Facebook’s Mark Zuckerberg popularized the ‘tech bro-ish’ saying, “Move fast and break things”, but it has clearly been adopted by Elon Musk' DOGE and the Trump 2.0 transition project. As I write this post less than a month into the Trump 2.0 presidency, things are moving quickly in Washington, DC, in directions unimaginable before January 20, 2025. One friend even compared these events to Germany in 1930s.
My friend is right to be alarmed at the pace and breadth of executive action, but one doesn’t needs to compare Trump to Hitler to make the point that these are autocratic power grabs.[1] That said, I haven’t seen any sign of antisemitism, and I don’t think firing the National Archivist or the Kennedy Center Board is anything like dissolving Congress or the Supreme Court, so I am not yet sounding the same kind of Kristallnacht alarm bells. But I am watching carefully.
To be sure, the limits of executive branch power and the status of independent agencies like CFPB in the constitutional order are being tested by the Trump 2.0 administration. The judiciary has its hands full of constitutional issues as does the sharply divided Congress. Unfortunately, the breaking of norms, procedures, and perhaps law by Trump and DOGE reflects the pendulum swinging back hard, not only upon DEI type identity politics progressive liberalism,[2] but also classical liberalism’s checks and balances and fundamental trust in the durability of process over outcomes. I am not making any specific predictions as to what will result, but use and abuse of the power of federal agencies for political purposes will no doubt continue seeking other outcomes with many babies being thrown out with the bathwater and more bathwater being created. Outcomes that may be cheered today may not prove durable in another administration.
Business (un)usual for CFPB
I underestimated the seriousness (and ruthlessness) of DOGE, but as Musk’s and Trump’s power grabs are applied to a politically swampy and business unfriendly regulator like Chopra’s CFPB, it is hard to imagine the agency escaping the next few weeks and months with business as usual. That said, please don’t expect me to provide blow-by-blow details on the status of these fast-moving developments after this post. I suspect anything I report will be out of date a minute or two after I publish. In fact, that almost happened with the information in the paragraph below about the interim director.
As of this posting’s date, Rohit Chopra is officially out the door[3]as CFPB Director. He was initially replaced on an interim basis by Treasury Secretary Scott Bessant. Unlike the last interim CFPB Director under Trump in 2017 (Mick Mulvaney), Bessant’s first move on February 3, 2025, was not to bring donuts.[4] Rather, it was to tell everyone to immediately stop and freeze whatever they were doing. “Simon says, ‘Freeze!’” [5]
Specifically, staff were directed by Bessant as follows:
· Not to approve or issue any proposed or final rules or formal or informal guidance;
· To suspend the effective dates of all final rules that have been issued or published but that have not yet become effective;
· Not to commence, take additional investigative activities related to, or settle enforcement actions;
· Not to issue public communications of any type, including publication of research papers;
· Not to approve or execute any material agreements, including related to employee matters or contractors; and
· Not to make or approve filings or appearances by the Bureau in any litigation, other than to seek a pause in proceedings.
Then, late on Friday February 7, 2025, Trump appointed recently confirmed Office of Management and Budget Director, Russell Vought, as acting CFPB Director to replace Bessant. This is why I am not a daily news reporter.
Now what for CFPB staffers?
Supervision and examinations did not appear affected by Bessent’s directive, but over the weekend it was reported that the new Interim Director Vought sent an email ceasing all supervision and examinations as well and notified the Federal Reserve that the agency will not take its next appropriation for funding. Again, it’s hard for me to keep up with the daily news, but enforcement attorneys had already begun filing notices in pending litigation notifying the courts of their inability to appear further in litigation for any purpose other than to seek stays of the cases. After Vought was installed, CFPB staffers apparently were told to work from home in the coming week.
What exactly all these expensive government employees will be doing this week working from home with these freeze directives were issued, however, is a mystery.[6] With apologies and sympathy to many CFPB staffers who are apolitically and sincerely dedicated to their federal government jobs, I’m guessing that everyone is preparing a very well-rehearsed response to the inescapably inevitable question to come from Trump’s DOGE cost cutters: namely, “What would you say you do here?”
Is the “pause” temporary?
Meanwhile, officially, we are just talking about a pause right now while a new administration takes over to implement its own policy directions.[7]That said, unlike the immediate hue and outcry reaction to Trump’s EOs about freezing Federal agencies that issue checks to people (inside or outside the US) or eliminating birthright citizenship, virtually no one has gotten apoplectic over the CFPB being told to stop working other than Senator Elizabeth Warren[8]and a few hard-core consumer activists who don’t already work at CFPB. For example, according to Housing Wire, Jesse Van Tol, President and CEO of the National Community Reinvestment Coalition said, “It means instability, uncertainty and exposure. Chaos only benefits bad actors. I urge Secretary Bessent to restore this key regulator and watchdog to active duty swiftly.”
Chaos and lawlessness?
It's true there is massive uncertainty in how the CFPB itself will operate going forward, but breathless pearl clutching about “chaos” ensuing is ridiculous. The Warren view that absent a powerful federal cop on the beat that all financial services companies will go into full-fledged lawlessness and consumer rip off mode is, frankly, bonkers. Last year’s administrative law developments already clarified that the CFPB’s interpretive powers are subordinate to the judiciary’s power. And, unlike the chaos that could have ensued if the CFPB were found to be entirely unconstitutional from its inception in the CFPB funding case decided last year, executive action alone can’t unwind validly issued laws and regulations. Still, it appears that the Trump team’s boundary smashing is likely to play out in the federal court system as well as with the thin Congressional majorities.
