The power struggle raging Monday (Tuesday in Manila) at the top of a key consumer protection agency underscores US President Donald Trump’s efforts to rein in financial regulation.
Two senior government officials claim to be rightfully in charge of the Consumer Financial Protection Bureau—a Trump appointee and the agency’s new deputy director—and the politically charged case was poised to play out in the federal courts.
The independent agency, created during the Obama administration in the wake of the 2008 financial crisis, polices banks, debt collectors, payday lenders and investment firms to protect consumer rights.
It has constantly been under fire from Republicans and Trump has promised to roll back regulations across the economy that he says have hindered lending and business activity.
CFPB director Richard Cordray, a Democrat, stepped down Friday and appointed his chief of staff, Leandra English, as deputy director, to allow her to take over the agency until a new director is appointed.
But the same day Trump named his own ultra-conservative budget director, Mick Mulvaney, a sharp critic of the agency, as its interim director.
In response, English filed a lawsuit on Sunday to block Mulvaney from taking up his post, arguing that she is the legitimate interim leader of the bureau.
Both officials reportedly asserted control of the agency in emails to staff, each signing as “acting director.”
The agency is perhaps most famous for leading the charge against commercial banking giant Wells Fargo, which created millions of phony bank and credit card accounts that resulted in untold sums in fees for customers, damaged credit scores and higher interest rates.
As the battle for leadership of the agency broke out, lawmakers on both sides of the aisle decried what they said was a scandal.
The White House on Monday cited friendly legal views from the Justice Department and the CFPB’s own chief counsel, saying Mulvaney was the rightful acting director.
Mulvaney himself told also reporters on Monday he would divide his time between the White House, where he remains director of the budget office, and the CFPB.
Trump wants to the CFPB to cease obstructing the flow of capital to the public, Mulvaney said.
“He wants me to fix it. He wants me to get it to the point where it can protect people without trampling on capitalism,” he said.
“I still think it’s an awful example of a bureaucracy that has gone wrong when it is almost entirely unaccountable to the people that are supposed to oversee it or supposed to pay for it.”
Senator Elizabeth Warren, a Democrat and an architect of the CFPB, told CNBC on Monday that Mulvaney’s views were antithetical to the agency’s mission.
“If by trampling on capitalism he means he wants to open the doors again so the big banks can cheat more families, I think that’s a real problem,” Warren said.
An unfettered financial sector had produced the global financial crisis and ensuing worldwide recession, she added.
“We saw what happened before this agency was put in place.”
The dispute comes just as the Trump administration is beginning to hit its stride in reshaping financial oversight to its liking with leadership changes at several key institutions.
And Trump’s nominee for chair of the Federal Reserve, Jerome Powell, will testify at his Senate confirmation hearing on Tuesday.
Powell, a centrist Republican, current Fed governor and former investment banker, is expected to sail through the process and to take up his position in early February once the term of current chair, Janet Yellen, ends.
With Yellen’s departure, Trump has a free hand to name the majority of the seven members of the Federal Reserve Board, a body with a central role in banking oversight and regulation.
The question of the CFPB’s leadership is highly likely to come up during Powell’s appearance.
In prepared testimony released Monday before the hearing, Powell said regulations put in place after the crisis had made the financial system “without doubt far stronger.”
But he sounded a note of compromise.
“We will continue to consider appropriate ways to ease regulatory burdens while preserving core reforms,” said Powell. AFP