November 19, 2024

SusanIsaacs

FINANCIAL DEREGULATION AND CONSUMERS

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The Trump-DOGE-GOP Agenda

Updted February 10, 2025

Trump is again taking aim at financial regulations in his second term, putting federal agencies and workers squarely in his sights. The administration is drastically reduce the power of U.S. financial regulators as part of what he calls the ‘dismantling of the administrative state’ and hand Wall Street a ‘deregulatory boost’ after 15 years of tightened regulation following the 2008 subprime mortgage crisis attributed to their actions.

What Would Deregulation Mean For Consumers?

Bankers and mortgage lenders are hoping for a new regulatory landscape with Trump’s reelection. But what would that look like?

We’re seeing the Project 2025 playbook unfold in real time. Dismantling of regulatory agencies, installation of inexperienced loyalists, cleaning house of watchdogs and career civil servants. What will be left when the axes stop falling?

It depends on how successful Trump’s administration is in defending legal challenges and how motivated (or complicit) the opposition is, and how much noise is made by the public. As a result of the actions already taken, consumers will enjoy far fewer protections than they have had over the thirteen years the CFPB has defended them.

A Short History of Deregulation

Looking to the past, deregulation in the financial industry gave banks and other financial institutions the autonomy to decide how to use and allocate their capital. Banks could be competitive with internationally and invest their money into securities. U.S. banks were deregulated before, under the Clinton administration, with the 1999 repeal of the Glass-Steagall Act, which was enacted in 1933 in response to banking crises in the 1920s and early 1930s. It prevented the separation of commercial and investment banking. The repeal of Glass-Steagall meant banks could invest in low-risk securities only. But–surprise–banks ignored the limitation and began investing in high-risk financial derivatives instead. This led, in good part, to the Global Financial Crisis of 2008.

Now Trump wants to loosen regulations again.

New leadership across a number of regulatory agencies is expected under his agenda, the CFPB is being muzzled and likely dismantled and the Federal Housing Finance Agency (FHFA) is targeted for major leadership, policy, and structural shifts. Fannie Mae and Freddie Mac are likely to see changes at the top, with reevaluation of their conservancy a real possibility.

While deregulation can have benefits in terms of promoting competition and economic growth, it also has serious drawbacks. These include the risk of market failures, increased inequality, lack of transparency from degregulated businesses, consumer protection risks, fraud risks, economic instability, small businesses being pushed out of the marketplace and the creation of monopolies, according to the Corporate Finance Institute.

Is Trump Taking A Wrecking Ball To Consumer Protections?

It appears so. Here’s why regulations were created in the first place:

Following the worst economic crisis since the Great Depression, Congress formed the CFPB and passed the Dodd-Frank Act to increase government oversight of the financial industry. Its major provisions include the Volcker Rule, Fed-mandated stress tests, and the empowerment of the FDIC to seize “too big to fail” firms. The goal: Prevent a repeat of the 2008 global banking meltdown.

The Act made mortgage lending safer and more transparent by including a large number of protections for borrowers. It changed income verification requirements to prevent home buyers from being approved for mortgages they couldn’t afford or weren’t qualified for, created a more equitable mortgage services market by limiting fees, protected borrowers by prohibiting certain types of pre-payment penalties and balloon payments, added transparency by requiring various disclosures to be provided to borrowers during and following the mortgage process and directed the CFPB finalization of the ‘Know Before You Owe’ rule integrating mortgage loan disclosures required under TILA and sections 4 and 5 of RESPA, established the Office of Housing Counseling to provide support for borrowers, and much more.

Here’s how the action may impact these protections:

Dodd-Frank

Tthe Dodd-Frank Act, which created stricter regulations for banks with at least $50 billion in assets may be weakened or eliminated. The banks included in the Act were deemed “systemically important” to the financial system and required to undergo annual stress tests by the Federal Reserve, maintain specific levels of capital and liquidity (in order to absorb losses and quickly meet cash obligations), and to file a dissolution plan (so-called “living will”) for potential failure.

Trump advisors have discussed eliminating bank stress testing provisions, replacing them with stronger capital requirements.

In 2018, Trump signed the Economic Growth, Regulatory Relief, and Consumer Protection Act. which eliminated the $50 billion threshold, maintaining enhanced regulations for banks with $250 billion in assets (which included only a dozen institutions at that time). In signing the rollback legislation, Trump called Dodd-Frank “job-killing regulations” and congratulated the bill’s supporters: “This is all about the Dodd-Frank disaster. And they fixed it, or at least have gone a long way toward fixing it.” The legislation was supported by the Senate Republican Conference and 13 members of the Senate Democratic Caucus, and it passed in Congress with a vote of 258-159. Former Democratic House Financial Services chairman, Rep. Barney Frank, who co-authored Dodd-Frank, said the rollback bill left the most important provisions of Dodd-Frank intact. But he added that he wouldn’t have signed it. Frank supported raising the cap to $100 billion, but not the $250 billion Republicans pushed for, cautioning that raising the threshold to $250 billion goes too far because the failure of two or three banks in that category could pose systemic risk problems.

Wall Street deregulation proponents claim, as did the CEO of SVB, that lending has been negatively impacted by Dodd0Frank, however the data proves otherwise. Dodd-Frank increased banks’ loss-absorbing cushions of equity capital and added other regulatory enhancements, such as strengthened liquidity rules and stress tests. Studies show that better capitalized banks lend more over an economic cycle. Banks have significantly increased overall lending and business lending since the bill’s passage.

Credit card loans, auto loans, and mortgage lending have also increased since the passage of Dodd-Frank.

