Federal Worker Mortgage Forbearance Act

— 837 — Financial Regulatory Agencies l Require the SEC and the CFTC to publish a detailed annual report on SRO supervision. AUTHOR’S NOTE: The preparation of this chapter was a collective enterprise of individuals involved in the 2025 Presidential Transition Project. All contributors to this chapter are listed at the front of this volume, but Paul Atkins, C. Wallace DeWitt, Christopher Iacovella, Brian Knight, Chelsea Pizzola, and Andrew Vollmer deserve special mention. The author alone assumes responsibility for the content of this chapter, and no views expressed herein should be attributed to any other individual. CONSUMER FINANCIAL PROTECTION BUREAU Robert Bowes The Consumer Financial Protection Bureau (CFPB) was authorized in 2010 by the Dodd–Frank Act.32 Since the Bureau’s inception, its status as an “inde- pendent” agency with no congressional oversight has been questioned in multiple court cases, and the agency has been assailed by critics33 as a shakedown mecha- nism to provide unaccountable funding to leftist nonprofits politically aligned with those who spearheaded its creation. In 2015, for example, Investor’s Business Daily accused the CFPB of “diverting potentially millions of dollars in settlement payments for alleged victims of lending bias to a slush fund for poverty groups tied to the Democratic Party” and plan- ning “to create a so-called Civil Penalty Fund from its own shakedown operations targeting financial institutions” that would use “ramped-up (and trumped-up) anti-discrimination lawsuits and investigations” to “bankroll some 60 liberal non- profits, many of whom are radical Acorn-style pressure groups.”34 The CFPB has a fiscal year (FY) 2023 budget of $653.2 million35 and 1,635 full- time equivalent (FTE) employees.36 From FY 2012 through FY 2020, it imposed approximately $1.25 billion in civil money penalties;37 in FY 2022, it imposed approximately $172.5 million in civil money penalties.38 These penalties are imposed by the CFPB Civil Penalty Fund, described as “a victims relief fund, into which the CFPB deposits civil penalties it collects in judicial and administrative actions under Federal consumer financial laws.”39 The CFPB is headed by a single Director who is appointed by the President to a five-year term.40 Its organizational structure includes five divisions: Operations; Consumer Education and External Affairs; Legal; Supervision, Enforcement and Fair Lending; and Research, Monitoring and Regulations.41 Each of these divisions reports to the Office of the Director, except for the Operations Division, which reports to the Deputy Director. Passage of Title X of Dodd–Frank was a bid to placate concern over a series of regulatory failures identified in the wake of the 2008 financial crisis. The law imported a new superstructure of federal regulation over consumer finance and — 838 — Mandate for Leadership: The Conservative Promise mortgage lending and servicing industries traditionally regulated by state bank- ing regulators. Consumer protection responsibilities previously handled by the Office of the Comptroller of the Currency, Office of Thrift Supervision, Federal Deposit Insurance Corporation, Federal Reserve, National Credit Union Admin- istration, and Federal Trade Commission were transferred to and consolidated in the CFPB, which issues rules, orders, and guidance to implement federal consumer financial law. The CFPB collects fines from the private sector that are put into the Civil Pen- alty Fund.42 The fund serves two ostensible purposes: to compensate the victims whom the CFPB perceives to be harmed and to underwrite “consumer education” and “financial literacy” programs.43 How the Civil Penalty Fund is spent is at the discretion of the CFPB Director. The CFPB has been unclear as to how it decides what “consumer education” or “financial literacy programs” to fund.44 As noted, critics have charged that money from the Civil Penalty Fund has ended up in the pockets of leftist activist organizations. In Seila Law LLC v. Consumer Financial Protection Bureau,45 the Supreme Court of the United States held that the CFPB’s leadership by a single individual remov- able only for inefficiency, neglect, or malfeasance violated constitutional separation of powers requirements because “[t]he Constitution requires that such officials remain dependent on the President, who in turn is accountable to the people.”46 The CFPB Director is thus subject to removal by the President. The CFPB is not subject to congressional oversight, and its funding is not determined by elected lawmakers in Congress as part of the typical congressional appropriations process. It receives its funding from the Federal Reserve, which is itself funded outside the appropriations process through bank assessments. CFPB funding represents 12 percent of the total operating expenses of the Fed- eral Reserve and is disbursed by the unelected Board of Governors of the Federal Reserve System.47 This is not the case with respect to any other federal agency. On October 19, 2022, in Community Financial Services Association of America v. Consumer Financial Protection Bureau, the U.S. Court of Appeals for the Fifth Circuit held that the CFPB’s “perpetual insulation from Congress’s appropriations power, including the express exemption from congressional review of its funding, renders the Bureau ‘no longer dependent and, as a result, no longer accountable’ to Congress and, ultimately, to the people”48 and that “[b]y abandoning its ‘most complete and effectual’ check on ‘the overgrown prerogatives of the other branches of the government’—indeed, by enabling them in the Bureau’s case—Congress ran afoul of the separation of powers embodied in the Appropriations Clause.”49 The Court further remarked that the CFPB’s “capacious portfolio of authority acts ‘as a mini legislature, prosecutor, and court, responsible for creating substantive rules for a wide swath of industries, prosecuting violations, and levying knee-buckling penalties against private citizens.’”50

