The Journal. - R.I.P. CFPB?

Episode Date: February 11, 2025

The Trump administration's newly installed acting Consumer Financial Protection Bureau chief Russell Vought is closing the agency and has ordered staff to halt all work. WSJ’s Brian Schwartz explores what the agency does and why it’s become the next target for Trump allies like Vought and Elon Musk. Further Listening: - Trump 2.0: Less Foreign Aid, More Tariffs  - Inside USAID as Elon Musk and DOGE Ripped It Apart  - Trump’s Tariff Whiplash  Further Reading: - CFPB to Close Office After Vought Tells Staff to Halt All Supervision  - Russell Vought Taking Over as New Acting Head of CFPB  Learn more about your ad choices. Visit megaphone.fm/adchoices

Over the weekend, the Trump administration continued taking a buzzsaw 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. The CFPB, it's 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. That's our colleague Brian Schwartz. He says Republicans have been railing against the agency for years. So this is clearly a big target, just for the Trump administration but for the banking industry at large. And over the past few days the agency ground to a halt. The Trump administration has ordered the Commercial Financial Protection Bureau to stop working effective immediately. The Consumer Financial Protection Bureau is

closing its headquarters this week. Employees received an email from President Donald Trump's budget chief to stop all work. 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. Welcome to The Journal,

our show about money, business, and power. I'm Ryan Knudson. It's Tuesday, February 11th. Coming up on the show, is this the end of the Consumer Financial Protection Bureau? 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. In her view, there had to be some major regulator of the banks that specifically represented the consumer. 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. 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? 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, the CFPB says that they've gone and found out various forms

of malfeasance. 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 dollar fine and that required the bank to give two billion dollars 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 consumers. 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? 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 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. Here's Republican Senator Tim Scott grilling the former head of the CFPB at a hearing in 2023. 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, rule-makings driven by politics instead of policy, and a lack of oversight, which only leads to less economic opportunity, have become hallmarks under your leadership. And so Republicans in particular have thought wait a minute here if these guys are gonna go after the big banks 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. 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? Russell Vogt has been a long time budget hawk in the Republican Party for years. Vote 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. The two of them have been close 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 Vought. And the reason is, is because Russell Vought has done pretty much everything Donald Trump has asked him to do. I would argue he's probably done everything Donald Trump has asked him to do.

And then post the first term, Vought publicly stayed very, very much a vocal Trump supporter. Vought 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. And this idea was that the Office of Management and Budget

as well as the executive authority that goes along with it really should be Route one 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 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 restarted to whatever vision Donald Trump has for it. — And after Trump won the election, he put vote 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 the break. When Russell Vo 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 VOTE took over, Musk posted on X, CFPB RIP, with an emoji of a tombstone. Once Russell VOTE 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 you're supposed to be supervising. Do not do your work. Stop all work. Stop doing your job. That's pretty wild, right? 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. And then on Sunday, employees got another memo. So the third memo was calling on staff not to come into the office. It said, do not come to the DC office because we have closed the office at least temporarily for this week. So basically at this point, the CFPB is an agency that is like frozen in place. It is not really doing anything.

For right now, the CFPB is on total lockdown. Vought 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?

Democrats are up in arms. Senator Warren went on social media to crack right at him. 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. 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. 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 consumers, protect the little guy from the big banks. So if this agency gets largely diminished, what would that mean for consumers?

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. So we have these two powerful Trump allies in Elon Musk and Russell Vogt 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? 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. Here's Voe a few weeks ago, talking about the work that Doge has been doing. 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. We have reporting that Voe 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 stringing cuts to a variety of agencies. 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 powerful people. 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%. I want to go back to this fact about Russell Vogt and how he was one of the

coauthors 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. Yeah. I mean, he said that the product 2025 won't have much say in his administration and maybe they don't have 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. 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 it? It 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 saying you can slowly dismantle it. I don't think there's anything anybody's 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 less than something here.

Russell Voht can go in and he can systematically break down different pieces of CFPB. On Sunday, the National Treasury Employees Union filed a lawsuit against Voigt, 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. 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 bet, with vote. Russell Vought 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 and the White House.

Before we go, do you have any questions about what the Trump administration is up to? Please send us a voice note to thejournal at wsj.com. That's thejournal at wsj.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.