One of the banks lobbying for the rollback was SVB (Silicon Valley Bank), a mid-sized institution with just under $40 billion in assets. SVB’s CEO testified to Congress that regulations imposed at the $50 billion level would unnecessarily burden SVB, which had assets at nearly $40 billion at the time, and require the bank to spend time and money on compliance instead of providing loans to job creators. He claimed that SVB and other “mid-sized” banks, “do not present systemic risks.”

By the end of 2022, SVB had approx. $209 billion in assets. In March of 2023, SVB failed due to mismanagement that caused a run on the bank. The FDIC was named receiver, and transferred SVB’s remaining deposits and assets. SVB’s failure was the third-largest bank failure in U.S. history and the largest since the 2007–2008 financial crisis. Its failure cost the Deposit Insurance Fund an estimated $16.1 billion. A Federal Reserve review concluded that the failure demonstrated weaknesses in regulation and supervision. Senior leadership failed to manage interest rate and liquidity risk, and the board of directors didn’t hold them accountable. SVB had invested a large amount of deposits in long-term U.S. treasuries and agency mortgage-backed securities, which dropped in value when interest rates increased.

Signature Bank was shuttered on March 12, 2023, on the heels of SVB’s collapse. Mismanagement and pursuit of “rapid, unrestrained growth” were determined to be the cause of its failure by the FDIC
First Republic Bank failed in May 2023 due to ‘loss of confidence’ triggered by the failures of SVB and Signature Bank
Heartland Tri-State Bank failed in July 2023 due to a cryptocurrency embezzlement scheme perpetrated by the CEO. The FDIC absorbed the $47.1 million loss and reassigned assets and deposits
Citizens Bank of Sac City failed in November 2023 due to inadequate risk management and lack of oversight by management & board
Republic First Bank failed on April 26, 2024, the first FDIC-insured bank failure of the year. The bank was seized and shuttered by Pennsylvania financial regulators and subsequently sold to Fulton Bank. The Deposit Insurance Fund will pay out $667 million to cover its failure
The First National Bank of Lindsay failed on October 18, 2024 due to deceptive and false bank records and other information (fraud)

Concerns of market contagion grew with the bank failures of 2023. Government intervention was required to contain the fallout. The Federal Reserve considered reinstating enhanced rules for mid-size banks after the SVB and Signature Bank failures. But there was ‘only modest’ evidence of a direct connection to the Dodd-Frank rollback bill. Mostly, experts concluded, it had sent the wrong message to banks.

Fannie Mae and Freddie Mac Conservatorship

On Jan 16 2025, Trump announced his nomination of Bill Pulte to be the next director of the Federal Housing Finance Agency.

The FHFA regulates Fannie Mae and Freddie Mac, the mortgage giants that have operated under U.S. government control since 2008. Pulte, who has since been confirmed as director, is expected to play a central role in any effort to return the pair, which back the majority of the nation’s residential mortgages, to the private sector.

Trump has promised to facilitate the release of the two GSEs from conservatorship. His goal is to achieve the longtime GOP goal of privatizing the Enterprises (req. Congressional approval or FHFA cooperation). Doing so could potentially boost lending volume, but lead to higher mortgage fees and costs for homebuyers due to the need for increased capitalization.

The plan was panned in “Privatizing Fannie and Freddie: Be Careful What You Ask For.”

GSEs (Government Sponsored Enterprises) are chartered by the U.S. government to facilitate the flow of money into mortgage products.

Nearly bankrupted by the 2008 subprime mortgage crisis that caused the 2008 housing market crash, Fannie Mae and Freddie Mac were bailed out at a total cost to taxpayers of $187 billion, and placed into conservatorship by the FHFA (Federal Housing Finance Agency) to reduce losses, operational and credit risk, and stabilize the mortgage and housing markets. Once the GSEs repaid their bailouts and returned to profitability, FHFA set annual performance goals. The conservatorship isn’t permanent, but for it to end, Freddie and Fannie would need to significantly increase their capital reserves to a level deemed sufficient by the FHFA, demonstrate financial stability and the ability to operate without government support, which likely requires significant recapitalization and addressing any outstanding issues related to Treasury Department loans and preferred stock holdings. Legislative action from Congress might also be required to define the exit strategy and regulatory framework.

Most experts believe the GSEs will remain under government control for the foreseeable future due to a lack of concrete plans for exiting conservatorship and ongoing political disagreements about how to restructure them. Some fear that releasing them could destabilize the housing market.

CFPB

On Saturday February 8th, Russell Vought, Project 2025 architect and Trump’s White House budget director and CFPB director, ordered the Consumer Financial Protection Bureau (CFPB), the independent government agency designed to protect consumers from corporate fraud and scams, to stop work.

As reported by multiple news outlets, Staff was directed not to issue any proposed or formal rules, cease pending investigations and refrain from opening new investigations, halt all stakeholder engagements and abstain from issuing public communications, among other duties.

Elon Musk’s DOGE team gained access to the CFPB and its internal systems on Friday, according to multiple news reports. Access included personnel rolls and financial records of the agency in recent days.

Musk is targeting the CFPB for closure, citing duplication of services as the reason.

No other U.S. agency duplicates the services and duties of the CFPB.

Democrats have called upon Treasury Secretary Scott Bessent to cancel the stop work order, asking Bessent when the order expires, whether it’s consistent with the Dodd-Frank financial reform law of 2010 and if consumers harmed by the order can expect compensation for any lapses in enforcement that prevent them from being made whole.

The Hill reported that Center for Responsible Lending counsel Nadine Chabrier said in a statement; “The latest developments at the CFPB are deeply troubling. These actions undermine the CFPB’s mission to protect consumers from financial misconduct.”

