

[Brian Schwartz]

Russell Vogt has been a longtime budget hawk in the Republican Party for years.

[Ryan Knudsen]

Vaude served in Trump's first administration as the head of the Office of Management and Budget, a powerful agency that helps the president manage government spending.

[Brian Schwartz]

The two of them have been closed for a while. The two of them have been allied on this larger goal of dismantling the federal government. Vote has been extremely loyal to Trump. You keep in mind, you know, when you look back at Trump's first term in office Post the 2016 election, Donald Trump reflects on a variety of people that were disloyal to him. One of the people he never mentions in the same breath as that sentence is Russell Vogt. And the reason is, is because Russell Vote has done pretty much everything Donald Trump has asked him to do, I would argue. So we've done everything Donald Trump has asked him to do. And, and then post the first term, Vote publicly stayed very, very much a vocal Trump supporter.

[Ryan Knudsen]

Boat was also one of the co authors of Project 2025, a conservative plan for reshaping the federal government. Boat wrote a chapter on how the executive branch should have much more authority to control federal spending.

[Brian Schwartz]

And this idea was that the Office of Management and Budget as well as the executive authority that goes along with it should really should be Route 1 to the presidency, that the presidency should have the ultimate authority of the omb, not necessarily entirely Congress. And what does that mean? Like the OMB is responsible for various budget matters that really the parts of the power of the purse should go through the executive branch, AKA the omb, and then not Congress. And that's a critical difference there. And that's similar to what he has said before in other instances where he just thinks that the federal bureaucracy really needs to kind of be broken down and, and, and restarted to whatever vision Donald Trump has for it.

[Ryan Knudsen]

And after Trump won the election, he put Vogt back in charge of the omb. And not only that, he also became the acting head of the Consumer Financial Protection Bureau. That's after.

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[Ryan Knudsen]

When Russellville became acting head of the CFPB on Friday, employees there had already received a memo ordering them to pause ongoing investigations, litigation and the implementation of new rules. And staffers from Elon Musk's Department of Government Efficiency, or doge, were inside the agency's internal computer systems. Around the time Vogt took over, Musk posted on X CFPB RIP with an emoji of a tombstone.

[Brian Schwartz]

Once Russell Vogt became the interim chief of the cfpb, he put out a note that went a little bit further than that and called for CFPB officials to pause on their supervisory efforts. In other words, stop supervising the financial firms that you're supposed to be supervising. Do not do your work. Stop all work. Stop doing your job. That's pretty wild, right? I mean, you get an email from somebody that just says press pause on what you're doing and don't move. Clear warning signs that something is up at that agency, that they are clearly trying to do something to it. It's just a matter of what and when at this point.

[Ryan Knudsen]

And then on Sunday, employees got another memoir.

[Brian Schwartz]

So the third memo was calling on staff not to come into the office. It said, do not come to the D.C. office because we have closed the office at least temporarily for this week.

[Ryan Knudsen]

So basically at this point the CFPB is an agency that is like frozen in place. It is not really doing anything.

[Brian Schwartz]

For right now, the CFPB is on total lockdown.

[Ryan Knudsen]

Boat also said in a post on X on Saturday that the agency would stop taking in money it had previously been allocated. Now there's a 404 page not found banner across the agency's website and its X account has been deactivated. What has the response been so far to these actions against the cfpb?

[Brian Schwartz]

Democrats are up in arms. Senator Warren went on social media to crack right at him.

[Elizabeth Warren]

Trump campaigned on helping working people, but now that he's in charge, this is the payoff to the rich guys who invested in his campaign and who want to check cheat families and not have anybody around to stop them.

[Brian Schwartz]

Yeah, the group that's going to be missing in this is Republicans. They control the House and the Senate. I don't see a single Republican raising their hand going, oh, we should keep the CFPB as is. Has not happened.

[Ryan Knudsen]

In fact, a group of Republican lawmakers led by Texas Senator Ted Cruz proposed legislation last month that would effectively defund the cfpb. So what do you think? I mean, ultimately, the CFPB was created with a vision to protect. Protect consumers, protect the little guy from the big banks. So if this agency gets largely diminished, what would that mean for consumers?

