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It’s the Game of Vacancies at the CFPB. Watch out for the bureaucratic duel of conflicting statutes.

- November 29, 2017

It’s not exactly “Game of Thrones” — federal budget procedures make it difficult to acquire decent-sized dragons — but there is a monstrous battle over who should be head of the Consumer Financial Protection Bureau (CFPB).

The CFPB has been controversial since it was created in 2010, both because it aggressively regulates financial institutions and because of its unusual organizational structure. The latter is what’s in the news right now — in no small part because so many people want to restrain the former.

So let’s look at that organization. The Dodd-Frank Act, which created the CFPB, decreed that it should have a single Senate-confirmed director who would serve a fixed term and could not be fired by the president. It also funded the agency via the Federal Reserve instead of the regular budget process, limiting legislators’ ability to slash the CFPB’s budget during annual appropriations.

Most relevant to this week’s drama, the Dodd-Frank Act also states that the agency’s deputy director becomes its acting director in the event of a vacancy at the top. On Friday, director Richard Cordray resigned amid speculation that he might run for governor in Ohio. On his way out the door, he named his chief of staff, Leandra English, as deputy director — and thus, in short order, acting director.

FVRA vs. Dodd-Frank: Bureaucratic battle of the giant statutes

Or was she? President Trump turned to a different statute — the Federal Vacancies Reform Act of 1998. The FVRA allows a deputy to fill a temporary vacancy but also provides that the president can instead appoint another executive branch official in that deputy’s place, so long as that official has also been confirmed by the Senate. And so as soon as Cordray’s resignation took effect, Trump named Office of Management and Budget Director Mick Mulvaney to do double duty at CFPB.

On Monday, Mulvaney occupied the CFPB director’s office, dispensed excellent New England doughnuts and emailed the agency staff to “disregard any instructions you receive from Ms. English in her presumed capacity as Acting Director.” English, for her part, sent her own email greetings to agency staff — and filed a lawsuit calling Mulvaney “the person claiming to be acting director” and herself “the rightful director” of the CFPB.

The legal question turns on whether the FVRA gives the president an option for appointing its head — i.e., the deputy or someone else — or whether the text of Dodd-Frank forecloses that option. The FVRA says it is the “exclusive means” of filling a position, except if another statute specifies a particular acting successor. English’s proponents argue that Dodd-Frank does precisely that. Better yet, in doing so it uses the word “shall,” not “may.” That word “shall” is significant, legal scholars such as Marty Lederman emphasize.

The Office of Legal Counsel in the Justice Department, by contrast, issued an opinion defending the president’s right to use the FVRA procedure. Perhaps more surprisingly, so did the CFPB’s own general counsel Mary McLeod. Quoting an earlier Office of Legal Counsel opinion, McLeod concluded the fact that the FVRA “is not exclusive does not mean that it is unavailable.”  That is to say, the FVRA may not be the only way to handle the matter, but it is a possible (an “available”) way, and it’s up to the president to make the call — as other legal scholars such as Adam White emphasize.

Here come the subplots

On Tuesday, a district court judge declined to grant a temporary restraining order against Mulvaney’s claim to the CFPB throne. That does not settle the merits of the case, of course. And in the meantime, other subplots abound.

One is that the judge in the case, Timothy Kelly, was appointed by Trump and only took the bench in September. He was quickly attacked on social media, in language that had an unsettling echo of Trump’s own much derided attack on “so-called” judges.

Another is that new acting director Mulvaney already has a full-time job as the president’s budget director, at a time when budget policy is rather salient. Funding for the federal government expires on Dec. 8. Hopes for a bipartisan spending plan keep sinking, further complicated by pending tax cuts that seem likely to add substantially to the federal deficit and national debt. One might imagine that this might require a full-time budget director.

Mulvaney says he will work three days each week at OMB and three at CFPB — which itself adds a new subplot. After all, Dodd-Frank says that the deputy director shall serve as acting director “in the absence or unavailability of the Director.” Does that put English in charge three days a week?

A third is that the full membership of the District of Columbia Circuit is currently considering whether the CFPB can even exist as it is currently structured. In October 2016, a three-judge panel of that court held that the organization of the CFPB was not just odd but unconstitutional, as I explained here at the time — that Congress could create an entity with a single director who served at the president’s pleasure, or one led by a multi-member commission with fixed terms, but not by a combination that shielded the agency from oversight by elected officials.

Sen. Elizabeth Warren (D-Mass.), an architect of the CFPB, argues that “the agency was built to be as far away from partisan politics as humanly possible.” But we might do better to see the CFPB as a classic example of what political scientist Terry Moe called “the politics of bureaucratic structure” — the product of partisan politics, that is to say, the product of a temporary majority coalition that sought to protect its creation from depredations by future opposition majorities. Cordray’s early departure shows one risk of that strategy. Accountability suddenly seems more desirable when an insulated structure is under the control of the “wrong” side.

And yet another plot line involves the FVRA itself. Those appointed under its auspices can serve only 300 days at the start of an administration — right about now. Without a new nominee in the pipeline — and the Trump administration has been notoriously slow in putting people forward — any actions taken by an acting official after the 300 days are up have no legal force. While this won’t affect Mulvaney’s seat at the CFPB for a while, there are enough long-term “acting” officials in place that political scientist Terry Sullivan says the FVRA could soon trigger an epic “changing of the guard” across the bureaucracy.

Trump celebrated the court ruling Tuesday with (what else) a tweet. But he may find, as Lawfare recently put it, that while the Vacancies Act can giveth, it can also taketh away.