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Filling In For Nobody

exterior of the Consumer Financial Protection Bureau, Washington, D.C.
photo by Ted Eytan

The presidential administration that gave us recess appointments without a recess has bequeathed to us a fill-in director when there is nobody for whom to fill in.

Richard Cordray, the former director of the Consumer Financial Protection Bureau, stepped down last week from his position, eight months before the scheduled end of his term. On his way out the door he named Leandra English as deputy director, establishing her as his successor for however long it would take the president to nominate a new director and the Senate to approve that choice. However, before what would have been English’s first day in the new position, President Trump named Mick Mulvaney as the CFPB’s acting director.

For Democrats and other supporters of the CFPB in its current form, it is understandably distressing to imagine an acting director who has formerly called the agency he will run “a sick, sad joke.” But the question is not whether Democrats prefer English to Mulvaney; the question is whether English has any legitimate claim to the position after Trump named his own choice for acting director.

This matter has become a mess because of a vaguely drafted section of the Dodd-Frank Act, which created the CFPB in the first place. The law states that the deputy director shall serve as the acting director in the appointed director’s absence. It does not say whether a director’s resignation or removal by the president constitutes an absence for this purpose, however.

Seemingly more on point, the Federal Vacancies Act authorizes the president to install an acting head of any executive agency temporarily, so long as that person has been confirmed by the Senate to another position. Mulvaney satisfies that condition because the Senate confirmed him as head of the Office of Management and Budget. English was never subject to Senate confirmation in her prior position on Cordray’s staff.

So while it was then-President Obama who asserted the right to make appointments (including Cordray’s original appointment) without Senate confirmation when the Senate was still hanging around – an assertion the courts later rejected – Obama merely signed the Dodd-Frank Act. The real blame for this mess lies with Obama’s fellow Democrats on Capitol Hill.

Congressional Democrats, while in full control of the government in 2010, decided to create an agency that was supposed to be immune from both congressional and executive oversight in the name of bureaucratic independence. Such freedom from any branch of government that is ultimately accountable to voters has been tried elsewhere – notably in places like the Soviet Union and communist China. It doesn’t fit well with a constitutional democracy in which government powers are both divided and limited.

Even in other institutions that are designed to create a measure of independence from elected branches, appointments to positions of power are always at the discretion of the elected president, and usually subject to Senate confirmation. Many voices agree that the CFPB should work this way too. The Justice Department has said Trump should appoint Cordray’s acting successor; the CFPB’s own counsel said Trump should appoint Cordray’s acting successor; and a variety of independent legal experts, including some who openly prefer English for personal reasons, have said that Trump has the stronger legal argument (though, of course, you can find plenty of legal experts to argue the reverse, too).

Still, English filed a complaint against Trump and Mulvaney in the U.S. District Court for the District of Colombia in an attempt to block Mulvaney from taking over the CFPB. English has asked, too, that the court declare more generally that Dodd-Frank’s line of succession provision supersedes the Vacancies Act. The CFPB’s head counsel is expected to challenge English’s suit. Although we may see quick action on English’s request for a temporary order, it will likely take some time for the courts to settle the bigger question of whether Cordray’s successor should have been appointed by the president or by Cordray himself.

This is not the first time the judiciary has had to intervene in the operation of the CFPB. Last fall, a divided panel of the U.S. Court of Appeals for the D.C. Circuit ruled that the agency’s structure was unconstitutional. The decision did not halt the CFPB’s operations, but did say that Congress had erred in giving its director so much power with so little oversight. Had that decision stood, the president would have gained the power, denied by Dodd-Frank, to terminate the CFPB’s director at will. However, the D.C. Circuit later vacated the panel’s judgment pending a ruling by the entire court, which is staffed largely with Obama appointees.

In the meantime, Cordray’s attempt to put English in charge has left the CFPB in a state of confusion. All of this chaos goes to show how misguided the board’s structure was in the first place.

Not that the financial services industry didn’t bring this regulatory misery on itself by going out of its way to abuse consumers, both before and during the financial crisis that led to Dodd-Frank’s passage. But in addressing the problem, Congress had no need to disregard constitutional separation of powers and try to establish the CFPB as a self-perpetuating fourth branch of government, as Cordray and English seem to believe it did.

Sooner or later, Trump will probably nominate a permanent replacement director for the Senate to confirm. Cordray and his supporters will no doubt be unhappy with that nominee, but at least we will once again know for certain who is in charge of the CFPB.

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