The News
Senior officials at the US Consumer Financial Protection Bureau were forced to resign on Tuesday after the Trump administration effectively shut down all major operations at the once-powerful agency.
Lorelei Salas, the agency’s head of supervision, and Eric Halperin, its head of enforcement, were placed on administrative leave this morning by Office of Management and Budget General Counsel Mark Paoletta, according to a CFPB spokesperson through the OMB.
Both Salas and Halperin emailed their own resignation notices to CFPB staff, saying they disagreed with the direction of the agency, according to internal memos seen by Semafor. The Trump administration’s moves throw into doubt the future of the agency — which was created in the wake of the 2008 crisis, launched Sen. Elizabeth Warren’s political career, and has been a punching bag for much of its existence.
Critics resented that its budget was set by the Federal Reserve, rather than through Congress, and Republicans saw it as an overly zealous watchdog in a field already crowded with financial regulators. The US already had five other agencies overseeing financial firms, though the CFPB is the only one with consumer protection as an explicit mandate and the power to go after nonbanks, like tech companies that offer financial services.
This story was updated to reflect comments from the CFPB under OMB.
Now What?
The White House can defang but not legally disband the agency, though Congress has the legal authority to restructure it or dissolve it into another agency, something it has done in the past. “I don’t know whether we end up keeping it or not,” Sen. John Kennedy, R-La., told Semafor. “But if we do keep it, you won’t recognize it after we finish fixing it.”
Bank lobbyists, even those who have long criticized the CFPB, have been quiet this week, unsure of how to apply rules enforced by a kneecapped agency. And while traditional lenders have been critical of the bureau, the regulator also helped rein in fintech firms and other, newer rivals that aren’t hamstrung by banking regulations. It recently brought enforcement actions against Walmart and Apple, for example.
“You can’t just wish away an agency, and there’s been lots of consumer protections,” Sen. Mark Warner, D-Va., told Semafor. “So the question is going to be: Why don’t my Republican friends stand up?”
Know More
Trump targeted the agency in his first term and won over the Supreme Court in giving the president authority to fire the director at-will — though he failed to convince them its structure was unconstitutional.
The CFPB has collected $25 billion in penalties and consumer relief, but attracted even greater criticism under its most recent head, the now-fired Rohit Chopra, for going after non-financial companies and over-interpreting the law.
“They do have a view that the industry is bad and consumers are good, that the industry can’t do right,” said Richard Horn, co-managing partner at Garris Horn LLP, who was a senior counsel and special advisor at the CFPB.
David Weigel contributed reporting.