The watchdogs are circling the Consumer Financial Protection Bureau (CFPB). And for good reason.
The Federal Reserve’s inspector general is now investigating the Trump administration’s dramatic attempt to gut the Consumer Financial Protection Bureau. Nearly all employees were targeted for layoffs. Contracts were canceled wholesale.
CNBC has learned that the IG’s office responded to concerns from two Democratic senators about the chaotic February takeover. Sen. Elizabeth Warren of Massachusetts and Sen. Andy Kim of New Jersey had demanded answers about what they saw as an illegal dismantling of consumer protections.
Acting Inspector General Fred Gibson confirmed the investigation in a June 6 letter. “We had already initiated work to review workforce reductions at the CFPB,” Gibson wrote. The scope is expanding. Contract cancellations are now part of the probe.
This all started when Russell Vought took over the bureau in February as Trump’s acting director. Vought didn’t ease into the role. He told employees to stop working. He worked with Elon Musk‘s Department of Government Efficiency to lay off most staff and terminate external contracts.
The moves sparked immediate pushback. Warren and Kim asked both the Fed inspector general and the Government Accountability Office to review whether Vought’s actions were legal. They wanted to know if the CFPB could still do its job protecting consumers. The GAO already told the lawmakers in April it would investigate.
“As Trump dismantles vital public services, an independent OIG investigation is essential to understand the damage done by this administration at the CFPB,” Kim said. The goal is making sure the agency can still “hold companies who try to cheat and scam them accountable.”
The Fed’s inspector general office has real power here. It serves as an independent watchdog over both the Federal Reserve and the CFPB. The office can examine agency records. Issue subpoenas. Interview personnel. It can even refer criminal matters to the Justice Department.
There’s an interesting twist in the inspector general story. Trump fired more than 17 inspectors general across federal agencies after taking office. But he spared one notable figure: Michael Horowitz.
Horowitz has been the Justice Department’s inspector general since 2012. This month, he was named the incoming watchdog for the Fed and CFPB. He starts at the end of June. Trump supporters reportedly praised Horowitz for exposing problems with the FBI’s handling of its Trump-Russia investigation.
The CFPB’s future remains uncertain. A federal appeals court is weighing a crucial decision about Vought’s plans. Judges temporarily stopped the mass layoffs. Now they’re considering the Trump administration’s appeal.
The inspector general investigation adds another layer of scrutiny to an already contentious situation. The CFPB has been a political football since its creation after the 2008 financial crisis. Republicans have long wanted to eliminate or drastically reduce the agency. Democrats see it as essential consumer protection.
What’s clear is that government watchdogs are now examining whether the Trump administration went too far, too fast in trying to dismantle the bureau. The results of these investigations could determine not just the CFPB’s immediate future, but how aggressively the administration can remake other federal agencies.