— 706 — Mandate for Leadership: The Conservative Promise liquidation authority (OLA), the law’s alternative to bankruptcy for large financial firms. OLA was based on the faulty premise that large financial institutions cannot fail in a judicial bankruptcy proceeding without causing a financial crisis. It gives such companies access to subsidized funding and creates incentives for manage- ment to overleverage and expand high-risk investments.55 Congress should repeal each of these provisions to guard against bailouts and too-big-to-fail problems.56 Treasury plays a role in funding the conservatorships of Fannie Mae and Freddie Mac. It should work to end the conservatorships and move toward privatization of these massive housing finance agencies. This would restore a sustainable housing finance market with a robust private mortgage market that does not rely on explicit or implicit taxpayer guarantees. Direct government ownership has worsened the risks that government-spon- sored enterprises (GSEs) pose to the mortgage market, and stock sales and other reforms should be pursued. Treasury should take the lead in the next President’s legislative vision guided by the following principles: l Fannie Mae and Freddie Mac (both GSEs) must he wound down in an orderly manner. l The Common Securitization Platform57 should be privatized and broadly available. l Barriers to private investment must be removed to pave the way for a robust private market. l The missions of the Federal Housing Administration and the Government National Mortgage Association (“Ginnie Mae“) must he right-sized to serve a defined mission. ANTI-MONEY LAUNDERING AND BENEFICIAL OWNERSHIP REPORTING REFORM The Financial Crimes Enforcement Network is a relatively small bureau within the Treasury Department with approximately 285 employees and a FY 2022 budget of $173 million.58 Although FinCEN makes a significant contribution to law enforce- ment efforts, it also does demonstrable, substantial and widespread economic harm because it: (1) is largely oblivious to those adverse economic effects; (2) conducts almost no meaningful cost-benefit analysis or retrospective review of regulations; (3) has been subject to extraordinarily lax oversight by both Congress and the Trea- sury Department; and (4) demands total transparency by those it regulates but is itself disturbingly and purposefully opaque. For example, FinCEN no longer issues an annual report59 and no longer publishes cash transaction report (CTR) data.

— 706 — Mandate for Leadership: The Conservative Promise liquidation authority (OLA), the law’s alternative to bankruptcy for large financial firms. OLA was based on the faulty premise that large financial institutions cannot fail in a judicial bankruptcy proceeding without causing a financial crisis. It gives such companies access to subsidized funding and creates incentives for manage- ment to overleverage and expand high-risk investments.55 Congress should repeal each of these provisions to guard against bailouts and too-big-to-fail problems.56 Treasury plays a role in funding the conservatorships of Fannie Mae and Freddie Mac. It should work to end the conservatorships and move toward privatization of these massive housing finance agencies. This would restore a sustainable housing finance market with a robust private mortgage market that does not rely on explicit or implicit taxpayer guarantees. Direct government ownership has worsened the risks that government-spon- sored enterprises (GSEs) pose to the mortgage market, and stock sales and other reforms should be pursued. Treasury should take the lead in the next President’s legislative vision guided by the following principles: l Fannie Mae and Freddie Mac (both GSEs) must he wound down in an orderly manner. l The Common Securitization Platform57 should be privatized and broadly available. l Barriers to private investment must be removed to pave the way for a robust private market. l The missions of the Federal Housing Administration and the Government National Mortgage Association (“Ginnie Mae“) must he right-sized to serve a defined mission. ANTI-MONEY LAUNDERING AND BENEFICIAL OWNERSHIP REPORTING REFORM The Financial Crimes Enforcement Network is a relatively small bureau within the Treasury Department with approximately 285 employees and a FY 2022 budget of $173 million.58 Although FinCEN makes a significant contribution to law enforce- ment efforts, it also does demonstrable, substantial and widespread economic harm because it: (1) is largely oblivious to those adverse economic effects; (2) conducts almost no meaningful cost-benefit analysis or retrospective review of regulations; (3) has been subject to extraordinarily lax oversight by both Congress and the Trea- sury Department; and (4) demands total transparency by those it regulates but is itself disturbingly and purposefully opaque. For example, FinCEN no longer issues an annual report59 and no longer publishes cash transaction report (CTR) data. — 707 — Department of the Treasury There were 2 .7 million suspicious activity reports (SARs) filed in 2021.60 The number of CTRs filed were approximately 10 times that number.61 In 2014, FinCEN anti-money laundering/countering the financing of terrorism (AML-CFT) rules cost an estimated $5 billion to $8 billion per year.62 Undoubtedly, this cost is now substantially higher both because of inflation and because the rules have become more onerous.63 Yet there is little evidence that this massive expenditure of resources is doing much good,64 and there is no evidence regarding which aspects of the AML-CFT regime are effective and which are not. The AML-CFT regime is a major contributing factor causing the decline in the number of small broker-deal- ers and the decline in the competitiveness of community banks. Congress must require FinCEN to annually publish data regarding: l The number of SARs filed; l The number of CTRs filed;65 l The number of AML-CFT prosecutions, disaggregating those in which the AML-CFT prosecution is stand-alone and in which the prosecution is an add-on count connected to other predicate crime;66 l The number of AML-CFT convictions (similarly disaggregated); l The number and aggregate amount of AML-CFT fines imposed and the type of institution upon which the fine was imposed; and l Annual estimates of the aggregate costs imposed on private entities by the AML-CFT regime.67 Without this data, it is impossible for policymakers to make an informed judg- ment about the effectiveness of the AML-CFT regime. Congress should also require both FinCEN and the Government Accountability Office to undertake separate evaluations regarding which aspects of the AML-CFT regime are effective and which are not. FinCEN should be required to undertake a thorough retrospec- tive review of its regulations and various statutory requirements and report to Congress on its findings in a publicly available report. Anecdotes and assurances from FinCEN staff that all is well—but that even more onerous requirements are needed—are not enough. Congress should repeal the Corporate Transparency Act, and FinCEN should withdraw its poorly written and overbroad beneficial ownership reporting rule. Both are targeted at the smallest businesses in the U.S. (those with 20 or fewer employees) and will do nothing material to impede criminal finance.68 The FinCEN