The past weeks have generated national outrage in response to the mass federal employment cuts pursued by the new Department of Government Efficiency (DOGE). From Raleigh, North Carolina, to Washington, D.C., protestors are standing up to DOGE and DOGE-overseer Elon Musk after mass dismissals of federal workers. The Billionaire CEO has sought to reap the benefits of his billion-dollar investment in the 2024 Trump Presidential campaign as the designated “special government employee,” catalyzing the initiatives of DOGE to cut key regulatory agencies and dramatically decrease the federal payroll. One of the latest targets of federal cuts is the Consumer Financial Protection Bureau (CFPB), a key financial regulatory agency established in response to the 2008 recession. Remaining effectively shuttered, hundreds of CFPB employees were laid off via email in early February, with further orders cautioning employees against going into the office. As the U.S political landscape is dominated by intense unknowns and concerning oligarchic displays of executive power, the shuttering of a key financial regulatory agency like the CFPB highlights how institutional checks and balances that were put in place for the sake of progress are being eliminated with no afterthought.
The Consumer Financial Protection Bureau formally began operation on July 21, 2011, just three years after the initial shock of the 2008 recession. From the mid-1970s until 2007, the U.S. experienced “The Great Moderation,” a period of relative macroeconomic stability. Between 1994 and 2005, home ownership rose from 64% to 69%, and by 2005, residential investment was over 6% of the GDP of the U.S. Yet, expansion within the housing sector was accompanied by a drastic increase in home mortgage buying by U.S. households, and with this came an increase in risky lending practices. Mortgage-backed securities were created in the 1980s, functioning by putting a pool of mortgages into a trust. Investors could buy a small share of interest in that trust and would receive a small share of cash flow as those mortgages were repaid. The Collateralized Debt Obligation (CDO) was a more advanced form of mortgage-backed securities, where instead of investors owning interest in the whole mortgage pool, the pool was divided into tranches. Investors in the highest tranches got the first right to cash flows, while those in lower tranches take more risks, but still yield a great cash flow. In theory, this form of securitization is positive for the market, transforming non-assets into something that can trade and be traded in capital markets.
However, these bonds were backed by rating agencies that were supposed to rate bonds based on their quality and speculation of success, but instead, gave high AAA ratings to complex and risky mortgage-backed securities, which were backed and subprime (loans to borrowers who have poor credit). In 2006, the housing bubble popped, and by 2007, losses on mortgage-based financial assets were becoming more apparent. Additionally, several major firms experienced financial distress, sending shockwaves throughout the market. Although the Federal Reserve attempted to alleviate the issues by providing liquidity, by September 29, 2008, the Dow Jones Industrial Average fell by 777.68 points. This marked the largest single-day drop in its history at the time.
The “Great Recession” was one of the most costly economic meltdowns in history, and one study even reveals that ¼ of Americans lost 75% of their wealth. This is where the CFPB played a central role – the chief mission of the agency was to provide consumer protection from the risky financial processes that greatly contributed to the 2008 financial crisis. As of 2023, the CFPB reported saving Americans over $17.5 billion in the form of monetary compensation, cancelled debts, and other consumer reliefs. The agency additionally reported receiving over $4 billion as the result of penalties imposed on companies for violating consumer protection law. It’s then abundantly clear that the CFPB has played an instrumental role in advocating for the average American consumer, just a few short months ago having broad jurisdiction over financial goods and services marketed to consumers. Yet, it’s no surprise the agency is being gutted.
Musk’s DOGE planned from the beginning for “large-scale reductions in force,” and is also ending diversity policies and freezing trillions of dollars in federal grant funds. These major changes are already underway; as early as January 8th, two million federal workers received buyout offers from the Trump Administration. DOGE has also begun its accost of the Department of Education, cutting 89 independent research contracts at the Institute of Education Sciences worth nearly $900 million as of February 11, 2025. It’s clear that the name of the game is elimination; key federal agencies that seek to institute regulatory accountability are being overhauled for the purpose of government control. The CFPB is, unfortunately, just another target of DOGE. On Feb. 11, dozens of CFPB probationary employees were terminated, with headquarters continuing to be shuttered.
While the general worry was the permanent closure of the agency altogether, new court filings reveal the Trump Administration likely intends to keep the bureau operational. But the goals of the Trump administration and acting CFPB Director and Project 2025 engineer Russell Vought remain the same: to exert a tight grip on the agencies deemed by conservatives as liberal institutions. If the bureau remains open, its staff will be significantly downsized, its budget slashed, and its chief aims of consumer protection eviscerated in the name of “streamlining policies.” This will enable big banks and corporations to avoid penalties for inappropriate behavior, and their lending practices will then be allowed to remain untouched. But that is what created the 2008 financial crisis in the first place.
A similar form of hypocrisy has defined many of the actions pursued by DOGE; the agency recently found itself scrambling after accidentally firing key figures handling the national bird flu threat. DOGE doesn’t quite know what it’s doing. But this should be expected, considering it’s in the control of Musk, a billionaire C.E.O. with no practical political experience. The fact that Musk has the ability to shutter federal agencies at his own whim signals that the road outlining the next three years of the presidency is unpredictable. How can a non-elected figure have such a resounding executive say? It is, again, crucial to remember that the very agencies being upheaved are the ones that advocate for average Americans, especially students like those at Cal.
While it’s incredibly easy to get caught up in the never-ending news cycle of “shock and awe,” it’s equally important that we make sure this doesn’t lead to complacency. As more watchdog institutions are decimated, we must continue to pay attention to the flat-out authoritarian role of Elon Musk over DOGE and U.S. politics in general. Left unchecked, the authoritarian role Musk plays has the potential to become authoritarian rule. And with fewer checks and balances, like the shuttering of the CFPB, it will be harder to hold politicians and businessmen alike accountable.
Featured Image Source: Consumer Financial Protection Bureau
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