DOGE Must Not Be the Dog that Eats CFPB

Unless you’ve been living under a digital rock, you probably know about digital Doge. It’s a decade-old meme of an adorable, latte-colored shiba inu that even Millennials had mostly moved past – long, long before Zoomers and Gen Alpha had their own memes. Now, many years after the meme had gone stale and just months after the pictured dog Kabosu had passed away, the name reappears… as a far less cute government entity trying to “delete” a different, more critical part of the government.

Billionaire-oligarch Elon Musk loved the crypto token Dogecoin, a so-called memecoin inspired by the dog, enough to send it “to the moon” in 2020. And Trump recently installed him to head a wholly new government entity called DOGE – yes, there is a point here – the Department Of Government Efficiency.

DOGE isn’t a department so much as it is a two-person advisory body, but Musk is tight with Trump. So when Musk posted “Delete CFPB” on his social media site, Xitter, we had to take notice.

The Consumer Financial Protection Bureau has obtained over $21 billion in relief (restitution and cancelled debts) for consumers since its inception. Voters across party lines overwhelmingly support the CFPB’s mission. So, in response, AFR sounded the alarm that destroying the CFPB would “please financial companies that want to keep charging junk fees and avoid accountability for unfair and abusive practices.”

The CFPB not only protects people from financial predation; it is the agency that would regulate Musk’s ambitious concept for an “everything app” centered around a payment service on Twitter/X. And it’s already the one that keeps an eye on Tesla’s lending business. Over the past three years, the CFPB has logged 263 complaints from Tesla customers related to its loan and credit product.

Joining Musk, billionaire venture capitalist Marc Andreessen, one-half of the founding duo behind Andreessen Horowitz, implied that dismantling the CFPB would lend a hand to fintech and crypto. In fact, the CFPB has already run into Andreessen via its enforcement actions against LendUp, a startup that so egregiously defrauded people that the agency forced it to shutter operations.

Do you get the feeling billionaires don’t like it when a government agency stops them from ripping people off?

Weirdly, Musk thought that it was “concerning” that data brokers can sell data on military personnel to shadow buyers. Does he know that the very agency that he’s trying to gut is trying to stop data brokers from doing just that? That’s one of countless CFPB proposals that AFR has supported.

Let’s hope DOGE’s bark is worse than its bite.

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BANKING AND FINANCIAL STABILITY: Capital Requirements – Watchdog Audit – Bank Control Act – Risky Risk-Shifting – Artificial Intelligence – No Broad Brush
CONSUMER: Wall Street Ripoff – Sticky Credit Cards – Too-Big Tech – Gone in a Synapse – Banking Off Scams – Medical Debt – Predatory Loans – Enforcement Actions
CAPITAL MARKETS: Derivatives Self-Dealing? – Dealing with Dealers – Whose Advice? – Self-Regulation – Asset Manager Antitrust – Lizárraga Steps Down
PRIVATE MARKETS: Public Pain, Private Gain – Private Credit – PE Landlord Discrimination – PE and Retirement – Other Private Markets News
CRYPTO: Bitcoin Bonnie & Clyde – Reining in the Kraken – Crypto Laundering – Crypto in the Oval Office? – Bitcoin Lending
HOUSING: Pensions = New Housing – HUD Trouble – Privatizing a Public Service? – Robo-Rents – YIMBY in Congress’ Backyard – DOJ vs. NAR
CLIMATE AND FINANCE: A PE Pipeline – NCUA
POLITICS AND MONEY: Senate, Please, Confirm – Wall Street and Trump – Corporate Power

Feedback? Reach us at afrnews@ourfinancialsecurity.org

BANKING AND FINANCIAL STABILITY

Capital Requirements.

Having already watered the original proposal down to the benefit of big banks, the Fed announced that it wouldn’t move forward to finalize the Basel III Endgame – which would have shored up the financial system by beefing up banks’ capital to make the system more resilient and financial crises less severe and less likely – while Biden was still in office. The OCC and FDIC made similar announcements, with the latter’s Chair Gruenberg saying that his agency wouldn’t finalize any of its pending rules before the new administration.

Fed Vice Chair Barr plans to stay in his seat into the next administration, as a Republican trifecta takes over the White House and both chambers of Congress. Gruenberg, meanwhile, will step down the day before Trump’s inauguration, opening the door for a Republican appointee to take his place.

Watchdog Audit.

