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Trump budget surprise: Gutting the CFPB

Budget proposal shifts appropriations to Congress, then slashes funding

The impact of President Donald Trump’s 2018 federal budget proposal would certainly be felt in the housing industry via the 13% cut to the budget of the Department of Housing and Urban Development, but that’s hardly the only impactful move that the budget proposal holds.

Buried on the second-to-last page of Trump’s budget is a move that is sure to please Trump’s fellow Republicans and many in the housing industry as well – gutting the Consumer Financial Protection Bureau.

Currently, the CFPB gets its funding from the Federal Reserve, but Trump’s budget would shift the CFPB’s appropriations process to Congress, a move that other Republicans have long pushed for.

In fact, recently Rep. Andy Barr, R-Ky., reintroduced the Taking Account of Bureaucrats’ Spending Act that would make the budget of the CFPB subject to congressional appropriations.

But Trump’s budget goes beyond that, calling for the reduction of the CFPB’s mandatory funding in 2018 and then reducing the CFPB’s budget to almost nothing in subsequent years.

The proposal regarding the CFPB is on page 158 of the 159-page budget, under the heading: “Restructure the Consumer Financial Protection Bureau.”

The proposal would cut the CFPB’s budget by $145 million in 2018, with the cuts increasing to more than $700 million by 2021.

The CFPB’s budget for 2018 is not yet public, but the most recent budgetary documentation from the CFPB pegs the agency’s 2017 budget at $636.1 million, an increase of 5% from its 2016 budget of $605.9 million.

Based on that math moving forward, the CFPB’s 2018 is estimated to be roughly $668 million. Trump’s budget calls for a $145 million cut to that figure in 2018.

And the cuts then get far more substantial.

In 2019, Trump’s budget calls for a $650 million reduction of the CFPB’s budget, which would take away nearly all of the bureau’s estimated funding for that year.

Moving forward, the cuts continue to increase. From 2018-2022, the Trump budget estimates the reduction in CFPB funding will total $2.9 billion. And from 2018-2027, the budget proposal estimates the CFPB’s funding would be reduced by more than $6.8 billion, effectively reducing the CFPB to rubble.

In addition to breaking down the cuts, Trump’s budget proposal lists its “justification” for the cuts, including stating that the CFPB needs to be reined in and prevented from engaging in “activism.”

Here’s how the Trump budget proposal justifies the cuts to the CFPB’s budget:

“Restructuring the CFPB to refocus its efforts on enforcing enacted consumer protection laws is a necessary first step to scale back harmful regulatory impositions and prevent future regulatory hurdles that stunt economic growth and ultimately hurt the consumers that CFPB was originally created to protect. Furthermore, subjecting the reformed Agency to the appropriations process would provide the oversight necessary to impose financial discipline and prevent future overreach of the Agency into consumer advocacy and activism.”

As one might expect, Democrats greeted Trump’s CFPB proposal with a cold reception.

“Donald Trump has once again revealed who he really is, with a cruel and senseless budget that abandons Main Street and the vulnerable,” Ranking Member of the House Committee on Financial Services Rep. Maxine Waters, D-Calif., said in a statement.

“The Trump budget mirrors efforts by Congressional Republicans to roll back Wall Street reform and take us back to the bad old days of weak oversight, lax enforcement and taxpayer bailouts,” Waters added. “The budget proposes to functionally terminate the Consumer Financial Protection Bureau, the only federal agency with the sole purpose of protecting consumers, and once again expose communities across the country to predatory financial institutions.”

For more on the impact of the Trump budget and some reaction to it, click here and here. And to read the Trump budget in full, click here. The CFPB section is page 158 of 159.

The proposed budget cuts were revealed just one day before the full Court of Appeals for the District of Columbia Circuit is set to rehear the landmark challenge to the agency’s constitutionality brought by PHH Corp.

On Wednesday, both the CFPB and PHH will make their case before the full Court of Appeals, which agreed to rehear the court’s October decision that declared the CFPB’s leadership structure unconstitutional by a 2-1 vote and vacated a $100 million fine levied by the CFPB against PHH. Read a recap of the litigation here

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