Politics & Policy

The CFPB Showdown

OMB director Mick Mulvaney speaks to reporters at the CFPB offices, November 27, 2017. (Reuters photo: Joshua Roberts)

The question in Washington is: Who should be the acting director of the Consumer Financial Protection Bureau? There are two answers: Mick Mulvaney and nobody.

What has happened is this: The director of the bureau, Richard Cordray, has resigned. President Donald Trump has named his budget director, Mick Mulvaney, acting director until a permanent director can be confirmed by the Senate. But Cordray’s deputy, Leandra English, has attempted to block that appointment, offering a very novel interpretation of the bureaucratic rule holding that the deputy director operates as acting director in the event the director becomes unavailable. She is arguing that the director’s resignation makes him “unavailable” and hence makes her acting director. But a resignation doesn’t make a director unavailable — it makes him no longer the director.

Only the most gullible liberals are taking English’s oddball legal argument seriously. English is being represented in the matter by private counsel, the bureau’s own general counsel having concluded that the Trump administration has the better case, with “better case” here meaning “plain statutory authority.” The CFPB is established in law as an “executive agency” and the Federal Vacancies Reform Act of 1998 explicitly empowers the president to name an acting director when there is a vacancy in a position requiring presidential nomination and Senate confirmation. The law is not ambiguous on the point.

Mulvaney has been through the Senate confirmation process before, for his previous position, but if the Senate doesn’t like him for the role, or if President Trump decides to choose someone else for the job after Mulvaney serves as acting director, then that is up to the Senate or to President Trump, respectively, not to the in-house management team at the CFPB. The president and senators face regular elections during which the American people have the opportunity to render judgment in such matters. The deputy director of the CFPB does not.

And that is the larger issue. The CFPB’s leadership structure, which already has been found unconstitutional by a panel of the Court of Appeals for the District of Columbia, is designed to create a separate power within the federal government, one that is answerable neither to the president, who in the ordinary course of affairs has the power to dismiss and replace officers of executive agencies, nor to Congress — and which is hence outside of ordinary democratic oversight. That is a recipe for abuse, and that abuse is not hypothetical: The bureau already has been obliged to reverse itself when Cordray, with no legal authority, unilaterally increased the fine in a mortgage-insurance case from $6 million to $103 million. A federal bureaucrat who can levy hundreds of millions of dollars in fines on his own authority while immune from ordinary executive-branch accountability and enjoying wide-ranging jurisdiction across the financial industry is positioned to become an extortion artist of the first rank, which the cynical among us have always believed was precisely what the CFPB was intended to be. Elizabeth Warren et al. did not come up with this by accident.

The agency’s leadership structure, which protected the director from being dismissed by the president except for good cause — whatever that might hope to mean — was found unconstitutional by the panel, which issued a narrow ruling throwing out only the for-cause provision, along with that $103 million fine. The full court is expected to rule on the question, which very well may be headed to the Supreme Court.

It is an executive agency, not a court or a legislative body, and officers of the executive branch are answerable to the president.

We have three branches of government, and the CFPB is in one of them: It is an executive agency, not a court or a legislative body, and officers of the executive branch are answerable to the president. There are a few other agencies that have similar quasi-independent directors, and they, like CFPB, are constitutional chimeras, though most of them are obscure and enjoy nothing like the princely powers of the CFPB. The simplest solution would be to dissolve the bureau entirely. Its legitimate functions are better handled by bank regulators and other financial-oversight agencies, and its deeply political nature — already on such dramatic display — renders it less than credible as an evenhanded regulator.

President Trump is well-positioned for a short-term victory in this matter. For a more substantive victory, he should help usher the CFPB to a deep and unmarked legislative grave.


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