The stop work action is likely to result in a reversal of many rulemaking efforts recently passed or underway. These include:

Proposed rule on overdraft lending requiring insured financial institutions with $10 billion+ in assets to comply with the Truth in Lending Act (TILA) when extending overdraft loans
Supervisory guidance for federal and state consumer protection enforcement preventing banks and credit unions from charging overdraft fees in certain circumstances
The finalized credit card late fee rule which reduces the maximum late fee that large credit card issuers can charge to $8
The medical debt rule impacting medical debt credit reporting and the use of information related to the nonpayment of medical debt for underwriting purposes. Creates new rules for medical account servicers and debt collectors beyond the FDCPA and Regulation F requirements when conducting medical bill collections. *All Republican members of the committee signed on to a comment letter opposing the CFPB medical debt credit reporting proposed rule, stating that the proposal would “undermine underwriting processes and increase risk in the financial system.” The legal and policy challenges to this rule are ongoing.
The Section 1033 data-sharing rule (section 1033 of the Dodd-Frank Act) requires depository and non-depository entities to make available to consumers and authorized third parties certain data relating to consumers’ transactions and accounts; establish obligations for third parties accessing a consumer’s data, including privacy requirements; and provide standards for data access (requiring banks to provide customers’ financial information to fintech companies and data aggregators). This rulemaking falls under the 60-legislative day lookback period.
Mortgage costs research. Last May, CFPB released a Request for Information (RFI) regarding mortgage closing costs, asking nine questions about their impact and how they relate to borrowers and the mortgage market, targeting “junk fees.” CFPB planned to issue a proposed rule in December.

President Trump’s first term brought a number of changes to the CFPB. His initial director, Mick Mulvaney, an outspoken critic of the Bureau, once requested an operating budget of $0.00 from the Federal Reserve, which funds it. Enforcement actions ground to a near stop, and civil monetary penalties were reduced during his tenure. Trump’s second director, Kathy Kraninger, increased enforcement actions but settled actions for small amounts (including one for $1.00), and reduced consumer restitution.

What has the CFPB done for consumers recently?

Why The CFPB Matters

The Consumer Financial Protection Bureau (CFPB) was established by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 as a direct response to the 2007–2009 financial crisis. It protects consumers from predatory financial practices, and is designed to promote a fair and competitive marketplace.

Consumers were severely harmed by the 2008 financial crisis (aka the global financial crisis, or ‘Great Recession’), which was primarily caused by:

Subprime mortgages: Predatory lending practices that promoted subprime mortgages to unqualified low-income homebuyers
Lax lending standards
Lack of regulation of non-depository financial institutions
Credit derivatives: Unregulated credit default swaps (CDSs) from issuers who weren’t required to maintain enough money to pay out in a worst-case scenarios
Excessive risk-taking by Wall Street and mortgage originators and lenders
Rising interest rates
Falling home prices

It was the most devastating global economic crisis since the 1929 Wall Street crash that took America into The Great Depression. From 2007 to 2009, an estimated 15 million Americans lost their jobs (Bureau of Labor Statistics) and 3.4 trillion in retirement accounts was wiped out. Approx. 1.8 million small businesses failed. Inflated home prices plunged an est. 30%, triggeirng a massive wave of foreclosures, creating an overall loss of $7 trillion in the real estate industry. Negative equity (mortgage balace higher than the property’s market value) prevented homeowners from selling or being able to leverage their property. Loss of home equity significantly reduced the overall wealth of many Americans, and reduced spending on goods and services, contributing to recessionary conditions. The fallout extended to long-term damage to consumers’ credit ratings and loss of income, $1 trillion in plunging stock portfolios, weakening of the U.S. economic system and the spreading of our $20 trillion misery to other countries.

All caused by the growth of predatory mortgage lending due to lack of regulation, generation of a massive amount of consumer debt, and the creation of “toxic” assets. Wall Street played a significant role by securitizing mortgages, packaging subprime loans with other loans, some of which were higher quality, selling them as mortgage-backed securities (MBS) to investors. Wall Street also assigned AAA ratings to upper tranches of MBS, even if they contained subprime loans. In exchange, the rating agencies received lucrative fees. Many Wall Street firms accepted excessive risk by purchasing MBS, which led to huge losses when housing prices fell and mortgage delinquencies increased. Some investors profited from the crisis, while devastating U.S. consumers and homeowners.

President Barack Obama is credited with turning The Great Recession around. In February 2009, Congress passed the $789 billion American Recovery and Reinvestment Act, which helped bring about an end to the economic recession. The stimulus package included $212 billion in tax cuts and $311 billion in infrastructure, education and health care initiatives. Creation of new agencies like CFPB two years later, helped to restore consumer confidence and prevent Mortgage originators and lenders, and Wall Street. from falling back into predatory practices.

FDIC

The Federal Deposit Insurance Corporation (FDIC) is an independent agency created by Congress to maintain stability and public confidence in the nation’s financial system.

Leadership of the agency will undoubtedly change. Preident Biden nominated Christy Goldsmith Romero to replace current FDIC chair Marty Gruenberg after an investigation revealed a toxic work environment that included sexual harassment and misogyny that drove women out of their positions. While the blame fell on Gruenberg (and assumably his vice-chair Travis Hill), the report failed to detail the failings of the agency’s prior chair, during whose term these conditions existed and were left to worsen.

But Republicans stalled Romero’s confirmation, so Gruenberg remains at the helm of the embattled agency. The acting comptroller of the currency also sits on the FDIC board, along with the CFPB director, both of whom are expected to be replaced with Republican appointees.

SEC

The Securities and Exchange Commission (SEC) oversees securities exchanges, securities brokers and dealers, investment advisors, and mutual funds in an effort to promote fair dealing, the disclosure of important market information, and to prevent fraud.

During his campaign, Trump promised to suspend sales of U.S. government bitcoin holdings and fire current Securities and Exchange Commission (SEC) Chairman Gary Gensler the very first day of his administration.

