The War at the CFPB

The Consumer Financial Protection Bureau has been a political hotspot since it was first proposed in the wake of the 2008 financial crisis. The Republican leadership miscalculated in blocking Elizabeth Warren from becoming the first CFPB Director, which allowed her to turn to election as Senator and becoming a much larger political figure. Her replacement just stepped down and created another political firestorm.

The CFPB is well insulated politically by having an independent director. (The Director can only be removed by the President for “inefficiency, neglect of duty, or malfeasance in office.”) It’s budget comes from the Federal Reserve. (That means it’s free from financial control by Congress.)  I respect the arguments that it is questionably positioned by having such unprecedented independence.

This independence apparently had an additional wrinkle since it’s enabling statute in Dodd-Frank has a provision for succession of the Director. When the Director is removed, the Deputy Director becomes acting Director until the President appoints and the Senate confirms a new Director. 12 U.S. Code § 5491(b). At least that is according to Leandra English who was appointed Deputy Director at 2:30 on November 24. The then-current Director, Richard Cordray resigned effective midnight on November 24.

President Trump appointed Director of the Office of Management and Budget Mick Mulvaney as Acting Director of the Consumer Financial Protection Bureau in a press release at 8:50 on November 24.

The President had the Department of Justice look at the law to strengthen his position. Steven Engel, the assistant attorney general for Office of Legal Counsel issued a memorandum over the weekend that cited the 1998 Federal Vacancies Act as giving the president the full authority to appoint an acting director to the Wall Street watchdog, notwithstanding the CFPB’s established line of succession.

“The fact that the Deputy Director may serve as Acting Director by operation of the statute, however, does not displace the President’s authority under the Vacancies Reform Act,”

Presumably, both Ms. English and Mr. Mulvaney would be heading to the same office this morning, with the entire CFPB wondering who is in control. But Ms. English stopped off in court on Sunday seeking a court order declaring her as Acting Director and holding that position until the President appoints and the Senate confirms a replacement.

This is certainly just applying a band-aid to a gaping head wound. There will be a new Director shortly and that Director will do everything he (or she) can to shut down the CFPB within the statutory requirements.