President Trump’s choice for interim director at the Consumer Financial
Protection Bureau (CFPB), Mick Mulvaney, entered the building Monday apparently
quite confident in his mandate. However, on Friday, Director Richard Cordray,
a Democrat, had already promoted his deputy director, Leandra English
to the position as he resigned from the federal watchdog agency.
The string of events led to an awkward moment on Monday, as English sent
out an early morning email to her staff and signed it as “Acting
Director.” As Mulvaney entered the building at 7:20 AM and took
a seat in the director’s office, English was nowhere to be seen.
She was instead filing a lawsuit in Federal Court trying to prevent Mulvaney
from being promoted to the position by the president.
In a victory for President Trump, U.S. District Judge, Timothy J. Kelly,
who was nominated by Trump earlier this year, denied a temporary restraining
order requested by English in her lawsuit. The judge found that English
had not proven the harm that would come to the agency if Mulvaney were
to lead it until a new director is nominated and approved by Congress.
In a message to CFPB staff, Mulvaney asked them to “please disregard
any instructions you receive from Ms. English in her presumed capacity
as acting director.” In an interview later, Mulvaney said he had
no intention of firing English, although he did note that she did not
show up for work on Monday.
The dispute over who is the acting director is highly politicized, with
lawmakers on both sides of the aisle offering their opinion on who should
be leading the powerful oversight agency.
Under the Federal Vacancies Reform Act of 1998, the president is allowed
to fill vacant positions with a person who has already been confirmed
by the Senate. Mr. Mulvaney is the acting OMB director and has already
passed Senate confirmation. For the time being, he will run both agencies
until a replacement is nominated.
Democrats argue that under the Dodd-Frank Act – the financial reform
law which created the agency – the law states that the deputy director
shall “serve as acting director in the absence or unavailability
of the director.”
However, the Trump administration argues that Federal Vacancies Reform
Act supersedes Dodd-Frank, allowing him to appoint Cordray’s temporary
Press Secretary Sarah Huckabee Sanders said that the DOJ’s Office
of Legal Counsel agreed with the president’s position, as did the
bureau’s legal counsel, Mary McLeod.
In a memo to the bureau’s senior leadership on Saturday, McLeod said
that it was her opinion that Trump has the legal authority to appoint
an acting director. She went on to advise CFPB personnel to “to
act consistently with the understanding that Director Mulvaney is the
acting director of the CFPB.”
One of the key architects of Dodd-Frank, Barney Frank (D-MA), said that
the intention of the law was clear about the deputy director assuming
responsibility in the director’s absence.
Frank said that when crafting the bill, lawmakers wanted to ensure that
the agency had “as much insulation as possible” from the political
process. He added that he believes the acting director provision of Dodd-Frank
was intended to prevent presidential appointments and political interference.
Ms. English filed the lawsuit in her capacity as a private citizen, naming
both Trump and Mulvaney in the suit filed in U.S. District Court for the
District of Columbia.
English’s attorney, Deepak Gupta issued a statement saying, “The
president’s interpretation of the FVRA cannot be reconciled with
Dodd-Frank’s mandatory language. Where the two statutes conflict,
Dodd-Frank controls as the later-enacted, more specific statute.”
“The president may not, consistent with the statutory requirement
of independence, install a still-serving White House staffer as the acting
head of an independent agency — particularly when doing so would
displace an acting head who has a clear legal entitlement to the position,”
the complaint stated.
Judge Kelly disagreed, ruling that Trump has the right to appoint Mick
Mulvaney as the interim Director.
“Denying the president’s authority to appoint Mr. Mulvaney
raises significant constitutional questions, Kelly said in his decision.
“Nothing in the statutes prevents Mr. Mulvaney from holding both
of these positions.”
Both sides agree that the president has the right to appoint a new director,
but Democrats hope that they can force Trump’s hand to nominate
a new director quickly before Mulvaney has an opportunity to change the
direction of the agency.
Republican Mitch Mulvaney has been a long-time critic of the agency, even
referring to it as a “joke” and indicating that he “would
like to get rid of it.” The Trump administration has been critical
of the CFPB from the beginning, saying that the bureau has been too aggressive
and unchecked in its regulatory capacity and that the approach had limited
consumer’s access to credit and made it more difficult for financial
services companies to offer new products.
Since 2011, the agency has provided consumer refunds of more than $12 billion,
including mortgage reductions, foreclosure prevention, and other relief
from financial institutions.
On Monday, consumer advocate groups and demonstrators gathered outside
the CFPB headquarters to protest Mulvaney’s first day.
Mulvaney took immediate action in his new position, by placing a 30-day
hold on any new regulations being released by the agency.
“It’s creating chaos at the agency,” said Alan S. Kaplinsky,
head of the consumer financial services group at the Ballard Spahr law
firm. “Who are the employees supposed to listen to?”
“Until things get clarified by the courts, I don’t think they
should do anything other than to give out donuts to their employees and
make sure they don’t leave,” he said.
Kaplinksy added that whoever is deemed to be the acting director, they
should resist taking any regulatory steps that could be legally challenged
due to the dispute.