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White House says Trump has right to name CFPB head, setting up clash
November 25, 2017
The White House said President Donald Trump has the authority to put budget director Mick Mulvaney at the helm of the Consumer Financial Protection Bureau, setting the stage for what could be a protracted legal battle.
A senior administration official said the decision to appoint Mulvaney was informed by communication with the Justice Department's Office of Legal Counsel, which will issue a formal opinion soon. Mulvaney, director of the Office of Management and Budget, will start his second job at the CFPB Monday morning, replacing Richard Cordray, who resigned Friday.
"It seems like a pretty clear-cut legal question," the official told reporters. "We consulted with the OLC, they have signed off on it."
Yet Mulvaney's appointment came just hours after Cordray abruptly resigned and named the agency's chief of staff, Leandra English, as deputy director, establishing her as his successor as he steps down.
The competing moves plunged the agency into confusion over the leadership of the bureau, which was established in the wake of the financial crisis and has become a target for relentless attacks by Republicans and business executives for its aggressive enforcement.
The legal counsel's opinion is still being drafted, the official said. The Justice Department did not immediately respond to requests for comment.
Mulvaney "will go into the office Monday and start working," another senior administration official said.
Trump and Cordray, long at odds over the direction and future of the agency, are headed for a showdown in court that could take months or more to unravel.
On Trump's side is the Federal Vacancies Reform Act of 1998, which allows the president to designate a Senate-confirmed official to perform the functions of a vacant position until a nominee can be confirmed to the office.
In Cordray's corner is the Dodd-Frank Act, the landmark 2010 law that created the CFPB and sets up its own line of succession, stating that the bureau's deputy shall serve as acting director in the "absence or unavailability of the Director."
Cordray pitched the bureau into that legal chasm just after 2 p.m. Friday, when he elevated English to deputy director. Minutes later, Cordray said he would resign at the end of the day. On Nov. 15, he had said he would step down at the end of the month.
"Appointing the current chief of staff to the deputy director position would minimize operational disruption and provide for a smooth transition given her operational expertise," Cordray wrote in his resignation letter to staff.
Just after 7:30 p.m. Friday, the White House designated Mulvaney as acting director of the watchdog agency until a permanent leader can be nominated and confirmed.
"Cordray is saying, and the consumer advocates are saying, that a resignation by Cordray constitutes absence or unvailabaility, whereas the White House is saying no it doesn't," said Ballard Spahr lawyer Alan Kaplinksy, a leader of the firm's consumer financial services group.
"I think Trump will ultimately prevail here, but it's going to end up in litigation regardless of the opinion the White House is seeking from the Office of Legal Counsel," Kaplinsky said. "The issue could ultimately end up in the U.S. Supreme Court, but in the meantime who's running the agency? It will be very unclear who has authority to govern the agency."
At other agencies, including Office of Management and Budget, the Small Business Administration and the Federal Aviation Administration, Congress expressly provided for a deputy to take over a vacant leadership post, Kaplinsky said.
Congress didn't do that in the case of the CFPB, which suggests the lawmakers didn't intend to give the consumer bureau's deputy director authority to automatically serve as acting director, he said.
An ongoing lawsuit could add to the confusion of the bureau's leadership -- or settle it. The U.S. Court of Appeals in Washington is weighing whether the bureau's structure is constitutional, given the vast power vested in its sole director. An opinion in that case could come at any time.
English joined the agency during its earliest days under Elizabeth Warren, who fought to create the bureau and set it up before being elected to the Senate.
Until English's appointment Friday, the deputy director position had been vacant for nearly two years, with David Silberman, the bureau's associate director of research, markets, and regulations, serving in an acting capacity during that time. The CFPB press office did not respond to requests for comment.
"This is almost laughable what's going on," said Richard Hunt, president of the Consumer Bankers Association and a longtime critic of the agency. "No one should be surprised Richard Cordray did this. I just hope Leandra English is not a pawn."