The White House is preparing for a legal battle for control of the top US consumer finance watchdog, with two rival acting heads expected to appear at its Washington offices on Monday morning.
The Consumer Financial Protection Bureau (CFPB), established by the Obama administration after the last financial crisis, is in turmoil as two officials with radically different views on its future have apparent legal authority to take charge until the Senate decides on a permanent head.
Mick Mulvaney, an arch-critic of the agency who has described it as a "sick joke", was appointed by the White House after its chief Richard Cordray stood aside on Friday. However, Mr Cordray named Leandra English, a CFPB executive, as the interim head.
Mr Cordray, who extracted about $12 billion from the financial industry in penalties and consumer compensation during his six-year tenure, came under attack over the weekend from President Donald Trump, who described his spell at the watchdog as a "total disaster".
“Financial institutions have been devastated and unable to properly serve the public,” said Mr Trump. The administration would “bring it back to life”.
Mr Cordray’s crusade against financial sector wrongdoing has won praise from consumer advocates but bankers complain his approach was overzealous and anti-business.
‘Chaos’
However, Elizabeth Warren, a Democratic senator who has long been a cheerleader for the CFPB, argued that the president was "causing chaos" and ignoring the law.
Maxine Waters, a Democratic congresswoman from California, said: [Mr Trump] "is once again trying to circumvent Congress to rush allies of Wall Street into key positions to put their priorities first, at the expense of American consumers."
Mr Mulvaney, Mr Trump’s choice for interim chief, is a conservative who runs the White House budget office.
Ms English, who has held senior positions at the CFPB, is a close ally of Mr Cordray. The outgoing director promoted her to the position of deputy director hours before he left the bureau on Friday, a move he argued left her placed to run it in his absence.
A senior Trump administration official said on Sunday the outgoing chief was trying to “provoke” a legal fight.
While the president has clear authority to nominate a permanent successor to Mr Cordray, lawyers said it was less clear if he could install a leader in the interim.
The post-crisis Dodd-Frank legislation that created the agency is open to interpretation, meaning both Mr Mulvaney and Ms English could argue they have legal backing. It could take months for the Senate to approve a permanent head.
Mr Cordray highlighted a section of Dodd-Frank that says the deputy director “shall serve as acting director in the absence or unavailability of the director”.
However, the justice department’s Office of Legal Counsel issued an eight-page opinion over the weekend supporting Mr Mulvaney’s appointment. It said the legislation did not specify what happened when the director vacated his position, giving the president authority to appoint a temporary leader under the Vacancies Reform Act.
Ms English’s intentions were unclear over the weekend. The CFPB did not respond to Mr Mulvaney’s appointment.
Rob Portman, a Republican senator from Ohio, claimed on NBC that Mr Cordray had resigned a week earlier than he was planning to in order to put his deputy in charge and try to "circumvent the normal process". – Copyright The Financial Times Limited 2017