Gensler’s removal has major implications for the digital currency industry. During the Biden administration, the commission’s enforcement actions have been the largest regulatory hurdle faced by crypto. The SEC’s first digital asset enforcement action occurred in 2015, and it has pursued over 170 legal actions since, with more than half carried out under Gensler’s leadership. The current SEC position is that most digital tokens are securities under the Howey test, and thus must be registered under the Securities Act of 1933. This led to a “regulation by enforcement” approach to digital assets, resulting its history of legal victories and fines against crypto and stablecoin issuers. The agency stepped up enforcement after the bankruptcies of FTX, Voyager Digital, BlockFi, and other cryptocurrency platforms, taking more than 25 actions in 2023. The SEC’s stated goal is to prevent fraud, reduce market manipulation, and force more disclosure from cryptocurrency holders and exchanges.

But Trump’s SEC is likely to take an entirely different approach, ending the “war on crypto,” and drafting new regulations clarifying the definition of digital assets. SEC Commissioner Hester Peirce’s regulatory proposal may be used as a guideline for change. Her Safe Harbor initiative calls for providing crypto startups with a 3 year grace period to develop networks and build communiites before SEC compliance for registration is required. Pierce was appointed to the Commission by Trump in 2018.

Investopedia offers a thorough breakdown of this topic.

Federal Reserve

The central bank of the United States provides a safe, flexible and stable monetary and financial system for the country. The Fed is the most powerful economic U.S. institution, possibly the most powerful in the world. Core responsibilities include setting the Federal Funds Rate, managing money supply and regulating financial markets.

Trump is pushing for more power over the Fed’s interest rate decision-making:

“I feel that the President should have at least say in there, yeah, I feel that strongly. I think I have a better instinct than, in many cases, people that would be on the Federal Reserve, or the chairman”, Trump said in a 2024 interview.

Jerome Powell’s CV

Jerome Powell, the current Fed Chairman, attended Georgetown Preparatory School, earned a bachelor’s degree in politics from Princeton University (1975), a law degree from Georgetown University (editor of the Georgetown Law Journal, 1979), gained experience in the law profession then moved into investment banking, working for Dillon, Read & Co. from 1984 to 1990. Powell served at the Treasury in 1990 as an assistant secretary for financial institutions and later as an undersecretary for domestic finance. Returning to investment banking following the end of the Bush presidency in 1993, Powell served as a partner of the Carlyle Group, a private equity firm and was a visiting scholar at the Bipartisan Policy Center in Washington, D.C., where he focused on federal and state fiscal policies. In 2012 President Barack Obama appointed him to the Federal Reserve Board of Governors. He rose to the position of Chairman in 2018, becoming the wealthiest Fed chair since the 1940s, with a net worth between $19.7 million and $55 million.

Donald Trump’s CV

In 1968, Trump joined his father’s business. In 1973, the US Justice Department accused the Trump company of discriminating against African American would-be renters. The company settled the matter by agreeing to rent more apartments to Black tenants. In 1976, Trump developed the Grand Hyatt Hotel. He didn’t have the money to purchase it and instead used his personal relationship with the Hyatt hotel chain and his father’s political clout to negotiate an arrangement with the NYC government whereby Trump received a 40-year tax abatement, or a reprieve on paying property taxes on the hotel. The abatement value of $4 million per year eventually grew to $400 million due to inflation in the value of the property and changes in the tax code. He used the promise of those savings to persuade the Commodore to sell to him and Hyatt to partner with him. Quite a profit at taxpayer expense. He subsequently built Trump Plaza and Trump Tower, and entered the casino business in Atlantic City, NJ with the Trump Plaza Hotel and Casino (formerly Harrah’s ) and Trump Castle. In 1990, Trump Taj Mahal was constructed at a cost of nearly $1 billion. Throughout this period, Trump borrowed significant amounts of money to fund the hotels and casinos. In 1990, 80 year-old Fred Trump purchased more than $3 million in casino chips at Trump Castle so the casino could make an interest payment. That purchase was later judged to be an illegal loan, and New Jersey assessed a fine of $65,000. Two Trump-owned companies filed for bankruptcy during this time: the Trump Taj Mahal in 1991 and the Trump Plaza Hotel in 1992. An unflattering biography of Donald Trump, published in 1993, was titled Lost Tycoon and declared that he had become a “public laughingstock” in the wake of his business failures. Trump used bankruptcy protection to reconfigure the debts of the many companies that comprised the Trump Organization, successfully making debt payments even as he accumulated more total debt at higher interest rates. He formed a publicly traded company, Trump Hotels and Casino Resorts to protect himself from financial liability and sell shares to the general public. He initially owned 56 percent of the stock, giving him a majority and thus total control of the company, which acquired several of the Trump Organization’s troubled properties and companies. In 2004, the company was unable to pay its loans and had failed to turn a profit. It, too, entered bankruptcy protection, and Trump reduced his stock holdings to 27 percent, giving up an active role in the company. It entered bankruptcy again in 2009 and 2014. By the time Trump announced his campaign for president in 2015, his gambling businesses had entirely ceased operation. Shareholders in the company lost their investments, and many vendors and creditors suffered losses, but Trump’s personal financial losses were mitigated by his financial and legal actions. As Trump’s real estate and gambling businesses failed, he protected his brand and shifted into licensing businesses in the U.S. and abroad. Working with ghostwriters, Trump published a number of how-to and business advice books, including the widely read Trump: The Art of the Deal, first released in 1987. He licensed the “Trump” name to a variety of businesses and products. From 1996 to 2015, he was an owner of the Miss USA, Miss Teen USA, and Miss Universe beauty pageants. In 2015, television broadcasters Univision and NBC declined to broadcast the pageants in response to Trump’s racist attacks on Latin American immigrants during his presidential campaign. The next year, Trump announced that he had settled lawsuits with them and sold his stake in the pageants. Trump’s shift to the entertainment industry peaked with his role on the hit reality television show The Apprentice, which ran on NBC from 2004 to 2015.

