It doesn’t seem like anything could unite Republicans in Congress these days, but ask them if they want to eliminate the Consumer Financial Protection Bureau (CFPB) and you’d get broad agreement. At the very least, the entire coalition — the president, House and Senate Republicans and financial industry lobbyists — want to see Richard Cordray, the bureau’s first director, fired.
Yet even as Trump exerts some powers of the presidency, we’re going to hit the 100-day mark of his administration with Cordray still doing his job, heading up an oasis amid a sea of deregulation. The CFPB is investigating racial bias in the administration of student loans. Last month it fined Experian for deceiving consumers about their credit scores, adding to a 2017 hit list of mortgage lenders and prepaid card companies. Even the mortgage division of Citigroup has faced the CFPB’s wrath.
How are Cordray and his independent agency hanging on when virtually the entire government has its knives out for him? A Wall Street Journal op-ed last week called it “the greatest mystery in Washington.”
Politico provided the official story on Monday. Gary Cohn, the White House economic adviser (and honorary president), sat down with Cordray recently and emerged convinced that he would voluntarily leave soon to run for governor of Ohio in 2018. So Cohn advised the president that there was no need to can Cordray now and give him a rallying cry for next fall; the situation would take care of itself, and Trump would get a replacement soon enough.
Cordray, an ambitious politician, may indeed bolt to run for office. But this is a cover story for the administration. In truth, Trump can’t fire Cordray unless he wants his whole life — even his taxes — broadcast in open court. An appeals court ruling could give the president a freer hand, but Trump’s Justice Department has itself twisted in knots trying to make the case.
Cordray’s term expires next July (something Trump apparently didn’t know until after becoming president). Under current law, the president can only fire the CFPB director for cause, based on a finding of “inefficiency, neglect of duty, or malfeasance.” Some Republicans believe the president can carry that out anytime he wants. But if Trump and his allies wanted to build a fact pattern supporting their case, they couldn’t have gone about it in a worse fashion.
The president started interviewing replacement candidates (including a former vice chairman at the bank once run by Treasury Secretary Steven Mnuchin) before opening any investigation into Cordray’s alleged misdeeds. In early February, when asked about potential changes at CFPB, Cohn stated coyly, “personnel is policy.”
So if Trump did try to fire Cordray, the director could sue for wrongful termination, arguing that Trump was pursuing a policy goal instead of following the for-cause language in the statute. As Georgetown law professor Adam Levitin explains, that would lead to a public lawsuit in which Cordray could seek, and possibly get, discovery, including a deposition of the president and maybe a peek at his tax returns, to see if Trump was benefiting himself personally by tossing out a consumer watchdog that affects his personal business interests.
Clearly the White House wants to steer clear of anything like that. So their main option to depose Cordray before the July 2018 deadline is a change to the CPFB’s governing structure. Some have called for shifting CFPB to a five-member bipartisan commission, which would give Trump the opportunity to stack it with a Republican majority. House Financial Services Committee Chair Jeb Hensarling, perhaps CFPB’s biggest opponent in Congress, has introduced legislation that would simply allow the president to fire the CFPB director at will.
Passing any change like this would require surviving a Democratic filibuster in the Senate. And you’re simply not going to find eight Democrats to vote affirmatively to effectively gut Elizabeth Warren’s brainchild.
Trump has one more chance, though. In a ruling last October, the Court of Appeals for the District of Columbia ruled that the “for cause” provision in the CFPB’s structure was unconstitutional (although several other independent agencies, from the Federal Housing Finance Agency to the Office of the Comptroller of the Currency, have the same language). The court altered that provision to allow presidents to fire directors without cause. But the CFPB appealed, setting up a decision from the full D.C. appeals court.
That hearing will be held next month. The Justice Department, which under President Obama had sided with CFPB, reversed its position, filing an amicus brief supporting private litigant PHH Corporation and agreeing that CFPB’s director structure is unconstitutional. But as Deepak Gupta and Jonathan Taylor point out, Trump’s Justice Department has been completely inconsistent on this issue.
On Feb. 27, DoJ filed a brief in a case involving the Federal Housing Finance Agency where it literally says, “It is long settled that Congress is not prohibited from creating independent agencies run by officers removable only for cause.” The same lawyer at the Justice Department who signed this brief also signed the brief in the CFPB case, which reaches the exact opposite conclusion.
There’s a certain useless quality to the legal proceedings. It could take up to a year to get a ruling out of the full D.C. Circuit, and either side would likely appeal to the Supreme Court. There’s court precedent upholding the for-cause provision, but even if they overturn it, that wouldn’t happen until well after July 2018, at which point Cordray’s term expires. The only thing the court would be doing at that point, practically speaking, is limiting Trump’s selection of a CFPB director to his term in office.
As a result, CFPB keeps chugging along, and could do so for another 15 months, despite the Trump administration’s philosophical opposition to its actions. That could mean completion of payday lending and arbitration rules designed to prevent some of the financial industry’s worst abuses (though lenders have already plotted to find loopholes around the payday rule).
More than anything this demonstrates what Trump has already come to figure out: Governing in America is harder than jumping up on a stage and mouthing off about whatever pops into your head. We’ll learn more about the durability of our bureaucratic institutions as the Trump administration rolls along. But for now, inside a government disdainful of regulation, the defender of consumers remains intact.