[Brian Schwartz]

You know, it's tough to say. Right. Because if Vote goes ahead and whittles this thing down, the supporters of the CFPB would say, well, there goes an institution that was really meant to help the little guy. But on the other hand, you know, Republicans in Congress would say we already have agencies who can do this. Right. That they have various entities who investigate the big banks, investigate financial firms. We don't really need a CFPB like this.

[Ryan Knudsen]

So we have these two powerful Trump allies in Elon Musk and Russell Vote, both working to dismantle parts of the federal government at Doge and the Office of Management and Budget. Can you help me understand how they're working together? What is the difference between them?

[Brian Schwartz]

Well, I don't know how much difference there is, to tell you the truth. I mean, I think that they're very similar. You know, Russell Vogt talks about partnering up with Doge. He said that in his testimony.

[Ryan Knudsen]

Here's Vogt a few weeks ago talking about the work that Doge has been doing.

[Russell Vogt]

We're going to be looking at ways that OMB can come along beside and ask the right questions, both on the management and the budget side. Get a sense.

[Brian Schwartz]

We have reporting that Vote and Musk really started to establish this partnership Shortly after the 2024 election in November, late November. So they know each other, at least from a distance. And I feel like they are coming from the same world. It's loyalty to Trump executing his vision and making stringent cuts to a variety of agencies. I, I don't really see the daylight between them. And for any Democrats on the Hill, that's probably a scary thought, right? Because you've got two very, very one is a billionaire, the other one is kind of this budget hawk nerd. And, you know, that's a scary thought for Democrats in Capitol hill. It is 100%.

[Ryan Knudsen]

I want to go back to this fact about Russell Vogt and how he was one of the co authors of Project 2025. Didn't Trump try to distance himself from Project 2025 during the campaign? And I recall the Wall Street Journal even reported that the administration was trying not to hire people who are connected to Project 2025.

[Brian Schwartz]

Yeah, I mean, he said that the Project 2025 won't have much say in his administration. And maybe they don't have, you know, as much access as the Heritage foundation, which who authored that piece wishes they had. But the truth is, is that there are elements of Project 2025 in Trump's government.

[Ryan Knudsen]

So technically, this action with the CFPB is a freeze. But how far could this go? Do you think this could be the end of the agency as we know?

[Brian Schwartz]

Seems it really depends on who you ask. I mean, if you ask Democrats in Congress, particularly Elizabeth Warren, you know, she's going to say, you know, he doesn't have really the authority to totally demolish the agency, which I think that's probably true. I don't think you can legally take out the whole thing, but I don't think there's any laws of, of saying you can slowly dismantle it. I don't think there's anything, anybody stopping him from doing that, which means you can fire people. I don't think there's anyone saying somebody who runs an agency, that person can't fire people. I've never heard of that in my entire life. I mean, so unless I missed something here, Russell Vogt can go in and he can systematically break down different pieces of cfpb.

[Ryan Knudsen]

On Sunday, the National Treasury Employees Union filed a lawsuit against vote aiming to prevent the shutdown of the cfpb. The union said that, quote, Congress, not the president, has the power to create or destroy executive branch agencies.

[Brian Schwartz]

If you follow what everything Trump is saying. Trump said that he has authorized Elon Musk to do everything that he's doing. It's the same thing. I'd bet with Vote Russell Vogt wouldn't be going ahead and doing these things without the explicit approval of the White House. People think these are like people just doing whatever they want. I'm telling you right now, that is not how this works. These guys, Musk and Vote, aren't doing this in a vacuum. They're doing this with the clear authorization of Trump in the White House.

[Ryan Knudsen]

Before we go, do you have any questions about what the Trump administration is up to? Please send us a voice note to the journal sj.com that's the journal sj.com we'll try to answer them in our special series, Trump 2.0, which comes out every Friday morning. That's all for today. Tuesday, February 11th. The Journal is a co production of Spotify and the Wall Street Journal. Additional reporting in this episode by Dylan Tokar and Ken Thomas. Thanks for listening. See you tomorrow.