Source: Benjamin C. Waterhouse, Professor of History, University of North Carolina, Chapel Hill as published by UVA | Miller Center

Trump And The Fed

Unlike his Musk/DOGE-led blitz through other agencies, Trump has few options in vying for more control of the Fed. His most likely approach will be to “jawbone,” which entails complaining loudly on social media, in press conferences and other public forums about the Fed’s monetary policy to put pressure on the Board to take certain actions on interest rates. This seems a very Trumpian act.

He can nominate Board members, subject to Senate confirmation, but his first opportunity eon’t come until January 2026, when Adriana Kugler’s term as a Fed governor expires. Fed chair Jerome Powell’s term as chairman won’t expire until May of 2026.

Then there’s the action alluded to by Chair Powell, which is for Trump to ask him to resign, or, going further, Trump could attempt to demote Powell from the chair position, an action that has never been litigated and is certain to end with a Supreme Court case. And even if successful, Trump would have to choose his successor from sitting Board members.

Another, more extreme, option is for Trump to request that Congress by assign more direct control over rate setting to the president, in the form of legislation. An example would be requiring that every Fed monetary policy action to be subject to presidential approval. This, of course, would undermined confidence in the Fed and strip the agency of credibility.

Alternatively, Trump could go bigger and dismantle the Federal Reserve’s entire institutional foundation utilizing a legal theory known as the ‘unitary executive theory,’ which claims that independent agencies like the Fed are unconstitutional because Article II of the Constitution opens by stating that “The executive Power shall be vested in a President of the United States of America.” There’s no mention of independent agencies. All decision making power currently exercised by the Fed would accrue to the president. And, by extension of that theory, all independent agencies would lost autonomy. It’s another approach that would end at the Supreme Court’s door, and take months, even years to resolve. In the meantime, the resulting chaos and uncertainty would be devastating for the US and global financial systems.

The Volcker Rule

The Volcker Rule generally restricts banking entities from engaging in proprietary trading and from owning, sponsoring, or having certain relationships with a hedge fund or private equity fund. A bank that does not have, or isn’t controlled by, a company with upward of $10 billion in total consolidated assets and/or total trading assets and liabilities of 5% or more of total consolidated assets is excluded from the Rule.

In 2018, Trump signed a rollback measure raising the threshold for federal stress tests to $250 billion and exempted banks with under $10 billion in assets from the Rule, arguing that certain Dodd-Frank provisions were stifling growth and innovation.

Additional efforts to ease regulations are part of the Trump second term agenda.

Basel III Endgame

The Trump administration is likely to delay Basel III Endgame, at the very least.

Basel III is an internationally agreed-upon set of measures developed by the Basel Committee on Banking Supervision following the financial crisis of 2007-09. The measures were designed to strengthen the regulation, supervision and risk management of banks. The final set of rules in the Basel III series focus on the amount of capital banks are required to have in order to offset the credit, operational, and market riskiness of their business. It requires banks with over $100 billion in assets to increase their capital by an aggregate 16%. Banks calculate the riskiness of their assets in multiple ways and use the method that results in the most capital being set aside. Banks have a compliance window of July 2025 to July 2028, but when The Federal Reserve attempted to implement the rules, they met an unfavorable market reaction.

“A new era after 15 years of harsher regulation should aid capital, bureaucracy, costs, and fees,” Wells Fargo analysts wrote, adding that regulatory risk is likely to decline under Trump amid more predictable approaches, costs and benefits analyses, and a pro-business attitude.

Wells Fargo was determined to be one of the worst actors in the subprime mortgage crisis and has a long history of anti-consumer bahavior. During the 15 years of ‘harsher regulation’, they show a consistent pattern of breaking the law.

EO 12866

Revisions to EO 12866 compel all federal agencies to “report up” to the White House and the Office of Management & Budget on initiatives that are not specifically authorized by Congress. Many of the policy initiatives taken during the Biden administration will be rescinded.

Schedule F

Trump’s agenda called for dramatic cuts to regulatoratory agency staff through Schedule F, which would reclassify up to 50,000 civil servants across the government as at-will political appointees, replaceable if they don’t support his agenda. Trump reenacted Schedule F immediately following his inauguration, on January 20, 2025.

Who Profits From Deregulation?

The answer to this question is that the entities that were being constrained by the regulation tend to capture the most immediate and measurable gains from its removal. Whether the public ultimately benefits depends heavily on what kind of regulation was removed and whether competition actually forces those savings through to consumers.

Regulation eliminated → operating/compliance cost falls → profit margin rises → earnings rise → share price/dividends potentially rise → shareholders and executives benefit.

A company benefiting from deregulation could allow the benefit to trickle down to consumers by lowering its prices, but is more likely to increase its margin and/or dividends, buy back shares, increase executive compensation, or invest it. What determines the outcome is largely competition and market structure.

