Here’s where the $920 million [from the Morgan settlement] went: OCC, $300 million; SEC, $200 million; the Fed, $200 million. (The remainder went to the British authorities.) That much money, in a single action, raises the alarming prospect of agencies that become self-funding and, moreover, profit centers for a cash-starved Congress — through their enforcement activities. Here’s the blazingly obvious problem: most of the laws on the books are stupid and, when fully enforced, would land half of us in jail and the rest of us in bankruptcy. A principal way to check that problem is the appropriations process, which limits the enforcers’ budgets (and may influence their enforcement choices, for good or ill). When the money starts flowing in the other direction, all bets are off: you’re living under a NAFI regime.
NAFI is a term of art: it means “Non-Appropriated Funds Agencies”—outfits that are part of the government but financed not through congressional appropriations but through their own operations and revolving funds. The U.S. Mint is a NAFI. So is the Federal Reserve: it finances its budget from its earnings and then kicks the rest over to the Treasury. The CFPB has strong NAFI features: it simply sends a demand letter to the Fed, telling it how much money it wants (up to a certain percentage of the Fed’s earnings—above that level, the CFPB may receive appropriations). As noted, the Fed’s earnings don’t initially go into the Treasury and therefore aren’t appropriated from it.
The Securities and Exchange Commission hasn’t reached NAFI status yet, Greve writes, but not for want of trying.