Western Gothic might be one way to describe the confrontation stretching out this week as two federal employees test the question: Who is the boss of us and this agency? The president or our own independent selves? The issue encompasses a duel between a presidential appointee to serve as acting head of the Consumer Financial Protection Bureau following the resignation of its Director, Richard Cordray, and the internal staffer Cordray presumed to tap as his temporary successor. It also involves competing interpretations of federal statues and constitutional provisions. It’s a perfect shootout for political geeks.
The clash is formally over who has authority to choose an acting director until a permanent replacement can be nominated and confirmed, which could take months. But, the context is more fraught. In designing the CFPB, Congress deliberately stretched, and some experts say broke, the limits of its power to create a truly independent regulator, free from direction of the president, and outside accountability to the purses strings and oversight of Congress.
How and why did we get here? Following the financial crash of 2008, the overwhelmingly Democrat Congress with Obama in the White House passed the sweeping Dodd Frank Act, ostensibly to prevent the kinds of errors, abuses, and conditions that precipitated the crisis. A key cog in the Act’s gears was the CFPB , intended to be an expert and aggressive financial regulator. The thinking of Chris Dodd, Barney Frank, and Elizabeth Warren was aimed at two problems. First, they believed financial hustlers are too clever, innovative, and quick for traditional regulation based on statutory direction. An agile, aggressive watchdog is needed to spot risky practices and danger signs and take action faster than Congress could come up to speed outlaw bad acts. Second, the big banks, the drafter felt, exercised too much influence with Congress and would, with lobbying and contributions, thwart necessary legislation.
Thus, Congress created the CFPB to operate free of presidential control and with an extremely long and flimsy statutory leash. Congress’s mandate to the agency essentially is: spot bad, risky, or unfair financial practices and stop them. Further, Congress freed the agency from traditional accountability based on Congress’s power of the purse. It made the agency self-funding from the fees and fines it collects from regulated financial institutions. The CFPB is truly the energizer financial regulator.
Setting up Monday’s clash was an extra bit of president-repellent: In the event of a vacancy in the director position, rather than a traditional nomination of an acting director pending confirmation of the replacement, the Dodd Frank Act provides that the deputy director becomes the acting director.
However, another federal statute, the Federal Vacancies Act, provides that the president has power to appoint a temporary head until a permanent nominee is replaced. Adding one more wrinkle, outgoing head Cordray’s choice to be his successor, Leandra English was his chief of staff, not the deputy director. So, the week before he exited, Cordray named English the Deputy Director, intending to plug her into the succession process outlined in the Dodd Frank law. Not so fast, said president Trump, who nominated his Budget Chief Mick Mulvaney to serve as acting director.
And so the showdown is shaping up. One imagines both “nominees” approaching the bureau office Monday with hands at the ready near their hips, poised for the fast draw. English was first to fire, filing a lawsuit in federal court arguing she is the rightful acting director. A judge rejected her motion and took the case under advisement. He is reading the parties’ briefs and preparing to issue a ruling. For now, the president’s choice is riding shotgun in this strange clash in a unique federal agency.