Trump’s SEC May Tee Up a Repeat of the 2008 Financial Crisis
Amid aggressive bank lobbying and Donald Trump’s efforts at deregulation, we may be seeing the return of residential-mortgage-backed securities — one of the financial products that led to millions of foreclosures during the Great Recession.
Paul Atkins, Donald Trump’s current SEC chair, has been called a “deregulation zealot” who helped weaken banking rules in the lead-up to the 2008 crisis, including by eliminating a rule preventing manipulative short selling, during his previous commissioner stint from 2002 to 2008. (Stefani Reynolds / Bloomberg via Getty Images)
Amid aggressive bank lobbying and President Donald Trump’s deregulatory efforts, one of the core financial products that led to millions of foreclosures during the Great Recession is being quietly readied for a comeback — even as economic and climate conditions make its return all the more destabilizing.
In September, the US Securities and Exchange Commission (SEC), Wall Street’s top regulator, solicited feedback on how it could help revive the residential-mortgage-backed securities market — one of the main drivers of the 2008 financial crisis. According to the statement, the agency wanted to hear from the public “on whether there are SEC regulatory impediments contributing to the absence” of these financial products, which have essentially been dead since 2013.
The move came as lobbying groups representing many of the major banks that helped sink the global economy eighteen years ago spent more than $10.3 million last year lobbying Congress, the SEC, and other regulators on residential-mortgage-backed securities, among other issues. In response to the SEC’s request for comments on the matter, the groups have urged the commission to roll back disclosure rules and other restrictions on the residential-mortgage-backed securities market.
Meanwhile, skyrocketing home prices have driven more homebuyers to turn to the same kind of risky “subprime” loans that previously helped crater the economy. Applications for adjustable-rate mortgages rose to a post-2008 high of nearly 13 percent of all mortgage loan applications for one week in September 2025.
What’s more, Federal Reserve economists are warning that climate change may lead to more delinquent mortgages, making these kinds of financial products all the riskier.
Paul Atkins, Trump’s current SEC chair, has been called a “deregulation zealot” who helped weaken banking rules in the lead-up to the 2008 crisis, including by eliminating a rule preventing manipulative short selling, during his previous commissioner stint from 2002 to 2008.
Now consumer protection experts say that if Atkins eases safeguards around residential-mortgage-backed securities, it could once again threaten the stability of the broader economy while making the rich even richer.
“People should be very alarmed that we are trying to deregulate something that is a known problem in our financial system,” said Caroline Nagy, a housing expert with the consumer-protection-focused Americans for Financial Reform. “It seems like they’re making changes that will exacerbate wealth inequality and make it easier for Wall Street lenders to make more money at other people’s expense. It feels very much like we’re repeating a pattern in some ways.”
Atkins’s deregulatory attempts come as Trump ordered Fannie Mae and Freddie Mac, two government-backed entities tasked with stabilizing the housing sector, to purchase $200 billion in mortgage bonds on January 8 to help lower mortgage rates. While the move seemingly worked at first, the turmoil from Trump’s ongoing tariff wars and attempted prosecution of Federal Reserve chair Jerome Powell could cause rates to rise again.
This follows Fannie and Freddie lowering credit score requirements in November for home mortgages, making it easier for people with potentially riskier financial backgrounds to access home loans.
Ben Schiffrin, director of securities policy for Better Markets, said that the SEC’s early moves are alarming.
“This is just a concept release, but the idea seems to be, ‘We want to scale back the disclosures that the SEC put in place that are designed to provide investors with as much transparency as possible into these formally opaque assets’ that, I think everybody agrees, were a prime driver of the financial crisis,” Schiffrin told the Lever.
The Great Recession, Part Deux
Residential-mortgage-backed securities and adjustable-rate mortgages were integral parts of the 2008 financial crash.
