The Trump Administration is hurtling us into another financial crash. This time, it’s assailing financial industry watchdogs and guaranteeing we won’t have any warning.
This article was originally published on Watchdog Weekly.
In the wake of the 2008 financial crisis, Congress created the Office of Financial Research (OFR) through the Dodd-Frank Wall Street Reform and Consumer Protection Act. Originating from the spirit to reform the wildly irresponsible Wall Street elite, OFR was charged with providing data, analysis, and research regarding systemic financial risks to the members of the Financial Stability Oversight Council (FSOC). Essentially, OFR is an integral part of the federal infrastructure for safeguarding financial stability.
Although Congress didn’t empower the office with any regulatory teeth, OFR’s knowledge production responsibilities are still critical. The office investigates systemic risks, standardizes the reports and other financial data used across government, and works to equip financial regulators with a more robust empirical base from which to devise regulations. The events leading up to the Great Recession may have been forgotten or repressed by some, but a focus on the willful ineptitude of various financial regulators in the lead up to disaster continues to be a necessary inoculation. That’s exactly what OFR was authorized to do, in addition to developing clear frameworks for understanding financial dangers before threats turned into system-wide devastation.
It’s an authority many elements of the financial elite have never acceded to, which is why Donald Trump and his billionaire backers are, once again, seeking to decimate the entire system.
Since its inception, OFR has been subject to a steady dismantling from the forces who prefer their unsound, speculative financial bets to remain a secret, lest the public become aware of their propensity to doom our collective economic fortunes. To be clear, the office has never been as effective as it could be because its staff has been ruthlessly cut, its budget gutted, and its productivity assailed from its creation in 2010.
The first Trump administration turbocharged this trend. The second Trump administration is going even further. Now, it’s inching us ever closer to the very same conditions that devastated hundreds of millions of regular people around the world in 2008.
Take for example the shadowy private credit industry, which boasts an increasingly larger piece of the United States’ financial pie as of 2026. It isn’t subject to the normal reporting requirements of traditional financial institutions, and risk is building as the industry hyperconcentrates capital in a handful of overvalued tech companies. The private credit industry has molded itself around a slate of real-world infrastructural liabilities that the industry refuses to account for.
Taken together, like 2008, it paints a dire picture of the looming risks that have the potential to roil the market long before regular people have time to react.
In 2008, financial engineering around the housing market obscured market risks by shunting them through complex, novel, financial tools that essentially eliminated the possibility of readily reading warning signs until it was too late. Now it’s not just the manufacturing of financial tools, but reliance on real-world risks and vulnerabilities, “hazards that markets have no framework to analyze,” that the financial industry has built itself around, and once signs of a crash ricochet through those physical institutions, it will be much too late for our financial infrastructure to correct.
That may be sooner than we think, because the industry is already showing disturbing signs of trouble.
The companies that the private credit industry is the most highly invested in are largely software and tech companies. The American Prospect reports that “Last month, Apollo co-president John Zito told an investment conference that most private credit software loans issued between 2018 and 2022 were worth no more than 20 to 40 cents on the dollar.”
As Tkacik further expounds, “But the blanket dismissal of four years’ worth of deals suggests that the problem with private credit doesn’t have anything to do with AI or the avarice of a reclusive antique car collector in rural Ohio: It was systemic underwriting chicanery perpetrated to enrich the same tiny gang of private equity plutocrats that already enriched themselves by repeatedly enshittifying every facet of American existence, while laying off more than 600,000 tech workers over the past five years.”
It’s a complex system, one defined by its profound lack of transparency, and one that OFR was explicitly founded to prevent from happening again by proactively watchdogging the financial industry and providing warning to the rest of us with every new generation of the financial sector’s dangerous inventions designed to enrich the few while endangering the system as a whole.
Instead, the coming crash could be even worse than it was last time.
Long-Running Attacks on OFR
Republicans have continually circulated the misleading claim that OFR is wholly unnecessary, contending that it offers a mere replication of information already available in other sectors of the FSOC member agencies.
Alongside industry figures, Republicans have challenged the office’s output that they don’t like.
In 2013, for example, when OFR put out a study which effectively concluded that the multi-trillion dollar asset manager industry posed a significant threat to the country’s financial stability, the financial industry and its allies on Capitol Hill met the report with rage, arguing that OFR essentially fabricated the report to justify “unfair” regulatory interest in the industry. The coordinated pushback effectively served as a campaign to demonize the office as a wasteful, unnecessary, and repetitious institution that is not necessary for the financial health of the nation.