AFR welcomed two proposals to bring much-needed transparency to the audit industry from the Public Company Accounting Oversight Board – the watchdog that promotes accurate and ethical audits of public companies, which some fear could be in trouble by Trump. The proposals include requiring the disclosure of partner and manager involvement, workload, and other details of individual audit engagements as well as firm-wide metrics. Said AFREF’s Natalia Renta: “Approving the rules would shed light on key information about audit firms and specific company audits. We call on the SEC to act on this proposal promptly in furtherance of its investor protection mission.”

Bank Control Act.

AFREF led a 37-organization letter urging the FDIC to strengthen protections under the Change in Bank Control Act, the statute that requires anyone taking control of a bank to give the agency at least 60 days notice. A broad coalition and AFREF supports the FDIC’s proposal to remove certain exemptions, and makes the case for Financial Stability Oversight Council (FSOC) to holistically address the financial stability threats posed by asset manager concentration and power.

Risky Risk-Shifting.

In a synthetic risk transfer (SRT), a lender offloads potential loan losses by selling part of the risk to investors, who reap fees for helping shoulder the burden. So far this year, banks are on track to issue a record amount of SRTs. Bank of America has begun targeting regional banks – which are struggling with their own turbulence, including the tremors in the commercial real estate lending sector – in its push to expand the market. Skeptical observers are concerned that “less sophisticated buyers could end up owning exposure to riskier assets,” per the Financial Times.

Artificial Intelligence.

House Financial Ranking Member Waters and Chair McHenry unveiled two measures that tackle AI in the financial services and housing sectors: One is a bill that directs regulators to study the current and future benefits and risks of AI, and the other is a resolution that acknowledges the growing use of AI in the spaces. AFREF has repeatedly raised the alarm about the harms of AI in the financial sector, especially the many ways AI is already amplifying racial bias and racial economic inequality.

No Broad Brush.

AFR and 24 other organizations urged the House Oversight and Accountability Committee to oppose legislation that would privatize all federal guarantee programs — including for home mortgages, small business loans, and farm loans — a move that would reduce access, raise costs and worsen racial gaps in homeownership rates, small business formation and family farm viability.

CONSUMER

Wall Street Ripoff.

If you’re a fan of watching big numbers get bigger, check out AFR’s Wall Street Ripoff Counter, a counter that tallies the money consumers have lost ever since big banks blocked the CFPB’s proposal to limit high credit card late fees. It ticks upward at around $317 every second and now stands at around $5.6 billion. Said AFR’s Amanda Jackson:

Big banks must not be allowed to stop this new cap on junk fees, a power play that does nothing but boost their profits at the expense of everyone but especially hard-working families living paycheck-to-paycheck and consumers of color, who pay a disproportionate share of the fees.

Sticky Credit Cards.

This year, AFR is asking Santa for less credit card price-gouging, as credit card companies charge the highest rates since data began being collected in 1994 and credit card debt surges to a record $1.17 trillion. Part of it is a monopoly problem, with two major card networks (Visa and MasterCard) and a handful of big banks effectively controlling almost all credit card lending. Today, credit card interest rates surge whenever the Fed raises benchmark interest rates, but credit card interest rates fall far more slowly and far less when the Fed cuts rates. People know this from their lived experience: credit card rates jumped when the Fed raised rates but they haven’t really fallen since interest rates have fallen. Instead of a competitive credit card market where rival card companies and banks compete for customers by offering lower rates, the banks are able to harvest windfall profits when rates rise, then gouge customers when they fall.

Too-Big Tech.

The CFPB finalized a groundbreaking rule to put big digital payment app players that handle over 50 million transactions a year, including Apple, Google, and Venmo, under federal supervision. This rule would require these nonbank players comply with laws on privacy, fraud prevention, and consumer protections, leveling the playing field with banks and credit unions. AFR’s Mark Hays, commended the rule, stating that “you shouldn’t have to surrender your personal information to unknown parties just to obtain essential financial services.” Rep. Maxine Waters applauded it as a vital step and urged support for the bill to further protect people from scams.

Gone in a Synapse.

When Synapse, a fintech firm that connected traditional banks with shadow banks that offered financial products, collapsed earlier this year, it wiped out up to $96 million of customer funds. One family, who stashed over $280,000 into an account at the startup Yotta, was offered just $500 in recompense by Evolve Bank & Trust, the lender tied to the fintech by Synapse. Some victims have organized on a board called Fight For Our Funds to reclaim what was stolen from them.

Banking Off Scams.

