Congress established the Consumer Financial Protection Bureau in 2011 after the century’s worst financial crisis — so far — effectively canceled out billions in philanthropic antipoverty investments and wiped away decades of patient work by funders across the country.
The Great Recession played havoc with the pocketbooks of Americans from all walks of life. But none were more hard hit than populations philanthropy had been working so hard to lift and empower: lower-income people, people of color, small business owners, America’s main streets.
By some estimates, roughly 700,000 American workers lost their jobs each month during the recession’s height. Overall household net worth in the U.S. plummeted by 18%, or more than $10 trillion. As home equity wealth evaporated, Black and Latino homeowners were more likely to default or get foreclosed on, while young workers, less-educated workers and workers of color were more likely to lose their jobs.
Seven years later, the recession’s lingering toll on rural America and on the prospects of working-class white men would play a direct role in the rise of President Donald Trump.
With that in mind, the invisible hand of the Great Recession is now poised to strike what may be a fatal blow to the very institution created to prevent its recurrence. Over the past month, shadow president Elon Musk and the rest of Trump’s coterie of antibureaucrats have crippled the CFPB, ordering the financial watchdog to cease all activity. The administration cannot completely shutter the agency without action from Congress, which established the bureau. But as an anonymous CFPB employee put it in a court declaration, recalling the words of an agency executive, the aim is to neuter it down to “a room at [the] Treasury, White House or Federal Reserve with five men and a phone in it.”
The administration’s push to cripple the CFPB is, thankfully, running into some significant legal hurdles. But even if federal regulators are still technically at work, weakened, demoralized agencies will be at a severe disadvantage in staving off a crisis — one that may already be on the horizon. The administration’s toxic brew of aggressive deregulation, market-rattling chaos and no-holds-barred trickle-up economics is practically inviting another economic shock that will hit the vulnerable the hardest.
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Given everything philanthropy has to lose — not only for those it serves, but in terms of its own assets — one would expect Wall Street oversight to be a key donor priority. But as we’ve written time and again, this is an area most grantmakers have neglected, even as they pump billions into local poverty-fighting efforts that another big downturn could simply erase. And that’s not even getting into how the aftershocks of 2008 may be ushering in the sunset of American democracy, full stop.
Why has liberal philanthropy been missing in action? One of our running hypotheses has been that for most moderate and left-of-center grantmakers, it’s simply more straightforward to pump money into traditional, local interventions than to call into question the system pumping up their own endowments. Social and cultural factors may also be at play: Generously compensated sector execs and actual ultra-rich donors aren’t exactly Wall Street’s natural foes.
Still, philanthropy hasn’t been entirely bereft of attempts to cut against financiers’ interests and protect American consumers. It’s interesting that many of them have been spearheaded by wealthy living donors.
Before the Great Recession, pioneering progressive philanthropists Herb and Marion Sandler backed the Center for Responsible Lending, a think tank that targets the kinds of predatory practices that capsized the market. After 2008, hedge fund manager Michael Masters bankrolled Better Markets, a watchdog nonprofit that channels insider knowledge of how Wall Street works to advocate in the public interest. Billionaires Pierre and Pam Omidyar have also bucked the trend, backing financial reform as well as another oft-ignored approach in philanthropy’s economic equality toolbox: building worker power.
Other funders have kicked in money to question the prevailing economic order, such as the Hewlett Foundation, with its Beyond Neoliberalism work, and the Economic Security Project, through its antimonopoly support. However, all of these worthy approaches still fall under the broad category of advocacy. And as long as Musk and Trump’s other cronies are in charge, any arguments to rein in corporate capitalism will fall on deaf ears.
That’s not to say advocacy work shouldn’t continue — Trump’s GOP may be ascendant now, but a lot can change in four or even two years. Still, funders need to be examining additional avenues to target this area, including in the realms of organizing, journalism and more. There’s also significant opportunity to make up for a crippled CFPB’s actual consumer protection functions on the local and state levels — the Cities for Financial Empowerment Fund provides one good example of how.
In the end, if the recently passed U.S. budget is any indicator, the GOP’s trickle-up policies will put even more money in the hands of wealthy funders of all political stripes — at least in the short term. Those who actually care about their philanthropic missions to address poverty and economic equity should start paying attention to financial industry regulation before another crisis hits. The crony capitalists now in charge certainly won’t.
