The White House and the Consumer Financial Protection Bureau have been locked in a very public showdown this weekend over who will run the federal consumer finance watchdog, with each handpicking their own successor to lead the agency — and no one quite knowing who's going to be in charge come Monday morning when everyone turns up for work.
Richard Cordray, the bureau's first director, announced on Friday that he would step down at the end of the day. At the same time, he announced chief of staff Leandra English was being promoted to deputy director, and that she would serve as acting director once his resignation was effective at midnight Friday.
But shortly after Cordray announced his accelerated resignation and English's appointment, the White House named Mick Mulvaney, the head of the Office of Management and Budget, to serve as acting director of the CFPB.
Mulvaney will serve as the bureau's chief until a permanent director is nominated and confirmed, the White House said in a statement.
On Sunday night, English filed a suit to block Mulvaney's appointment from going through, arguing in a court filing that President Trump does not have the power to replace the acting director appointed by Cordray. The suit, against Trump and Mulvaney, seeks an emergency temporary restraining order, and asks the court to recognize English as the acting director of CFPB.
“The President’s attempt to install a White House official at the head of independent agency —w hile allowing that official to simultaneously serve in the White House—is unprecedented,” English’s lawyer, Deepak Gupta, said in a statement. “The law is clear: Leandra English is Acting Director of the Consumer Financial Protection Bureau until the Senate confirms a new Director.”
In a statement responding to English's suit Sunday, the White House reiterated that it sees Mulvaney as the rightful acting director of CFPB, and cited a memo from the bureau's own general counsel concurring with the administration's legal assessment.
"It is unfortunate that Mr. Cordray decided to put his political ambition above the interests of consumers with this stunt," White House Press Secretary Sarah Sanders said in the statement. "Director Mulvaney will bring a more serious and professional approach to running the CFPB."
If Mulvaney's appointment stands, it would put an opponent of the CFPB's very existence at its head, similar to Environmental Protection Agency director Scott Pruitt, who sued the EPA several times when he was attorney general of Oklahoma.
"I don't like the fact that CFPB exists," Mulvaney said in a 2015 hearing when he was a Republican congressman representing South Carolina.
Much of the confusion over the appointment stems from a lack of legal clarity surrounding the succession process.
Under the Federal Vacancies Reform Act, agencies can be run for up to 210 days by someone who has already been confirmed by the Senate to a different job. However, some legal scholars have argued that the statutory language establishing the CFPB ensures that its deputy director takes over as acting director until the Senate confirms a full-time director.
"We think that this move is clearly supported by the plain reading of the Vacancies Act," a senior administration official, speaking on the condition of anonymity, told reporters Saturday.
"We have gone out of our way to avoid an unnecessary legal battle with Mr. Cordray," the official said. "He has tried to provoke one."
A second official said that the Justice Department's Office of Legal Counsel had blessed the Mulvaney pick and would publish an opinion defending it.
In a letter to CFPB staff announcing his early departure and his appointment of English to serve as deputy director and then acting director, Cordray cited section 1011(b)(5) of the Dodd-Frank Act, the law that established the bureau.
This section says that the deputy director will "serve as acting director in the absence or unavailability of the director," which some have interpreted to mean that only a Senate-confirmed nominee could replace the acting director. Georgetown law Professor Adam Levitin argued that this "plain language is an express provision for a different succession."
"Leandra English is the acting director of the CFPB. She will be so until there is either a Senate confirmed appointee or a recess appointment," Levitin told BuzzFeed News Friday. "That's the right answer under the Consumer Financial Protection Act," the portion of Dodd-Frank that established the CFPB.
Levitin said that he expects English to sue to keep her job if Mulvaney attempts to lead the bureau.
"We expect her to show up on Monday," the second senior administration official told reporters. "She’s the deputy director of the CFPB, she should be there on Monday."
When asked about whether they expect English to sue, the first senior administration official said, "We’ll find out based on how Ms. English decides to act at the appropriate time. We have gone out of our way to avoid an unnecessary legal battle with Mr. Cordray."