A Consumer Reports investigation found that, while bank customers face more and more sophisticated scams, the largest banks often deny their reimbursement claims when they try to get their money back. Federal law doesn’t require reimbursement when customers are duped in elaborate schemes by professional cybercriminals, effectively giving customers “not days, not hours, but minutes to report it.” Last year, three of the largest banks reimbursed less – sometimes far less – than one-fourth of the losses: JPMorgan (2 percent), Wells Fargo (4 percent), and Bank of America (24 percent). And when Congress tried to amend the law, the American Bankers Association pushed back.

Medical Debt.

Earlier this year, the CFPB proposed to wipe medical bills from credit reports, a move that would remove $49 billion worth of debt that “unjustly lowers credit scores” for 15 million people. AFREF noted that the proposed rule is a critical step in confronting structural racism. Alabama’s Rep. Gary Palmer has introduced a resolution to review and strike down the agency’s rule

Predatory Loans.

The National Consumer Law Center (NCLC) surveyed the scattershot state-level regulations that protect (or fail to protect) consumers from predatory, high-cost loans. The group found that some states significantly increased protections, like Minnesota eliminating triple-digit interest rates on payday loans or Colorado decreasing the allowable rates on certain small-dollar, short-term loans. Others, like Alabama and North Carolina, allowed lenders to charge more junk fees and higher interest rates.

Enforcement Actions.

EarnIn. Washington, D.C., Attorney General Brian Schwalb filed suit against EarnIn, a workplace payday lender, for “deceptively marketing and providing illegal high-interest loans” to more than 20,000 D.C. consumers. The company claimed that its earned wage advance product could be accessed with no fees or interest. In reality, customers immediately had to pay a fee to get the funds, which are effectively a loan.

CAPITAL MARKETS

Derivatives Self-Dealing?

Earlier this month, the Chicago Mercantile Exchange got approval to become the first exchange to both operate the market and become a brokerage that could buy and sell commodities with and for the same customers who trade on its exchange. The approval will transform the CME from an independent exchange to an exchange and giant commodity firm that will place orders for clients on its own platform as well as have the ability to make its own trades on its exchange, essentially placing its own bets against rival traders. The conflicts that arise, writes AFR’s Andrew Park, could have serious consequences for market integrity and systemic risk.

Dealing with Dealers.

A federal judge struck down the SEC’s “dealer rule,” a February proposal that would have put high-frequency trading firms under greater SEC scrutiny. These firms had previously not been required to register as securities dealers. After the North District of Texas’ ruling, hedge fund managers don’t have to comply with the terms of registration, potentially leaving their investors in the dark.

Whose Advice?

Proxy advisers are worried that the incoming Trump administration will curb their ability to provide objective research and advice on ballot items at the companies in which they invest. Republicans and corporate executives have criticized the industry, dominated by the firms Institutional Shareholder Services (ISS) and Glass Lewis, for making some recommendations against management. For example, both firms recommended shareholders reject Elon Musk’s unprecedented $56 billion bonus at Tesla. AFR has long opposed efforts to coerce proxy advisers into making management-aligned recommendations.

Self-Regulation.

A federal appeals court ruled that FINRA can’t expel brokerages without first obtaining approval from the SEC. The decision stems from FINRA's attempt to ban Alpine Securities Corp. for its misuse of client funds. The court emphasized that FINRA’s regulatory role requires supervision by a government agency, potentially challenging the financial industry’s current self-regulatory model, in this case preventing FINRA from kicking out a brokerage that charged unconscionable fees and appropriated clients funds. This case is being closely watched for its potential to reshape industry oversight. If the SEC is hamstrung and FINRA cannot expel scofflaw brokers, who will protect investors?

Asset Manager Antitrust.

A group of 11 Republican state attorneys general filed an antitrust lawsuit against asset managers BlackRock, Vanguard and State Street, for allegedly boosting coal prices through their investments. The states claim that the managers used their power and involvement with climate groups to push coal companies to reduce coal mining. If you need a reminder about why responsible investing is a good thing for workers, communities and the planet: Investing for the Future, AFREF’s ESG explainer, has you covered.

Lizárraga Steps Down.

Democratic SEC Commissioner Jaime Lizárraga will step down before Trump’s inauguration, leaving only one Democrat on the commission when the next administration takes over.

PRIVATE MARKETS

Public Pain, Private Gain.

William Birdthistle, former director of the SEC’s investment management arm, warns that private equity, hedge funds, and venture capital moguls represent an unprecedented danger as they head en masse into the Trump administration. Trump has already tapped hedge fund tycoon Scott Bessent to head up the Treasury and billionaire private equity investor Stephen Feinberg to be deputy defense secretary. In their respective industries, they “concentrate ever more control over our financial system into substantially less regulated, less transparent capital markets dominated by firms and financiers about whom Americans know very little.”