Residential-mortgage-backed securities are essentially pools of loans issued by banks and sold to investors. The process allows banks to shift the risk of these loans onto other entities and provides the banks with more cash liquidity for other loans or investments. The concept was established during the 1930s New Deal era, but transforming the loans into securities took off in the 1970s.
These securities can be a lucrative investment because, in theory, there is a constant stream of money pouring in from homeowners paying off their mortgages. However, a lack of transparency in the mid-2000s about the types of loans issued and who received them helped cause the global financial meltdown, which led to a 10 percent unemployment rate, millions of foreclosures, and widespread financial turmoil.
“The transparency and the opacity around those securities was one of the main problems that led to a crisis,” said Oscar Valdés Viera, senior policy analyst at Americans for Financial Reform.
The Great Recession, as it became known, led to a total restructuring of the residential-mortgage-backed securities market, thanks to lawmakers and regulators implementing stricter disclosure rules. Issuers of these securities are now required to disclose partial zip codes, original loan amounts, loan issuance dates, and more than two hundred other data points.
In recent comment letters to the SEC, financial groups have argued these disclosure requirements have essentially killed the market. However, consumer protection groups contend that investors are afraid to reenter a market that exploded into chaos just two decades ago.
Now as the SEC considers deregulating the residential-mortgage-backed securities market, the same kind of subprime loan, an adjustable-rate mortgage, that left a ticking bomb in these financial products twenty years ago is once again growing more popular.
Adjustable-rate mortgages are a form of home loan that allows buyers to pay lower interest rates for the first few years of the mortgage, making it easier for people with shaky finances to purchase a home. But as those interest rates subsequently begin to rise, homeowners may find themselves unable to cover the cost. Under this arrangement, a homeowner could pay a 5.5 percent interest rate mortgage at first, but by year seven, that same homeowner could face a 10.5 percent interest rate — raising monthly mortgage payments by more than 50 percent.
In the years before the Great Recession, adjustable-rate mortgages comprised more than 50 percent of all home loans.
While compounding factors contributed to the widespread economic havoc in 2008, these loans and securities were core to the crisis. In short, residential-mortgage-backed securities were sold to investors without their knowledge that the securities were backed by dubious home loans doled out to people who were unlikely to make future payments. Once those homeowners fell behind on their mortgage payments, the securities quickly lost value, leading to massive financial and banking failures.
“The financial crisis was itself a failure of consumer protection,” said Valdés Viera at Americans for Financial Reform. “It was a failure of watching out for mortgages that were being offered with really sketchy terms, predatory terms.”
While not yet approaching pre-2008 levels, adjustable-rate mortgages have risen since the Federal Reserve raised interest rates in 2022 to address post-pandemic inflation. In 2022 and 2023, adjustable-rate mortgages — which are considered subprime loans — comprised nearly 8 percent of all home loans, dropping slightly to 6 percent in 2024.
But that figure could keep rising. With average home prices up nearly 50 percent since 2019, potential homebuyers may find these loans attractive since it offers them a chance to enter the housing market at a lower interest rate. A mortgage industry group recently reported that 7.1 percent of all mortgage applications filed for the week ending on January 16 were for adjustable-rate mortgages.
Although the demand for these risky mortgages is up, regulators now require far more stipulations attached to them to prevent another financial collapse, such as capping the loans’ final maximum interest rate and requiring greater scrutiny into whether prospective borrowers can afford the rate increases.
Still, experts are puzzled as to why the SEC would weaken disclosure rules.
“I don’t think anybody disputes the fact that there was a lack of transparency into those assets, and I don’t think anybody disputes the fact that greater transparency was necessary to prevent a recurrence of those conditions,” Schriffin said. “It’s hard to understand, really, why the SEC is doing this.”
Similar Actors, Similar Risks
The Securities Industry and Financial Markets Association (SIFMA) and the Structured Finance Association, lobbying groups that represent many large banks and hedge funds integral to the 2008 market crash, are now urging the SEC to gut its residential-mortgage-backed securities regulations.
