The Fight Over the CFPB Reveals the Broken State of American Politics

Democrats created an agency insulated from political institutions they no longer trust—and Trump seems determined to validate their fears.

Joshua Roberts / Reuters

The festering feud at the Consumer Financial Protection Bureau certainly wins points for baroque legal maneuverings: There are two people claiming to be the rightful director, a lawsuit in process, two different federal laws at odds, and at least two plausible readings of the statutes.

The dispute between Leandra English, the deputy director appointed at the last minute by outgoing Director Richard Cordray, and the Trump administration, the vagaries of which my colleague Gillian B. White explains, is not just about who will run the agency, or even merely about different philosophies of consumer protection. The fight over the CFPB is a proxy war between two political parties that each believe that the system is broken but have wildly different prescriptions for fixing it.

New agencies are not especially common, and the CFPB was one of the signature accomplishments of President Barack Obama, created through the Dodd-Frank financial-regulation bill. In both mission and structure, it reflected the Obama administration’s faith in experts and its wariness about the current political landscape. The idea behind the CFPB was that consumers faced an uneven playing field. In a 2007 article that laid out the case for the agency, Elizabeth Warren—then a professor at Harvard Law School, and now a senator from Massachusetts—wrote, “Some portion of the credit crisis in America is the result of foolishness and profligacy. Some people are in trouble with credit because they simply use too much of it. Others are in trouble because they use credit in dangerous ways.”

However, Warren added, “That is not the whole story. Lenders have deliberately built tricks and traps into some credit products so they can ensnare families in a cycle of high-cost debt.” The agency that she proposed would serve as an equalizer, putting some heft on the side of consumers, who couldn’t be expected to outsmart a system designed to thwart them. To do that, experts would stand in as proxies for consumers.

It wasn’t just that the CFPB’s framers doubted individuals’ ability to parse financial offerings. Given that the institutions the CFPB would limit were politically powerful, its creators also doubted that CFPB could survive a political fight. Even if voters were sufficiently motivated and clued-in to fight an attempt to weaken the agency, the thinking went, it would be yet another unfair fight: They’d be rolled by moneyed donors who have captured Congress and the presidency. The only way to protect the agency, and by extension the consumers, was to insulate the CFPB from interference by keeping those two political actors as far from the agency as possible.

As a result, the Democrat-controlled Congress made it an independent agency, like the Federal Reserve Board or the Federal Election Commission. While its director is appointed by the president and confirmed by the Senate, he or she serves a set term and (probably) can’t be fired by the president. Additionally, the CFPB is funded not by Congress, which could decide to close its wallet and starve the agency, but by the Federal Reserve.

There are two predominant, separate objections to the CFPB among conservatives. One is that it serves an unnecessary purpose, that regulation is generally a bad thing, that the CFPB will stifle financial institutions, and that individuals ought to be left to make their own choices. Trump, for example, tweeted, “The Consumer Financial Protection Bureau, or CFPB, has been a total disaster as run by the previous Administrations pick. Financial Institutions have been devastated and unable to properly serve the public.” (As Jonathan Chait notes, Trump’s concurrent boasts about the booming Dow appear to contradict his claim.)

The second is that regardless of the substance of what the agency does, the way it is set up—shielded from presidential and congressional oversight—is concerning to anyone who believes that the government in general, and unelected bureaucrats in particular, are prone to abusing their power and the people. “It is not inherently ‘anti-CFPB’ to be appalled by the way the body was established, any more than it is ‘anti-children’ to believe that any legislation aimed at helping minors must pass through both houses and be signed by the president,” argues Charles C.W. Cooke.

As this week has proven, the 2010-era Democrats were correct to suspect that future elected officials would attempt to meddle with the CFPB if given the chance. At the start of his administration, Republicans tried to get Trump to fire Cordray, which might not have been legal, but in any case the president decided to wait for Cordray to leave. Once Cordray announced his departure, Trump appointed Mick Mulvaney, the head of the Office of Management and Budget, to be the interim director of the CFPB in addition to his OMB duties.

The current legal fight will determine just how shielded CFPB is from presidential interference. Trump’s argument is that the Federal Vacancies Act authorizes him to appoint an interim director; his opponents insist the CFPB’s authorizing legislation creates an alternative process that supersedes the Vacancies Act.

Regardless of whether courts side with Trump, Mulvaney is a cynical choice to lead the agency on an interim basis. That’s not just because Mulvaney previously told a House panel, “I don’t like the fact that CFPB exists, I will be perfectly honest with you.” It is also because in choosing a person who is not just an executive-branch appointee but in fact a direct report to the president, Trump is acting to take full presidential control over the CFPB, contravening Congress’s intent in establishing it as an independent agency.

The move reveals a GOP that’s just as pessimistic about the political process as the Democrats were in establishing the agency. No one disputes that Trump has the right to appoint a new director. He could nominate someone for Senate confirmation today, and given that Republicans control the chamber, it’s likely he could find someone who could be confirmed. (Trump has, however, been extremely slow to nominate people for the many vacancies in the executive branch.) The administration could also ask Congress to rewrite the legislation authorizing the CFPB. In fact, it has done so, though that initiative has been on the backburner as the White House continues to seek its first major legislative win.

Why hasn’t Trump simply used these mechanisms to take control of the CFPB, or to eliminate the agency? It’s hard to say. Maybe the White House is behind on vetting replacements; Cordray’s term didn’t expire until next year, though he was widely expected to leave early to run for governor of Ohio. His choice of Mulvaney reflects a pattern in which Trump reshuffles people who are already appointees (like John Kelly). Maybe he’s dubious about the Senate’s ability to confirm an appointee, or maybe he doesn’t think Congress can or will pass the changes he wants to the CFPB. But if that’s true, then the president’s decision to simply bypass the process conveys the same bleak view of standard political processes that characterizes the agency’s establishment.

The fact that neither party sees the political process as effective in resolving these basic issues is worrying; the fact that they might both be right is worse still. That problem will linger long after the question of who’s buying doughnuts for CFPB staffers is resolved.