Private Credit.

Private credit is a relatively untested newcomer when it comes to weathering a high-interest rate environment. Last month, the International Monetary Fund warned that “the private credit industry’s rapid growth, competition from banks on large deals, and pressure to deploy capital may be leading to a deterioration of underwriting standards and weakened covenants” as signs show interest rate pressure on private credit borrowers.

Still, even despite the unseen risk brewing, private credit funds have been able to attract tons of cash from clients like insurers, which have pumped billions into risky “rated feeders” since 2021. Those are investment vehicles peddled by the likes of private equity megafirms Ares, Blackstone, Carlyle and KKR that sell stakes in private debt packaged into bonds. The National Association of Insurance Commissioners is concerned that these types of products might hide the true risk of their underlying investments. Investors, meanwhile, actually want to be able to see what’s going on behind the scenes and to sell off underperforming loans.

PE Landlord Discrimination.

Private equity landlords, Blackstone’s Tricon and Pretium Partners’ Progress Residential, are in legal hot water for allegedly using biased, outdated tenant eviction data and expunged criminal records to deny otherwise qualified Black rental applicants. The lawsuits claim these landlords turned housing into a game of “no second chances," disproportionately leaving Black renters struggling to find housing.

PE and Retirement.

Trump’s election has private equity firms pushing for the inclusion of private assets in 401(k) retirement plans, especially through target-date funds. Critics point to the danger of high fees and more risks, and no clear evidence that savers would benefit. Private equity firms, like Apollo and Blackstone, are vying for regulatory clarity, and viewing the $11 trillion-401(k) market as the “next frontier” of investments.

Other Private Markets News.

Accountants. Private equity firms are snapping up accounting firms, with Investcorp and PSP Investments acquiring PKF O’Connor Davies, and Centerbridge Partners taking a majority stake in Carr, Riggs & Ingram. Now, a third of the top 30 U.S. accounting firms are private equity-owned, fueling expansion, acquisition of smaller competitors, and investment in advanced technology, like AI.

Sandwiches. Jersey Mike’s Subs is selling a majority stake to Blackstone. The leading sandwich giant will keep founder and CEO, Peter Cancro, on board to purportedly slice and dice the company’s way to accelerated growth, expansion outside of the U.S., and investment in new tech.

Music. The private equity industry, high on the returns from investing in music catalogs, are now accelerating greater consolidation in the global music industry.

Private Credit. Asset mega-manager BlackRock plans to buy HPS Investment Partners, one of the foremost providers of private credit loans, for $12 billion.

CRYPTO

Bitcoin Bonnie & Clyde.

Heather Morgan (aka Razzlekhan) and her husband, Ilya Lichtenstein, were recently sentenced to time in prison for laundering billions in stolen Bitcoin. Their elaborate schemes, involving crypto mixers, privacy coins, and shell companies, highlight the broader vulnerabilities and rampant crime that crypto industry practices can enable. It took the FBI six years to crack the case. Despite the duo’s arrest, crypto remains a hotbed for scams, with $5.6 billion in losses reported to the FBI in 2023 alone.

Reining in the Kraken.

A California judge denied Kraken's request for an appeal in an SEC lawsuit against the platform for its alleged failure to adhere to securities laws. Kraken’s appeal boiled down to either a pretty-please request or an implied, don’t-do-this-or-else threat, but Judge William Orrick denied Kraken’s request for a speedier resolution, stressing the need for full facts to determine if Kraken's crypto transactions are securities.

Crypto Laundering.

The United Kingdom’s National Crime Agency uncovered a multi-million dollar Russian money laundering scheme that drug gangs used to exchange dirty money for crypto. The tale sounds straight out of a thriller, but it points to how the crypto industry continues to be an attractive space for bad actors to exploit crypto. Earlier this week, the U.S. Treasury also sanctioned the crypto kingpins at the head of the network.

Crypto in the Oval Office?

Trump has opened the door wide for the crypto industry to have their way with the government. His transition team tapped venture capitalist David Sacks for a first-of-its-kind “crypto czar” role. This comes after promises to boot Gary Gensler, a defender of investors and crypto skeptic, from his role at the SEC, and amid plans to tap former SEC Commissioner Paul Atkins in what is seen as a “crypto-friendly move.” Observers anticipate the SEC’s withdrawal from lawsuits that it had filed to get crypto exchanges to follow the financial market rules that protect investors.

Bitcoin Lending.

