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In the last Supreme Court term, the Court ruled in Seila Law LLC v. Consumer Financial Protection Bureau that Article II of the U.S. Constitution and separation of powers prohibit Congress from shielding the Bureau's director from termination except for cause. Seila Law has natural implications for the CFPB's independence (although the magnitude of that effect is unclear). More troubling, Seila Law could open up the financial system to destabilization by paving the path for a full-scale assault on the traditional independence of federal financial regulators and presidential manipulation of the economy. Seila Law erodes independent agency protections in the worst possible way, by enshrining its ruling as constitutional command. The constitutional basis of that ruling ossifies the law on independent agency safeguards and means Congress and the president cannot overturn it. The decision further exposes the CFPB, and possibly other federal financial regulators, to political strong-arming to chase short-term gains at potential expense to long-term financial stability. In the process, Seila Law damages the important ballast of economic health that agency independence provides.

Soon after the 2016 election of Donald Trump as President of the United States, while Republicans controlled Congress, opponents of the fledgling Consumer Financial Protection Bureau (CFPB) opened a campaign against the Bureau. Their target was less the substance of federal consumer financial protection laws than the structure of the CFPB itself. This emphasis on structure was a response to the fact that Congress in 2010 had given special thought to the design of the CFPB to safeguard the Bureau and its mission. In 2017, after legislation to weaken the Bureau's structure failed in Congress and constitutional challenges to the CFPB's structure became bogged down in the courts, the leadership turned to the White House to dismantle the CFPB from within. Following President Trump's appointment of Mick Mulvaney, the Director of the Office of Management and Budget, as CFPB Acting Director, Mr. Mulvaney executed on the strategy by halting implementation of CFPB rules, suspending parts of supervision, and drastically slowing enforcement. This inside strategy to immobilize the CFPB's operations will severely harm consumers in the short term. But longer term, the structure of the CFPB will likely survive and so will federal consumer financial protection, subject to three caveats. First, this analysis assumes that the pending constitutional litigation will not succeed in a way that cripples the Bureau. Second, it assumes that mortgage regulation will remain strong enough to avoid a repeat of the mortgage crisis, resulting in devastating long-term damage. Finally, it assumes that the CFPB's leadership under President Trump does not subvert the laws establishing the architecture of the CFPB sufficiently to undermine that structure.

The state-based model of U.S. insurance regulation has been remarkably enduring to date, in part because the traditional rationales for a greater federal role – efficiency, uniformity, and consumer protection – have not succeeded in displacing it. However, the 2008 financial crisis, the federal government's unprecedented bailouts of parts of the insurance sector, and the need for a coordinated international approach radically shifted the debate about the proper allocation of power between the federal government and the states by supplanting traditional concerns about efficiency, uniformity, and consumer protection in insurance with a new federal mission to control systemic risk. Unprepared and ill-equipped to counter this shift, the states face the biggest threat to their domination of U.S. insurance regulation in years. Already, the federal government has made inroads into insurance regulation for purposes of systemic risk oversight. That federal presence creates several openings for a broader federal role in insurance than just regulation of systemically important insurers. For instance, solvency regulation, which traditionally has been reserved to the states, increasingly could be subsumed under the rubric of systemic risk. Over time, other types of federal incursions could include higher reporting requirements for insurers, regulation of discrete, systemically risky activities (regardless of an insurer's size), oversight of captive reinsurers, and greater consolidated supervision of insurance groups.

The residential mortgage market in the United States has changed significantly since the passage of current federal mortgage disclosure laws in the 1960s and 1970s. In this Article, Professor Patricia McCoy advocates for the reform of these traditional disclosure rules. After describing the evolution of the subprime mortgage market and providing a description of current federal disclosure laws, she explores how these new market dynamics cause the traditional disclosure rules to break down in the subprime market. Professor McCoy concludes with proposals to counteract false advertising practices, facilitate "meaningful comparison-shopping, and formulate streamlined disclosures addressing loan applicants' greatest concerns in the subprime market.

Comment submitted to the federal government on a proposal to revise the rule implementing the Community Reinvestment Act.

During the run-up to the 2008 financial crisis, representations and warranties (contractual statements enforceable through legal action) may have given investors false assurance that mortgage loans were being properly underwritten. This assurance in turn may have contributed to overinvestment in mortgage-backed securities in two ways. First, the assumption that legally enforceable penalties associated with reps and warranties would deter lax underwriting may have led to less monitoring of these contracts than would otherwise have occurred. In turn, the lack of monitoring of actual underwriting practices enabled the spread of lax lending practices. The existence of these reps and warranties and the potential penalties associated with them did not deter lax underwriting. Paradoxically, after the fact, the reps and warranties were enforced and this enforcement contributed to a tightening of credit beyond historic norms. Post-crisis, lenders' fears over put-back exposure caused them to scale back, particularly on government lending to creditworthy borrowers. The reps and warranties as used in mortgage lending in the run-up to the crisis were part of the procyclicality of lending, both in the easing and tightening phases of the lending cycle. We suggest reforms to add to the deterrent value of reps and warranties. Particularly we suggest a shift to the countercyclical techniques including dynamic provisioning to increase the in terrorem effect of representations and warranties. Nonetheless such changes would be useless unless they were adopted throughout the lending industry, otherwise, just those entities with risky practices would increase their market share. And next time such entities are more likely to be thinly capitalized, as the lesson of capital exposure to legal risk has been learned, thus further reducing the deterrence effect of reps and warranties, going forward.

The financial crisis of 2008 gave rise to renewed discussion about whether financial innovations should undergo higher scrutiny for potential harm and, if so, what type? In this Article, the authors propose a new system for monitoring financial innovations through a system of registration, data collection and analysis using unique product identifiers. Creating product identifiers would increase monitoring abilities substantially at relatively low cost by facilitating the linkage of separate databases. The assignment of unique product identifiers would also minimize errors in the identification and classification of different financial products. These identifiers would be available to both the government and the public to harness outside analysis by independent researchers in order to improve the monitoring of financial risk.

In January 2021, the Consumer Financial Protection Bureau (CFPB or Bureau) will face a decision: renew its special definition for Qualified Mortgages (QMs) made by Fannie Mae and Freddie Mac, abolish that definition, or adopt some other approach to QMs. This seemingly arcane issue, which concerns the so-called Government-Sponsored Enterprise (GSE) Patch,is the subject of fierce debate and a recent Advance Notice of Proposed Rulemaking (ANPR) by the CFPB. While ostensibly inconsequential to those unfamiliar with the topic, this decision may open the floodgates again to a private-label mortgage system without the necessary regulatory controls to prevent ruinous competition. Today's mortgage market and existing law preclude many toxic mortgage products. But reckless firms offering underpriced credit to weak borrowers can still fuel a future bubble and bust. Moreover, today's market is more vulnerable to such shortsighted lending behavior because of the rise of nonbanks with limited capital.

In the wake of the stalled Johnson-Crapo bill, the overarching goal of housing finance reform continues to be the efficient provision of long-term fixed-rate mortgages to credit-worthy borrowers in all markets throughout the business cycle.This Issue Brief analyzes three newly-proposed plans for reforming the U.S. housing finance system: (1) a proposal from Jim Parrot et al. to merge Fannie Mae and Freddie Mac into a new government corporation; (2) Andrew Davidson's proposal for mutual ownership of the GSEs by mortgage originators; and (3) an opposing plan from Mark Calabria, arguing against securitization altogether and for a return to the regime of originate-and-hold. ; https://repository.upenn.edu/pennwhartonppi/1039/thumbnail.jpg