Trump Meets Obama at the Consumer Crossroads

Rarely has there been such a direct confrontation between incoming and outgoing administrations in Washington. The scene was bizarre, a kind of real-life parody of warring ideologies, as an Obama holdover at the Consumer Financial Protection Bureau (CFPB) and a Trump appointee both arrived at the office on Monday morning to take over for the agency’s just-departed director. Both greeted the 1,600-member staff as the new acting director, and both commenced giving their orders for the day.

Fortunately, the confrontation did not deteriorate into shouting matches or worse. Instead, the ultimate bureaucratic contretemps was to be settled civilly — in federal court.

And so, on Tuesday evening, Judge Timothy Kelly of the U.S. District Court in Washington declined a request for an emergency order blocking President Trump from installing Mick Mulvaney, head of the Office of Management and Budget, instead of Leandra English, the deputy tapped by outgoing CFPB Director Richard Cordray to be his successor.

Before entering politics, President Donald Trump had earned much notoriety for his flamboyant, entrepreneurial style, which featured, among other things, a penchant for spectacularly firing apprentices. However, in this case, he found dismissing those who displeased him was not so easy.

Even though he got his way in court on Tuesday, the win was only temporary. English, accompanied by her lawyer and liberal Massachusetts Sen. Elizabeth Warren, made it clear that they have not given up the fight for control over the agency, which was largely the senator’s creation.

They argued in court that the 2010 Dodd-Frank Act, which established the agency after the financial crisis, authorizes the deputy director to run things until the Senate confirms a new permanent director. Also, that Mulvaney cannot be both OMB chief and CFPB chief at the same time, which would compromise the agency’s mandate of independence. They could take their case to the next highest arbiter, the Federal Circuit Court, a course they are reportedly considering.

However, Deputy Assistant Attorney General Brett Shumate countered that the president was empowered by a pre-existing law, the 1998 Federal Vacancies Reform Act, to choose his own person. Indeed, whatever the tangle of overlapping empowerments, it seems improbable that the president, who can appoint or dismiss cabinet officers at will, cannot name his own consumer protection advocate, and that he should be made a captive of the previous administration’s choices.

Of course, there is a great deal more at stake here than conflicting personalities or career trajectories. Per its own self-description, the CFPB “has curtailed abusive debt collection practices, reformed mortgage lending, publicized and investigated hundreds of thousands of complaints from aggrieved customers of financial institutions, and extracted nearly $12 billion for 29 million consumers in refunds and canceled debts.”

It has also been, like Warren herself, a rather large thorn in the side of Wall Street and big business since its inception. Mulvaney immediately set about changing all that on his first day at the job, imposing a 30-day regulatory and hiring freeze.

He was nothing if not candid about his intentions. “Anyone who thinks that a Trump administration CFPB would be the same as an Obama administration CFPB is simply being naive,” he told reporters on Monday. “Elections have consequences at every agency, including the CFPB.”

And consequences there will be. A promised change of rules that will make it easier for consumers to obtain loans may be the least of them. For while all this is going on, House Republicans have already approved legislation to overhaul the agency, which would extract some of the teeth from the unruly CFPB.

Indeed, the unusual power invested in the agency has been a major issue — and an emerging irony — in the unfolding story. When it was established, the Democrats insisted on the model of a single director with extensive powers and little accountability, rejecting the Republican proposal for a bipartisan commission that would have represented diverse viewpoints.

In other words, the Democrats fashioned a powerful regulatory weapon, which, thanks to the surprising result of the 2016 presidential election, has fallen into what they consider to be the wrong hands — a Republican administration with a very different view of what the agency should be doing.

It’s hard to know exactly what the Democrats were thinking when they created the CFPB. Surely, they understood that sooner or later a Republican president would enter office and do just what this one has done — put in his own man. Probably, they figured that by the time that happened enough facts would be have been created on the ground — enough legal and administrative precedents — that it would be nearly impossible to undo them.

The fateful day has come — no doubt sooner than the Democrats had anticipated, given that they had assured themselves that Clinton would win the presidency and further entrench the Obama-era CFPB.

The motive force behind the CFPB was unquestionably worthy. In the wake of the financial crisis of 2007-8, in which millions of consumers fell victim to the unconscionable malfeasance of corporate and banking firms, a fresh layer of federal protection was in order to prevent a recurrence. Now the time has come to review and refine the mechanism created for that purpose. We wish them well.