CFPB Shutdown: Legal Clash Looms as Congress and Trump Administration Collide
Senator Elizabeth Warren (D-Mass.) asserts that only Congress holds the authority to dissolve the Consumer Financial Protection Bureau (CFPB), setting the stage for a potential legal battle with President Donald Trump's administration.
"Congress alone established the CFPB, not Donald Trump or Elon Musk," Warren told Yahoo Finance. "Only Congress can eliminate it."
Following the Trump administration's move to suspend CFPB operations, Warren penned a letter alongside 200 other lawmakers urging the agency's acting director, Russ Vought, and Treasury Secretary Scott Bessent to remove Musk's operatives and restore functionality.
Jonathan McKernan is nominated to succeed as the CFPB's permanent director.
"The law is clear, and the courts will uphold it if Elon Musk and Donald Trump violate it," Warren emphasized.
When asked about integrating the CFPB into the Congressional appropriations process to stabilize its operations, Warren dismissed it as an attempt to camouflage an intent to dismantle the agency.
Established after the 2008-2009 financial crisis, the CFPB monitors consumer finance at major financial institutions. It receives funding from the Federal Reserve.
"The CFPB enforces consumer protections, and Elon Musk has effectively ordered them to cease," Warren said. "This jeopardizes public safety."
Musk's Friday tweet, "CFPB RIP," hinted at the impending shutdown.
Republicans have long opposed the CFPB, established under the Dodd-Frank financial reforms in 2010, arguing for its closure due to alleged redundancy in Washington.
According to a Wall Street Journal report, the Trump administration is considering consolidating bank regulators, including the Federal Deposit Insurance Corporation (FDIC), the Office of the Comptroller of the Currency (OCC), and the CFPB, without congressional approval.
Warren maintains that Congress created these agencies and retains the exclusive authority to dissolve them. She also criticized the proposed FDIC consolidation, highlighting its crucial role as a deposit insurer.
"The FDIC insures customer deposits up to $250,000 per account," Warren stressed. "Weakening this protection would weaken our financial system."
Warren further expressed concern about the potential void in oversight of large banks if the CFPB is dismantled.
Federal Reserve Chair Jerome Powell acknowledged the lack of alternative regulators during a Senate Banking Committee hearing.
Warren supports President Trump's call for lower interest rates to assist families with mortgages and credit card payments. Powell, however, advises patience as the central bank assesses inflation and trade policy implications.
"The economic turmoil caused by Elon Musk and Donald Trump creates uncertainty for the Fed," Warren acknowledged. "But I still believe lower interest rates are warranted while we address the underlying chaos that harms American families."