The CFPB, born in controversy, becomes a farce

FOR anyone concerned that American consumers have suffered from not having enough financial regulators on the beat, there is now clear evidence of too many. The post-Thanksgiving working week began at the Consumer Financial Protection Bureau (CFPB) with two people claiming to hold the temporary leadership mantle, after the abrupt resignation of the previous director, Richard Cordray. Mick Mulvaney, who heads the Office of Management and Budget, was given a second job by the president, operating under the authority of a commonly used statute. He arrived at the agency with a bag full of doughnuts and an open invitation for employees to come by and grab one. As they munched away, they could read an e-mail signed by “Leandra English, Acting Director”, a relatively young staff member whom Mr Cordray promoted to deputy director on his way out, with the intention of putting her in charge under the authority of a clause in the Dodd-Frank Act.

America’s favourite form of warfare followed—a deluge of conflicting legal opinions followed by a petition to the bench. Ms English requested an emergency restraining order from the Washington, DC, District Court; it was denied. Her supporters attributed the cause to the judge having been appointed by Mr Trump. They were not helped by a ruling in favour of Mr Mulvaney from the CFPB’s own legaldepartment.

These are, however, still early innings. Because the dispute goes beyond conflicts in statutes to a constitutional issue, the “Appointments Clause” in Article Two, which covers the relative authority of the various branches in forming a government, there is the possibility that this is the rare sort of dispute that is quickly brought before the Supreme Court. If they take the case, the justices may end up weighing in on simmering debates over the power and autonomy of administrative agencies. In the meantime, there will be no shortage of political theatre, if only because many of the participants find it useful. Mr Mulvaney tweeted pictures of himself hard at work, and sent e-mails instructing employees to ignore Ms English. Unable to establish her authority in the office, Ms English settled for a photo-op with two Democratic senators fond of cameras and of opportunities to bash the administration, Charles Schumer and Elizabeth Warren.

For Mr Cordray, an Obama appointee widely expected to run for governor of Ohio, the result is publicity for being part of the resistance. That is also true for Ms English, who had been just another cog in a bureaucracy. Republicans have much to gain as well. They have long argued that the CFPB is overtly political, misuses the law and is not accountable for its actions. Those who agree will probably see all these elements in the current drama.

The substance of the fight will take place over dry material. On one side is the Federal Vacancies Reform Act, which allows presidents to fill temporary positions of this sort. On the other is a clause in the Dodd-Frank Act which says the deputy director “shall…serve as acting Director in the absence or unavailability of the Director.” Whether this covers the resignation of a director is blissfully unclear.

Beyond the squabble are deeper reservations. The CFPB was created with truly unusual characteristics. It is funded by the Federal Reserve, whose profits are a by-product of conducting monetary policy. This odd arrangement is designed to circumvent Article One of the Constitution, which puts spending decisions before Congress. The lack of financial oversight is compounded by its leadership structure. The bureau has just one director, unlike most agencies which are led by commissions that have bipartisan characteristics.

For supporters, the design ensures independence; to critics, it meant excessive power. Mr Cordray did little to resolve differences. His tenure included disputed settlements, notably in car finance, that strayed far from the specified mission of the bureau, and heated debates over the regulation of high-interest “payday” lenders. Shockingly, though obscured by all this, there are areas of agreement. Many Republicans say they support a financial consumer protection agency, though one with a more conventional structure.