“The current asset-level disclosure regime is a significant barrier to registered [residential-mortgage-backed securities] and is impractical or impossible to comply with,” SIFMA wrote in a December 1, 2025, comment letter to the commission.
SIFMA is asking the SEC to roll back long-term reporting requirements for each securitized loan, such as potential delinquent payment risks; property data for mortgage loans; and borrowers’ credit scores, lien checks, and income levels.
“The burden and expense required for initial compliance with the asset-level data requirements . . . makes a registered issuance uneconomical,” the group wrote, claiming the regulations were onerous for financial institutions.
The lobbying group also noted that “overly prescriptive rules and rules that are not currently generating meaningful disclosures should be revised or eliminated.”
SIFMA spent more than $9 million in 2025 lobbying the SEC, Congress, and other regulators on “executive branch nominations;” SEC, Treasury Department, and Federal Reserve policies; and other matters, disclosures show.
The Structured Finance Association cited similar concerns, stating in a comment letter that the “asset-level disclosure requirements for [residential-mortgage-backed securities] . . . have contributed to the lack of registered [residential-mortgage-backed securities] issuances.”
The Structured Finance Association spent nearly $1.4 million in 2025 lobbying Congress, the SEC, and other regulators on “the return of private-label mortgage-backed securities” and other matters, disclosures show.
Membership for both banking associations includes Bank of America, Citi, Goldman Sachs, JPMorgan Chase, Morgan Stanley, and Wells Fargo — all of which received tens of billions of dollars in government bailouts and then paid billions of dollars in fines and settlements due to their role in the 2008 financial crisis.
While these groups claim that overly burdensome regulations have killed the residential-mortgage-backed securities market, others contend that investors simply do not want to reenter a market that exploded into a financial crisis less than twenty years ago.
“Relaxing the very standards that have contributed to improved investor confidence in the securitization markets that not long ago caused a worldwide financial crisis is not the answer,” Better Markets wrote in a comment letter to the commission. “Rather than any SEC-imposed disclosure requirements, it was the financial crisis that caused investors to abandon the market.”
Consumer advocates are also concerned that the Trump administration has also gutted the agency established to help prevent another Great Recession.
“We created the [Consumer Financial Protection Bureau] because of [the 2008 crisis], and now we are trying to both remove any kind of consumer enforcement staffing and ability to actually enforce laws and regulations, while also trying to roll back disclosures on [residential-]mortgage-backed securities,” Nagy said.
“Fertile Ground for a Huge Crisis”
Last January, the Federal Reserve Branch of Dallas published a study on how climate change is affecting home insurance prices and housing affordability. Climate-change-intensified flooding, fires, winds, and other weather events have increased home insurance costs, causing some homeowners to default on their homes, and “represents an emerging threat to broader financial stability,” according to the study.
“Since mortgages and mortgage-backed securities are central to the financial sector, increased delinquencies can destabilize financial institutions,” noted the study authors.
According to Nagy at Americans for Financial Reform, climate change risks could also make banks hesitant to issue new mortgages in entire regions of the United States. Such upheaval and uncertainty could make disclosure requirements for residential-mortgage-backed securities all the more necessary.
“If I was investing in mortgage-backed securities, I would want to make pretty damn sure that I’m not buying a mortgage from somewhere that has an unmortgageable future,” she said.
Since taking office, Trump has gutted nearly all federal research related to climate change.
Between Trump’s deregulatory agenda and the SEC’s potential residential-mortgage-backed security rollbacks, experts are worried that signs could be pointing toward widespread financial risks.
“There are a lot of overlapping risks with the [artificial intelligence] investment bubble, geopolitical risks, lowering regulations for banks, letting banks become more leveraged,” Valdés Viera said. “We’re also opening private markets to more opaque and riskier investments. All of these at the same time, it’s just creating the fertile ground for a huge crisis.”