A loosely-related but memorable example is The 2017 Tax Cuts and Jobs Act. It was pitched as supply-side economics: slash the corporate tax rate from 35% to 21%, make it much cheaper for multinational corporations to bring overseas profits home, and corporations would invest the money in the United States, expand production, create jobs and ultimately increase workers’ incomes. But what actually happened:

U.S. multinationals repatriated an extraordinary $777 billion in 2018 after the law changed. Federal Reserve researchers subsequently examined what the biggest holders of overseas cash did with it. Their clearest finding was a sharp increase in stock buybacks. Among the 15 largest offshore cash holders, buybacks jumped from $86 billion in 2017 to $231 billion in 2018.
Apple is almost a caricature of the phenomenon. After the tax change freed its enormous overseas cash pile, Apple bought back $23.5 billion of its own shares in a single quarter and authorized an additional $100 billion buyback program. It also increased its dividend. Prices were not lowered for its customers, the opposite occurred. In fact, 2018 was famous for major price hikes on brand-new hardware (such as the newer iPhone XS, Mac Mini, and MacBook Air). There was no positive correlation between Apple’s 2017 tax windfall and benefits to consumers. The historical record shows a complete decoupling of corporate tax savings from consumer pricing. Apple’s windfall was channeled entirely into corporate and shareholder structures rather than lowering retail prices.
Cisco repatriated about $67 billion and announced plans for roughly $31 billion in additional share repurchases, as well as increased dividends.
Across corporate America, roughly $1 trillion in stock buybacks had been announced by the end of 2018, while CRS found relatively little of the corporate tax savings went toward the highly publicized worker bonuses.
And an NBER study found only 4% of the public companies it studied announced that some portion of their tax savings would go to workers.

Deregulation rests on a similar assumption: reduce the cost of doing business and companies will pass those savings along to consumers through lower prices. But there is nothing that requires them to do so. A company can just as easily retain the savings as profit, reward shareholders, buy back its own stock, acquire competitors or expand its market power. In fact, when consolidation reduces competition, the very mechanism supposedly responsible for forcing savings through to consumers becomes weaker. Unless deregulation increases competition along with reducing costs, “lower costs for business” and “lower prices for consumers” are not the same thing. One is guaranteed by the policy; the other is largely an assumption.

It’s not easy to find examples of deregulation benefiting consumers. Two exist, but one of them shows why deregulation usually works for consumers when it removes a barrier to competition instead of reducing corporate costs:

Over-the-counter hearing aids, 2022. Federal law and FDA action killed requirements that effectively forced many consumers to obtain hearing aids through the traditional prescription/professional-service channel. Adults with mild-to-moderate hearing loss could instead buy FDA-compliant hearing aids directly in stores or online. That opened the market to new sellers, unbundled the device from expensive professional services, increased consumer choice and created lower-priced alternatives. The FDA estimated average consumer benefits of about $63 million annually. Excellent. And an unusually good example of deregulation doing what proponents say it should do. The government didn’t merely tell existing hearing-aid companies, “We’re lowering your costs; please pass the savings along” and wait for the laughter to subside. It removed a barrier to entry and created competition. The FTC specifically predicted that the change would encourage new entrants, new distribution channels and lower-priced products;
Airline economic deregulation. I had to go back decades to 1978 to find this example, but the consumer benefits have carried forward and the subject is unusually well-documented. Pre-deregulation, the government controlled routes and fares, which effectively protected airlines from price competition. Removing those controls via the Airline Deregulation Act of 1978 allowed new and low-cost carriers to enter markets and compete on price. GAO concluded that deregulation increased competition, expanded air travel and reduced fares. More recent GAO analysis found inflation-adjusted domestic fares in 2024 were still below their 2007 level. But here’s what happened next; Consolidation weakened some of those gains. GAO’s 2026 review found that airline mergers that eliminated competitors generally resulted in 1% to 8% higher fares on affected routes, along with some deterioration in service quality.

In short, deregulation is generally not a consumer benefit.

Debunking Trump’s Deregulation

The Trump deregulation agenda largely follows the Heritage Foundation’s Project 2025 agenda. The connection is particularly strong because deregulation in Project 2025 isn’t just a collection of industry-specific rule changes, it’s part of a much larger plan to change who has regulatory power in the federal government.

The underlying Project 2025 Concept: dismantle the “administrative state”

Project 2025’s Mandate for Leadership runs more than 900 pages and contains agency-by-agency recommendations covering EPA, Energy, Interior, Labor, Treasury, SEC, CFPB, FTC, FCC, HUD, Transportation and numerous other departments and agencies. Heritage was unusually explicit about the objective. It described Project 2025 as an effort to prepare personnel to enter government on Day One and “deconstruct the administrative state.”

It’s not about too many regulations. Project 2025 challenges the modern system under which Congress passes broad laws such as the Clean Air Act, Dodd-Frank or workplace-safety statutes that don’t benefit corporations and protect consumers. Its goals is to reduce the independent power of that regulatory apparatus while increasing presidential (and thereby their own) control over it.

That’s very close to what the Trump administration is doing, self-described as beginning the “deconstruction of [the] administrative state.” It ordered agencies, working with DOGE and OMB, to review regulations for repeal and instructed agencies to use enforcement discretion to deprioritize certain enforcement actions.

1. Deregulate by default

Trump’s January 2025 executive order required agencies to identify at least ten regulations, rules or guidance documents for elimination for every new one issued, and requires the overall regulatory cost imposed during FY2025 to be “significantly less than zero.” The numerical target makes reducing the regulatory inventory itself an administration objective.

The result? OMB reported that during FY2025 agencies finalized 646 deregulatory actions versus five regulatory actions, a 129-to-1 ratio, which the administration estimated at $211.8 billion in regulatory cost savings. “Regulatory cost savings” should not be read as equivalent consumer savings.

2. Environmental and climate regulation

Project 2025 calls for substantial restructuring of EPA and reversal of climate policies, with a much greater emphasis on the direct economic costs regulations impose on businesses. It also calls for expansion of domestic fossil-fuel production and reduction of regulatory obstacles involving oil, gas, coal and federal lands.