Howard Lutnick of Cantor Fitzgerald, slated to become Commerce Secretary under President-elect Trump. Cantor is deepening its ties with Tether. Cantor Fitzgerald is in talks to secure the stablecoin issuer’s support for a $2 billion Bitcoin-backed lending program with tens of billions to gain in the cards. Tether, already a major Cantor client, uses its custody services for billions in US Treasuries backing its USDT stablecoin.

HOUSING

Pensions = New Housing.

A new report co-authored by AFREF argues that pension funds can address the U.S. housing crisis by redirecting investments toward affordable housing rather than predatory private equity and hedge funds. Examples include pension-funded affordable housing projects, in-house private credit operations, and initiatives like the AFL-CIO Housing Investment Trust. The report calls for cooperative asset managers to align pension investments with long-term goals, offering sustainable, impactful solutions to ease the housing crisis.

HUD Trouble.

The person who helped push billions into Opportunity Zones, effectively handing out tax breaks to wealthy real estate investors with little benefit for local communities, may be heading up the Department of Housing and Urban Development. Trump tapped former Texas Rep. Scott Turner for the position, years after he tried to “restrict housing aid and cut HUD’s budget” during the president-elect’s first term.

Privatizing a Public Service?

The Trump administration may push to privatize mortgage giants, Fannie Mae and Freddie Mac, under federal custodianship since the 2008 crisis. There’s no end to the chaos that could ensue, whether for housing affordability or the existence of the 30-year mortgage. And a number of hedge funds that bought worthless Fannie and Freddie shares are angling for a political solution that would make them a lot of money.

Robo-Rents.

Cities, like San Francisco and Philadelphia, are cracking down on algorithm-based, rent-pricing software, like RealPage, for inflating rents through their use of nonpublic data. New laws ban this practice, pushing for more fairness as housing costs skyrocket. RealPage denies driving up rents, but has agreed to let landlords opt out of using private data. The DOJ is currently suing RealPage for antitrust violations.

YIMBY in Congress’ Backyard.

A so-called YIMBY (Yes In My Backyard, the counterpoint to the generally anti-housing development, anti-tenant NIMBY movement) Caucus has emerged in Congress, seeing groups like UnidosUS, YIMBY Action, and the National Low Income Housing Coalition join with the National Multifamily Housing Council and National Apartment Association. In its better incarnations, the YIMBY movement is a push for more housing and greater affordability, but some self-identified YIMBYs are mainly interested in zoning deregulation, corporate consolidation of the US housing market, and opposing tenant protections such as rent control.

DOJ vs. NAR.

Earlier this year, the National Association of Realtors, the largest trade association for real estate brokers in the country, reached a multimillion-dollar settlement with homeowners over its alleged scheme to enable their realtors to artificially inflate home prices in exchange for higher commissions. At the eleventh hour before the agreement was to head to court approval, however, the Department of Justice stepped in to outline some concerns, including by calling for the elimination of a “buyer broker” agreement in the settlement that could “limit how brokers compete for clients.”

CLIMATE and FINANCE

A PE Pipeline.

Blackstone just snagged a $3.5 billion deal with energy company, EQT, for a stake in interstate natural gas pipelines, in a bid that shows how big companies are leaning on private capital for a financial relief. EQT will keep majority ownership and maintain its investment-grade credit rating while splitting the expected earnings of $750 million per year, with Blackstone receiving about 60 percent. Blackstone stands to get an 8% return — better than new equity. Plus, EQT can buy back its stake in a decade.

NCUA.

AFREF and other groups called on the NCUA to dedicate funding to support credit unions on climate-related risk mitigation, climate resilience, and providing equitable green lending for their members.

POLITICS and MONEY

Senate, Please, Confirm.

AFR and 51 other organizations pushed for Senate Majority Leader Schumer to confirm pending nominees for critical financial regulators at the CFTC and SEC and independent agencies like the National Labor Relations Board, who have demonstrated a commitment to the public interest, science-based policy making, and robust oversight of industry conduct.

Wall Street and Trump.

As Trump prepares to take office, Wall Street banks are celebrating anticipated regulatory rollbacks and loosening oversight. Delays in tougher rules on financial buffers and swipe fees, are just a few signs of the changing tides. Bank shares are up with deregulation promising higher profits and more mergers.

Corporate Power.

Sen. Chris Murphy urges Democrats to listen to voters and lean into efforts to rein in the excess power of corporations and billionaires, pointing to how the majority of Republicans, Democrats and Independents want to fight corporate power. This is in line with polling commissioned by AFR that shows that voters overwhelmingly want tough oversight of Wall Street. The obvious challenge: the corporations pour money into politics.