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The Consumer Financial Protection Bureau Is at the Heart of a Constitutional Crisis

As covered recently at The Jack News, the laws of presidential succession are vague and prone to flaws. By quirk of timing, that is now being demonstrated in real time with an increasingly absurd drama: Two different individuals claiming to be the acting Director of the Consumer Financial Protection Bureau.

On Monday, Mick Mulvaney showed up at the bureau’s headquarters, donuts in hand, and occupied the director’s office. At the same time, the former chief of staff of the recently resigned Director Richard Cordray made a brief appearance at the office, sent out an email signed with her purported title as acting director, and then made an appearance with Democratic members of Congress on Capitol Hill.

The conflict originates in two dueling interpretations of the law, as well as the novel and constitutionally-problematic structure of the CFPB. Mulvaney, a former Congressman currently serving as director of the Office of Management and Budget, has been designated by President Trump as the acting CFPB director.

Will the Vacancies Reform Act Trump the Dodd-Frank Act?

The authority for this is the Vacancies Reform Act, a 1998 law that sets the authority of the president to appoint executive-branch officials in an acting capacity. The law requires that the person so designated, must themselves hold a Senate-confirmed position. It also requires that this interim appointment cannot be the same person then nominated to the Senate to fill the office on a permanent basis.

The wrinkle is the Dodd-Frank Act, which created the CFPB. A provision in that law allows the agency’s chief to designate a deputy director, who then takes over in the “absence” of the director.

Attempting to take advantage of this, on his way out the door, Cordray designated his own chief of staff, Lauren English, as deputy director. The intention appears to be that English would run the agency unless and until the Senate confirmed a new permanent director.

Both the Office of Legal Counsel, which advises the White House, and the CFPB’s own general counsel have concluded that the appointment of Mulvaney is legal. In other words, English is not the acting director. English in turn has sued, asking a federal district court to rule that Mulvaney’s appointment is invalid and that she is the acting director.

Partisan Politics Takes Hold at the Consumer Financial Protection Bureau

Partisan politics color the whole debate in predictable ways. CFPB was the brainchild of Sen. Elizabeth Warren, D-Mass., then a Harvard Law profession,  and incorporated into the 2010 Dodd-Frank Act. In creating the agency, Warren proposed a novel structure: A single director, whom the president couldn’t fire at-will. Moreover, the agency’s funding was provided by the Federal Reserve.

This fight has echoes of the impeachment of Andrew Johnson. In a dispute over reconstruction, Congress attempted to make it illegal for Johnson to fire his cabinet secretaries, particularly the Secretary of War. Johnson did so anyway and was impeached but acquitted.

The end result re-affirmed a constitutional precedent established by John Adams: Executive-branch appointed officials serve at the pleasure of the president.

Another constitutional wrinkle in the form of ‘Independent’ agencies

A slight wrinkle was introduced later during the progressive era and the New Deal that followed it. Congress desired to create independent agencies that were purportedly to be immunized from political influence.

The problem is that the Constitution clearly vests executive power in the president alone. Depriving the president of that power seemed to violate separation of powers.

The compromise decided on by the courts was to allow independent regulatory agencies, but only if their power was vested in a multi-member board and commission. That’s why such familiar agencies as the Federal Communications Commission, the Securities and Exchange Commission, and the Federal Reserve Board of Governors are all structured that way.

In these independent committees, members are appointed to a fixed term, usually reflect a bipartisan balance, and can only be removed by the president “for cause,” such as malfeasance or negligence.

Warren herself lobbied to get the CFPB job before Cordray

Warren. who lobbied to get the job herself before the Obama administration backed away from the confirmation battle, insisted the usual commissions were not independent enough. She wanted the CFPB to have a single, politically-powerful director, with vast regulatory and enforcement powers. Such a person would, in effect, be answerable to nobody.

The Court of Appeals for the D.C. Circuit has already ruled this structure is unconstitutional, and that the president can fire the CFPB director at-will. Yet that case is currently on hold pending an en banc appeal to the full court, and possibly to the Supreme Court.

If Warren had not suggested this novel strategy, then the CFPB would today still be controlled by a majority of Obama-era appointees. Instead, vague and conflicting laws have entirely defeated the purpose.

It’s clear that the Trump administration has the law and the Constitution on its side with Mick Mulvaney as its acting director.

(Photo of the exterior of the Consumer Financial Protection Bureau, Washington, DC USA by Ted Eytan via Flickr)


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