Accordingly, Trump has reversed Biden climate policies, promoted fossil-fuel development and systematically reviewed environmental regulations for elimination or weakening. Independent comparisons identify climate and fossil-fuel policy as one of the strongest areas of Project 2025 implementation. This is especially important with environmental regulation because eliminating a regulation doesn’t necessarily eliminate its cost. It may simply shift the cost from the company to the public. If a power company no longer has to spend $20 million controlling pollution, the company saves $20 million. But the pollution doesn’t disappear. Its costs instead show up as health problems, environmental damage, higher insurance costs or taxpayer-funded cleanup. The cost wasn’t eliminated. The person paying it changed.

3. Financial deregulation

Project 2025 devotes a good deal of attention to Treasury, banking, securities regulation, the SEC and CFPB.

Its CFPB chapter is extraordinarily hostile to the agency’s existing structure and goal: consumer protection. It recommends major restrictions on its powers and funding, portraying the Bureau as an example of unaccountable administrative government. Heritage regurgitates the old post-Dodd-Frank deregulation argument that financial regulation imposes compliance and capital costs on banks and financial companies, potentially restricting credit and economic activity. During the Dodd-Frank years, specific parts of post-2008 regulations reduced a few kinds of lending, particularly small-business and some higher-risk mortgage lending. But the credit contraction began pre-Dodd-Frank, enacted in July 2010. During the financial crisis, banks suffered enormous losses, hundreds of banks failed, securitization markets nearly collapsed, collateral values plunged, and lenders tightened underwriting. Businesses were borrowing less because sales were weak, expansion plans went on hold, and borrowers had become less creditworthy. Also, there’s a fairly powerful irony here: some of what Dodd-Frank was criticized for eliminating was the easy credit that helped produce the 2008 crash. Requiring mortgage lenders to verify a borrower’s ability to repay makes it harder to originate some mortgages. But increasing the number of loans made without adequate consideration of borrowers’ ability to repay would be a laughable definition of improved economic activity. Dodd-Frank’s Ability-to-Repay rule was explicitly designed to prevent that practice.

In 2012, The Federal Reserve’s reports explained that the post-crisis decline in small-business credit reflected both sides of the market: lenders tightened credit, while businesses reduced their demand for it. It also noted that small-business owners consistently identified weak demand and economic uncertainty, rather than lack of access to capital, as their biggest problems.

And in 2018, GAO concluded that community-bank small-business lending after 2010 could be explained largely by macroeconomic conditions, local economic conditions and characteristics of the banks themselves. GAO found the effect attributable to regulatory changes was likely modest.

That doesn’t mean Dodd-Frank had no effect. Banks reported higher compliance costs, more documentation and longer loan-processing times. And there is academic research finding larger effects. A 2018 NBER paper found that the declining share of small commercial loans was statistically associated with the post-Dodd-Frank regulatory regime, particularly at smaller banks.

Heritage seized on that small issue in support of Trump’s current agenda, over-dramatizing post-2008 financial regulation as having “suffocated” financial services.

The counterargument, of course, is that some of those regulations deliberately make financial institutions bear costs in advance so taxpayers, depositors and the broader economy don’t bear catastrophic costs later. Remember the 2008-related bailouts and the public outrage over them?

Measuring only eliminated compliance cost can produce a very misleading picture of the economic benefit.

4. Consumer protection

The CFPB is specifically designed to correct an imbalance between individual consumers and enormous financial institutions. It regulates mortgages, credit cards, debt collection, consumer loans and other financial products.

Weakening the CFPB doesn’t introduce a new competitor in the way OTC hearing-aid deregulation did. It reduces the regulatory burden on the existing providers.

Removing a barrier to competition creates potentially powerful consumer benefit. Removing a restriction on incumbent businesses provides immediate corporate benefit, but no consumer benefit.

5. Labor and workplace regulation

Project 2025 also proposes extensive changes at the Department of Labor, NLRB and related agencies, including changes affecting overtime, independent-contractor classifications, union rules and workplace regulation.

Here again, the distributional issue is important. If a regulation requires an employer to pay overtime, provide a particular benefit, maintain a workplace standard or classify someone as an employee rather than an independent contractor, eliminating it creates a readily measurable saving for the employer. But that saving can simultaneously represent lost compensation, bargaining power or protection for the employee.

Calling the employer’s saving an economic benefit without counting the employee’s loss is one-sided and incomplete accounting.

6. Energy development and federal lands

Project 2025 advocates much more aggressive development of oil, gas and other natural resources, reduced regulatory barriers and a reversal of federal climate initiatives.

The intended economic chain is:

Less regulation → cheaper/faster development → more domestic production → greater supply → lower energy costs.

Project 2025 argues that reducing environmental regulation will lower costs for energy producers, encourage development and ultimately lower prices for consumers. But many of these regulations weren’t arbitrary costs imposed on industry. They were enacted because decades of experience showed what happened without them: polluted air and water, smog, serious illness, premature deaths and environmental destruction. Removing a pollution-control requirement may save corporations money, but the costs to consumers are huge. Deregulation simply shifts cost back onto the public in the form of poorer health, environmental damage and lives lost. We spent much of the twentieth century learning that lesson. Deregulation shouldn’t require us to learn it again.

Claims that environmental deregulation will make energy cheaper ignore what “cheap” energy once cost the public. Pollution controls did increase some production costs, but the benefits vastly exceeded them: EPA estimated that the Clean Air Act from 1970 to 1990 cost about $523 billion while producing roughly $22 trillion in benefits, including preventing an estimated 205,000 premature deaths by 1990. Meanwhile, major air pollutants fell dramatically as the economy continued to grow. Energy produced without pollution controls may result in a lower utility bill, but once the resulting illness, premature deaths, lost productivity and environmental damage are included, we find that the cost is simply being paid somewhere else.

