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President-elect Donald Trump listens to Elon Musk as he arrives to watch SpaceX's mega rocket Starship lift off for a test flight from Starbase in Boca Chica, Texas on Nov. 19, 2024.
One of the best parts of the Dodd-Frank financial reform law was the Consumer Financial Protection Bureau (CFPB). The brainchild of Elizabeth Warren, this agency is charged with protecting consumers in financial markets. And while it has by no means succeeded entirely at this goal, it has made a huge difference. Over its lifetime, it has provided nearly $20 billion to Americans in the form of “monetary compensation, principal reductions, canceled debts, and other consumer relief ordered.” About 195 million people have been eligible for this relief.
In a recent episode of the Joe Rogan podcast, Marc Andreessen, the co-founder of the venture capital firm Andreessen Horowitz, took aim at the CFPB with some highly inflammatory accusations. He said it is “Elizabeth Warren’s personal agency” that “she gets to control” and “run and do whatever it wants.” That plan includes preventing “fintech… new competition, new startups that want to compete with the big banks,” which it does by “terrorizing anybody who tries to do anything new in financial services.”
The victims are terrorized through “debanking,” he claimed. “My partner Ben’s father was debanked… we had an employee—” Rogan cut in: “For what?” “For having the wrong politics,” Andreessen responded. Rogan gasped.
In response to a tweet from Capitol Forum reporter (and Prospect alum) Jarod Facundo debunking Andreessen’s claims, shadow president Elon Musk wrote: “Delete CFPB. There are too many duplicative regulatory agencies.”
As an initial matter, Andreessen is comprehensively mistaken about almost every aspect of how the CFPB works. Though the basic idea of CFPB was Warren’s, and she helped stand it up as a senior advisor to the Treasury Department, she does not “control” it. President Obama nominated former Ohio attorney general Richard Cordray as the first director, and former Warren staffer Rohit Chopra now runs it. Second, it cannot do “whatever it wants.” Like any agency, CFPB has a strictly defined set of goals and powers that were outlined by Congress in law and could only be changed with a new law. It has the usual regulatory process with comment periods and so forth.
As for Andreessen’s most inflammatory claim—that CFPB commissars are going through lists of bank customers and kicking out anyone whose politics they don’t like—this is not just untrue, it is the exact opposite of true. The CFPB has worked to protect people from unfair debanking.
Companies do sometimes make purely private business decisions to cancel clients. For instance, when Kanye West posted vitriolic anti-semitism on Instagram and Twitter, JPMorgan cut ties with his shoe company, because that kind of toxic association could cost them money. These decisions can sometimes be unfair and arbitrary. For instance, contrary to Andreessen’s assertion that “I have not heard of a single instance of anybody on the left” being debanked, one of the more common victims of debanking are current or former sex workers.
CFPB has responded to this trend by investigating banks for discriminatory treatment of customers, only to be stopped by a Texas judge appointed by Trump. In court, the agency pointed out that this would stop it from preventing bias against Christians. “Under the district court’s logic, the Bureau could not even investigate this intentional religious discrimination to determine if it’s unfair,” it wrote in a brief. Even Breitbart has given CFPB credit for opposing Wall Street debanking.
It’s not some big mystery why the CFPB came about after one of the largest epidemics of financial theft, fraud, and abuse of all time blew up the global economy in 2008.
Even with that roadblock, the agency recently finalized a rule to prevent unfair debanking on payment apps. “Given the volume of payments consumers make through many popular payment apps, consumers can face serious harms when they lose access to their app without notice or when their ability to make or receive payments is disrupted,” it wrote in a statement. In addition, CFPB recently finalized an “open banking” rule to make it easier for people to move their money from one bank to another, enhancing personal financial freedom and making it harder for any one bank to discriminate.
To the extent that the government restricts anyone from access to the financial system, it’s typically in cases of violations of financial sanctions or crime. But the CFPB has pretty much nothing to do with this. Probably the most common regulatory reason is the increasingly strict rules regarding money laundering and terrorism, which has led to repeated large fines on big banks—but via the Justice Department, not the CFPB.
It’s curious that Andreessen would accuse the CFPB of doing something it is actually working to stop.
Another thing the CFPB does is punish companies that deceive or rip off their customers. Back in 2021, for example, it shuttered the company LendUp for violating an agreement with the agency, as well as lying to customers about its services, and failing to follow federal regulations about why people had been denied credit, according to a CFPB report.
One of LendUp’s biggest funders was Andreesen Horowitz.
More broadly, it’s not some big mystery why the CFPB came about after one of the largest epidemics of financial theft, fraud, and abuse of all time blew up the global economy in 2008. The history of finance can be told as a series of economic disasters of this kind.
If anything was wrong with Dodd-Frank, it’s that it was not nearly strict enough. The big banks are still far too large and powerful, finance’s share of GDP is far too high, and banks and bank-like institutions—particularly those connected to Silicon Valley—are still blowing themselves up. Last year, Silicon Valley Bank failed to hedge its interest rate risk and suffered a run, receiving an arguably rule-breaking bailout after venture capitalists fomented panic online. (One of the companies that banked with SVB? Andreessen Horowitz.)
Earlier this year, the fintech firm Synapse went bankrupt—and because it was deliberately set up to be outside FDIC protections, $265 million in customer funds were frozen. To this day many former customers have not been able to get their money out, and some $90 million in customer funds is missing. “Banking and finance of any sort is serious business. It requires both skill and wisdom to build and run,” Peter Hazlehurst, a fintech CEO, told TechCrunch. “There are regulatory bodies protecting consumers from bad outcomes like this for a reason.”
Some $33 million of Synapse’s $50 million in venture capital funding was provided by Andreessen Horowitz.
Musk’s opportunistic call for “deleting” CFPB (which like ending any federal agency would have to be done through an act of Congress) is similarly conflicted. The new CFPB rule supervising digital payment apps, which would also seek to reduce fraud, has a direct bearing on Musk’s ambition to turn X into a version of Venmo.
So in the end, you have tech moguls misleading their followers about a federal consumer protection agency that they don’t like for other, perhaps personal, reasons. With Musk in a high-level position in the incoming government, this call for deregulation is more than idle talk.
Some might call it a desire to defund the police.