In an opinion issued by the Justice Department's Office of Legal Counsel late Saturday night, the administration acknowledged that the law creating CFPB allows for the deputy director to serve as acting director, but argued that this does not preclude the president from appointing his own acting head of the bureau under the Federal Vacancies Reform Act.
"[E]ven when the Vacancies Reform Act is not the 'exclusive' means for filling a vacancy, the statute remains an available option, and the President may rely upon it in designating an acting official in a manner that differs from the order of succession otherwise provided by an office-specific statute," Assistant Attorney General Steven Engel wrote.
Engel's opinion later notes, however, that the question of whether the Vacancies Reform Act might apply to the situation "is not free of doubt."
Sen. Elizabeth Warren, whose academic work inspired the Bureau's creation, said Friday that Trump "can nominate the next @CFPB Director - but until that nominee is confirmed by the Senate, Leandra English is the Acting Director under the Dodd-Frank."
Other legal experts, including Alan Kaplinsky, an attorney at Ballard Spahr who has represented clients in front of the CFPB, argue that the Federal Vacancies Act does apply to the bureau and that Trump is free to appoint an acting director that has been Senate confirmed. "Litigation will soon result. In the meantime, chaos will ensue at the CFPB," Kaplinsky tweeted Saturday morning.
The Community Financial Services Association of America, a trade group that represents short-term, high-interest lenders that will be affected by the CFPB's new payday lending rules, called on the administration last week to appoint a temporary replacement for Cordray quickly under the Federal Vacancies Reform Act.
The CFPB did not respond to a request for comment following Mulvaney's appointment.
But in a tweet on Saturday, President Trump cast Mulvaney's appointment as an opportunity for the CFPB to better serve the public.
Under Cordray, the agency targeted a variety of lending practices, issuing new rules related to mortgages, payday loans, and other financial matters. Republicans excoriated the CFPB's rule-writing as too strict and pushed back against the agency and its director, who had announced earlier this week that he would be stepping down at the end of the month.
One of the Bureau's most aggressive opponents was Mulvaney, who served in Congress from 2011 to earlier this year, when he was confirmed to run OMB.
In 2014, Mulvaney told a trade publication, the Credit Union Times, that the CFPB was "a wonderful example of how a bureaucracy will function if it has no accountability to anybody, it turns up being a joke, and that’s what the CFPB really has been in sick, sad kind of way."
Mulvaney indicated that if he were allowed to run the Bureau, he would make it more open to the concerns of the companies it regulates.
"Financial services are the engines of American democratic capitalism," Mulvaney said in a statement Friday. "We need to let them work."
One of Mulvaney's criticisms of the Bureau from his time as a lawmaker was that it was insulated from Congressional pressure because its funding did not come from appropriations bills, but instead from the Federal Reserve.
Unlike some other regulatory agencies, which are run by a bipartisan panel of commissioners who are confirmed by the Senate, the CFPB only has a single director appointed by the president, a setup that many Republicans said gave one person too much power over consumer financial regulation.
This structure, Mulvaney told the Credit Union Times, "makes it very difficult for us to advocate on behalf of your industry, or anybody else for that matter, to the CFPB."
Now Mulvaney may be set to be invested with the authority that he once so harshly condemned — at least until someone else takes the job full-time.
While the White House hasn't put forward a full-time nominee, rumored potential nominees include Representative Jeb Hensarling, who chairs the House Financial Services Committee and who announced that he will retire in 2018; Todd Zywicki, a law professor at George Mason University and a leading conservative scholar of financial regulation; former Representative Randy Neugebauer, a Texas Republican; and the acting head of the Office of the Comptroller of the Currency, Keith Norieka.
Matthew Zeitlin is a business reporter for BuzzFeed News and is based in New York. Zeitlin reports on Wall Street and big banks.
Contact Matthew Zeitlin at email@example.com.
Grace Wyler is a news editor for BuzzFeed News and is based in Los Angeles.
Contact Grace Wyler at firstname.lastname@example.org.
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