7. Housing

Project 2025’s HUD Chapter 15 was authored by failed HUD Sec. Ben Carson, who repeats much of his plan that was rejected by Congress during his tenure. Some of his recommendations include:

Fair housing: Carson calls for reversing HUD policies involving disparate-impact liability and weakening or eliminating initiatives intended to affirmatively further fair housing.
Immigrant families: Project 2025 recommends prohibiting noncitizens, including mixed-status families, from receiving federally assisted housing benefits and specifically calls for ending policies that permit assistance to mixed-status families;
Housing assistance: It recommends adding work requirements, imposing time limits on assistance and eliminating Housing First requirements, which prioritize getting homeless people into stable housing before requiring treatment or other behavioral changes;
Public housing: It favors moving away from federal ownership/management models and toward private-sector participation, vouchers and other market-oriented approaches;
Developers and housing production: It calls for reducing regulatory barriers, expanding Opportunity Zones, using tax incentives and encouraging private investment and development;
HUD the agency: Carson proposes eliminating or consolidating programs and offices, reducing staffing and transferring some HUD functions elsewhere. The chapter repeatedly frames HUD’s existing regulatory and social-policy role as excessive federal intervention.

Most of these concepts have been proved ineffectual or punitive (or both). The one that is most misunderstood is Opportunity Zones. Opportunity Zones successfully increased overall housing construction by 70% in designated areas, but produced very few affordable housing units. The program has funneled about $100 billion in private investments into designated low-income communities and Economic Innovation Group research shows the initiative generated more than 416,000 new residential addresses from 2019 through early 2025. Approximately 75% of the funds went directly into real estate, mostly building multifamily apartment properties. *Less than 3% of the residential units financed through the program are explicitly designated as affordable housing., and remember, these zones were designated low-income. Nevertheless, most projects became market-rate or luxury apartments because the program rewards high financial returns for investors. And that’s why OZs don’t work. The “opportunity” is all on the developer side.

Carson again proposes reducing federal intervention and regulation in housing and mortgage markets. And the broader conservative agenda treats regulatory costs as a significant contributor to housing prices.

Some land-use, permitting, building and development restrictions do restrict supply, and removing unnecessary restrictions can allow additional housing to be built. Thus the YIMBY movement. But the biggest regulatory constraints on how much housing can be built are overwhelmingly state and local, not federal regulations imposed by HUD. Zoning, density, minimum lot sizes, height limits, parking requirements, setbacks, historic-preservation rules, subdivision requirements, permitting processes and local building requirements and all controlled by localities. Local governments exercise the relevant land-use authority, subject to state law.

That creates a problem with the way the Project 2025 HUD chapter frames housing deregulation. Carson repeatedly connects regulation with housing affordability, but many of the federal HUD rules he proposes eliminating or weakening aren’t the zoning barriers preventing additional homes from being built.

If eliminating $30,000 of regulatory expense makes a previously uneconomic project viable and increases housing supply, consumers may benefit substantially. If exactly the same number of homes gets built and developers simply make $30,000 more in profit, that’s primarily a transfer to producers. The consumer doesn’t benefit. If deregulation increases the value of development rights, savings may be capitalized into higher land prices rather than lower home prices. Increasing allowable density can still reduce the land cost per housing unit by spreading that higher land value across more homes, but deregulation that merely reduces a developer’s costs provides no guarantee that homebuyers will see any savings.

Project 2025’s choice of Carson to write its HUD blueprint is itself noteworthy. Carson came to HUD with no previous experience in housing policy, urban planning or government administration. As Secretary, he unsuccessfully sought deep cuts to HUD programs and tried to dismantle the Affirmatively Furthering Fair Housing rule, which he derided as “social engineering.” His tenure also produced the infamous $31,000 dining-room-set controversy while he was simultaneously advocating substantial cuts to the agency and its programs. Yet Heritage chose Carson to design its blueprint for restructuring HUD.

HUD was created on September 9, 1965 as part of the Department of Housing and Urban Development Act. Its mission was to address severe urban issues like substandard housing, decaying city centers and urban poverty by overseeing housing needs, develop urban communities, and eventually enforce fair housing laws to stop discrimination. HUD has successfully built a huge safety net that protects millions of Americans from homelessness. Programs like Public Housing and Housing Choice Vouchers (Section 8) provide stable, affordable shelter to over 5 million low-income families, seniors, and people with disabilities. Through FHA, HUD has insured more than 44 million home mortgages, allowing middle and low-income families to buy their first homes and build wealth. Following the Fair Housing Act of 1968, HUD created a formal legal path to investigate housing discrimination based on race, color, religion, sex, or national origin. The Community Development Block Grant (CDBG) program has funneled over $144 billion directly to local communities to build parks, fix roads, and rehabilitate local areas.

8. Reduce enforcement, not merely regulations

You don’t actually have to repeal a regulation to deregulate an industry. Instead:

cut the agency’s staff → reduce inspections → reduce enforcement → reduce penalties → narrow interpretation of the law.

Trump’s February 2025 order explicitly directs agencies to consider using enforcement discretion to deprioritize enforcement of regulations the administration doesn’t like. Project 2025’s personnel strategy makes much more sense when viewed through this lens.

If you replace career or politically insulated regulators with officials committed to the president’s regulatory philosophy, you can change the practical effect of regulation without Congress repealing the underlying statute.

9. Bring independent agencies under presidential control

Project 2025 argues for much stronger presidential control over executive agencies and challenges the independence of parts of the federal bureaucracy. Heritage’s current deregulatory program goes even further, recommending that independent agencies be subjected to executive-branch regulatory review, along with sunset dates for major regulations and congressional approval of major new regulations through something like the REINS Act. Trump has pursued increased presidential control of independent agencies.

Heritage’s stance is that deregulation removes government-created economic barriers so that the private market can thrive, producing what it calls the “rising tide that lifts all boats.” But we know from experience how that goes.

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