Again, I do not expect the financial service industry to devolve into lawlessness with or without a strong CFPB, nor does the market for consumer loans depend on CFPB’s existence.[9] I expect that loans will continue to close on time and lenders will continue to comply with laws and regulations. Meanwhile, anyone who thinks it is open season with the CFPB hamstrung needs to remember that between the various states’ attorneys general[10](especially in blue states), private rights of action, and statutes of limitation that may extend beyond the President’s term,[11]even without the CFPB, lenders do not have nothing to fear if they violate the law. So, I expect the market will continue to operate fine for most people in a toothless CFPB environment should that be the end result.
Market imposed discipline
While there are some bad apples in all consumer businesses, the idea that mortgage lenders only treat consumers fairly[12]because they fear enforcement is simply wrong. With a few regulatory guardrails to prevent market failures, (the Ability To Repay/Qualified Mortgage Rule and the TRID mortgage disclosure rule come to mind),[13]competitive market forces and consumer shopping behavior are generally sufficient to discipline the mortgage lending industry to achieve good consumer outcomes.[14]This is because in the consumer empowering internet information age, you simply cannot expect to treat consumers unfairly without word getting around and competitors replacing you.[15]Heck, even the idea that we need a law to prohibit racial or other discrimination in mortgage lending[16]seems ridiculous in 2025 when lenders are scrapping for every loan and a reputation for racial bias can sink an entire company’s workforce and pipeline even without a government investigation or penalty.
What’s next?
To those who would hope the CFPB will use this time-out to reassess the need for anti-consumer regulations such as the LO Compensation Rule or those who would hope for much needed RESPA reforms, I can’t imagine CFPB staff are of their own initiative reinventing themselves in the spirit of DOGE. If the new administration wants to really drain the swamp CFPB has created for consumer finance (at Congress’ direction), they will need to put someone in charge who knows how to do that within the bounds of the Constitution and has a plan beyond shutting it all down. At least for now, however, it is totally unclear to me what the Trump team’s plan for the CFPB is going to be now that this dog has caught the car.[17]
[1] I have faith that the constitutional checks and balances of the other two branches of government will constrain the President’s actions. Congress has been weak-kneed so far, but that majority in the House is razor slim and I believe there are still some Republicans with a conscience who will draw the line at certain kinds of Executive overreach. Meanwhile, despite some bellyaching from Elon Musk on X, the judiciary seems unbowed and has already stepped up on some of Trump’s EOs.
[2]For example, is disparate impact still considered evidence of illegal discrimination in fair lending cases?
[3]Chopra was reportedly physically out the door earlier having cleared out his office despite telling Congress days earlier that he was still on the job.
[4]In fairness to Mick Mulvaney, after calling the agency a “joke in a sick, sad kind of way”, donuts was the least he could do on day one. Bessent, on the other hand, didn’t have anything to apologize for to agency staff and was on the job less than a week, so, sorry, no donuts for you!
[5]As a kid, I loved the Underdog cartoon. Posing as a “humble and loveable shoeshine boy,” Underdog (voiced by the inimitably meek-voiced Hollywood Squares star Wally Cox) would transform into a superhero to defeat the evil Simon Bar Sinister (or Riff-Raff) in each episode. “When Polly is in trouble, I am not slow; it’s hip-hip-hip and awayyyy, I go!”
[6]I had half expected some of the more highly productive but sidetracked CFPB’ers would go around with brooms, mops and Windex cleaning the old OTS building they occupy, but the work from home instruction seems to prevent that idea.
[7]Jeff Ehrlich, a former CFPB Deputy Enforcement Director was quoted by Housing Wire, “This has happened with every change of administration. Rohit Chopra also paused all work, so what has happened this week is not unusual; it has happened with every transition that the bureau has gone through.”
[8]According to an emailed statement to Housing Wire from Senator Warren’s office, “Secretary Bessent just sent a signal to giant corporations and big banks that it is open season to cheat, trick, and trap hard-working American families.” As they sarcastically say in media circles, “Big, if true.”
[9]On the other hand, precipitous changes to FHA or Fannie or Freddie by the Trump team could severely impact the mortgage market.
[10]Yes, I believe I have that plural correct.
[11]A key feature of executive branch action is that it can be completely reversed in a new administration.
[12]“Fairly” is always in the eye of the beholder and CFPB’s definition under Chopra focusing on fairness as a DEI construct is decidedly opposed to the current administration’s concept of fairness.
[13]I would note that there has been virtually no enforcement actions by the CFPB or private litigants involving either ATR or TRID since their enactment over 10 years ago.
[14]Some of CFPB’s regulations actually cause worse consumer outcomes. Unfortunately, shutting down the CFPB doesn’t get rid of the LO Compensation Rule, RESPA or any other law or validly promulgated regulation, so that bathwater will remain in place even if CFPB shuts down.
[15]Since consumers cannot choose their mortgage servicer, I am sympathetic to the desire to reform the mortgage servicing relationship to enable more consumer-imposed accountability on servicer performance and operations other than default administration matters.
[16]In future editions of these Musings I expect to have further thoughts on how the fair lending laws are interpreted in the Trump 2.0 administration. Suffice it to say, I think my prediction about Townstone representing the apogee of fair lending enforcement may hold up well for a while.
[17]Vought is one of the principal authors of the Heritage Foundation’s Project 2025. The Project 2025 section on the CFPB was written by someone named Robert Bowes (I can’t find anything about him on the internet or in the Project 2025 Report). It can be found between pages 837-839 out of almost 900 pages. Aside from recommending that the CFPB be eliminated entirely either as unconstitutional or through Congressional action, it is clear that the Project 2025 authors didn’t have much to say about the CFPB, so I wouldn’t look to that document for much of a roadmap as to what is going to happen other than the already implemented freeze.