In reality, it seems more likely that Republicans were dissatisfied that OFR’s investigation of the emergent risks in the financial industry was potentially onerous for their generous donors on Wall Street who were simultaneously engaging in predatory, risky, and dangerous financial practices that had previously escaped regulators’ notice.
The agency is so reviled in conservative circles that in 2016 congressional Republicans introduced legislation, known as the CHOICE Act, that would have abolished the office altogether. In 2021, Sen. Ted Cruz re-introduced analogous legislation. All in all, between 2019 and 2024, Cruz introduced the legislation no less than three times.
These efforts have not been codified. But the never-ending attacks have destabilized the office’s foundations and made the institution continuously easier to railroad and undermine. The past several years in particular have borne the poison fruit of this long legacy of attacks, resulting in a decimation of the agency’s resources and a logistical incapacity to fulfill its mandate.
The First Trump Administration
The first Trump administration sought to undermine OFR’s authority by attacking its independence and having political appointees within FSOC and Treasury set the office’s priorities. A lack of independence critically harms OFR’s effectiveness and “makes it less likely that it will quickly identify and thoroughly investigate financial system vulnerabilities, data gaps and holes in the regulatory architecture.”
Then, in 2019, Donald Trump’s pick to head the office, Dino Falaschetti, began dismantling the agency from its helm. Not unlike Ben Carson’s tenure at the Department of Housing and Urban Development, Falaschetti oversaw broad staffing and budget cuts that crushed the institution’s productivity. The effects of those cuts continue to hinder the financial system’s readiness to anticipate potential financial shocks.
In line with Trump’s general deregulatory agenda, and Executive Order 13771, the Trump administration slashed the office’s budget under the guise of saving taxpayer money. The office’s 2017 budget of $101 million fell over 17% in 2018, to just $83 million. From 2018 to 2019, that dropped more than 9% to just $75 million, where it has remained roughly stagnant ever since.
To clarify, from 2017 to 2021, the office’s budget dropped a total of 25% even before accounting for inflation or the growth in complexity of financial systems, including the ascent of cryptocurrency. While the Trump administration claimed these cuts were completed in the interest of saving taxpayer money, they didn’t actually save any public funds. OFR’s budget comes from its fee authority over the country’s largest banks and other financial institutions, meaning that the cuts saved money only for financial giants, while leaving the public increasingly vulnerable to increasingly shadowy market disruptions.
Now What?
OFR fared somewhat better under the Biden administration, regaining chunks of its budget over Biden’s tenure, as well as dozens of staff members. This rebuilding was important, though it still lagged far behind the capacity necessary to fully fulfill its mandate.
The second Trump administration, though, has thoroughly eviscerated all of this growth, and gone even farther than it did the first time in gutting the crucial regulatory body.
Russell “Vampire” Vought, the architect of Trump’s deregulatory agenda, has taken it upon himself to fully, and nearly unilaterally, destroy OFR. Since Vought took over the director of the Office of Management and Budget, OFR’s existing staff has been essentially halved from 196 employees to just 100.
Yet, additional layoffs are coming, and OFR is getting steadily closer to the equivalent of just 70 full time employees.
Just seventy people to monitor the risks of an increasingly complex, unprecedentedly frenetic, economy, one that is rife with predatory processes, systemic risks, and teeteringly insecure trends across all sorts of sectors.
The very prospect of another financial collapse is terrifying, and the possible consequences—mass unemployment, hyper-inflation, bank runs, and more—seem increasingly inevitable.
Vought’s silencing of OFR, as aptly interrogated recently by The New Republic, is designed to rid average people of any basic warning signs of the impending financial doom that Trump and his cronies seem to be setting the stage for.
Should it come to pass, as in 2008, the architects of the crisis will make out with billions in bailouts, million dollar executive bonuses, and braggadocious executive suites, gearing up to do it all again just a few years down the line.
And the rest of us, those of us who will see our retirement funds zeroed out, our kids’ college savings accounts cleared, and our credit tanked, will once more be left holding the bag.
Note: this was updated out of an RDP blog Toni Aguilar Rosenthal published in 2021—for more information on OFR, and specifically more on OFR’s role in overseeing climate finance, check here.