On November 27th, 2017, Richard Cordray, the Director of the Consumer Financial Protection Bureau (CFPB) announced that he would step down and, consistent with the statute creating the CFPB, that Deputy Director Leandra English would serve as Acting Director.
That same day, President Trump unlawfully appointed Mick Mulvaney to be Acting Director. The dispute is being litigated.
The President’s appointment violated a key principle of the CFPB: its independence. In addition to being de-facto CFPB “Acting Director,” Mulvaney is Director of the Office of Management and Budget (OMB), which is part of the White House and “serves the President of the United States in overseeing the implementation of his vision across the Executive Branch.” The OMB also oversees regulation “that is subject to Presidential approval.”
The CFPB was established as an independent agency able to stand up to powerful industry groups in order to protect consumers. Prior to its establishment, federal regulators were too often under the sway of financial companies and did not serve as the needed a cop on Wall Street. The independence of financial regulators is considered essential to effective oversight.
With the appointment of Mulvaney, the White House appointed a White House official to an agency that was established as an independent agency – separate from the White House – thus violating its independence and harming the public interest.
“This clash will impact financial regulation and consumer protection and potentially undermine one of the bedrock principles of modern financial regulation: independence of financial regulators. To understand why, appreciate the nuances behind the drama, with a focus on one key element: the President is attempting to place a senior White House official to head the CFPB, which is part of the Federal Reserve System and a voting member of other key financial regulators…. The CFPB was created as an independent bureau within the Federal Reserve System…. This principle was evident during the run-up to the financial crisis when the former regulator of Fannie Mae and Freddie Mac was regularly pressured through Congressional appropriations to take it easier on these housing finance companies…. Yet President Trump is proposing to put his budget chief in charge of the CFPB. The Office of Management and Budget oversees not only the entire federal budget process that is under the President’s control, but also regulation that is subject to Presidential approval. By placing CFPB under the same leader as OMB, the President is in effect, eliminating CFPB’s independence…. In addition to running the Bureau, the Director sits on the board of the Federal Deposit Insurance Corporation (FDIC) and the Financial Stability Oversight Council (FSOC). As a voting member of those other financial regulators, the CFPB director’s influence extends beyond just consumer protection, impacting all financial regulation. The FDIC is also structured to be an independent regulator, so having a White House official voting on its policies would diminish independence…. OMB is an arm of the White House, not even that of an executive branch agency or another independent financial regulator. Those who value preserving the independence of financial regulators ought to condemn the path taken by the White House. This move is unnecessary and sets a precedent that could undermine the independence and effectiveness of other financial regulators.” [Aaron Klein, “Why the CFPB showdown threatens the independence of financial regulators,”Brookings, 11/28/17.]
“The CFPB was conceived as an independent agency, and under the previous administration, staffers took pains to keep the White House at arm’s length. ‘We were very careful to avoid aligning ourselves with the Obama White House,’ said Elizabeth Corbett, who was acting chief of staff under Cordray. ‘We would take meetings if asked, but never shared anything we wouldn’t share with Congress.’ Under Mulvaney, by contrast, there’s no pretense that the bureau should be independent. For example, he ordered a report on which of Trump’s executive orders the agency could voluntarily comply with. And Mulvaney himself, of course, is not separate from the White House, given that the other agency he heads, OMB, is part of the executive office of the president.” [Jesse Eisinger, “The CFPB’s Declaration of Dependence,” ProPublica,02/15/18.]