Michael Grunwald is a senior staff writer for Politico Magazine.

The Consumer Financial Protection Bureau is now the star of a bizarre legal and bureaucratic drama, a Rome-versus-Avignon power struggle unfolding a block from the White House. The resignation of the bureau’s director, Richard Cordray, has created a soap-opera succession battle tailor-made for the frenzied Washington news cycle, with two dueling officials claiming his job and furious partisans arguing both sides. President Donald Trump’s tweet on Nov. 25 trashing the CFPB as “a total disaster” got more attention than anything the bureau has done in its six-year existence. So did the doughnuts that Trump’s pick as acting director, White House budget chief Mick Mulvaney, brought to his first staff meeting at the bureau.

But with much less fanfare, the bureau has done quite a lot since President Barack Obama and congressional Democrats created it in response to the financial crisis of 2008. It has cracked down on predatory lenders, sleazy brokers, bullying debt collectors and Wall Street scammers, forcing financial firms to return $12 billion to 30 million ripped-off consumers. It has helped transform the mortgage market, the credit card industry, and other money-moving businesses that used to enjoy lax or nonexistent government oversight. Its database of consumer complaints—online and publicly searchable—has helped more than a million disgruntled financial customers get corporate responses, while serving as a kind of government-run Yelp for money matters.


Since it opened its doors in July 2011, the CFPB has quietly established itself as the most powerful and consequential new federal agency since the Environmental Protection Agency opened its doors nearly half a century ago. In the process, the bureau has provoked ferocious blowback from financial lobbyists and Republican leaders, who have portrayed it as a rogue Soviet-style bureaucracy and Cordray as an unaccountable dictator. Several federal judges have also smacked down the bureau for overstepping its authority, bolstering the critics who have accused it of launching a lawless ideological crusade to tear down Big Finance.

Mulvaney is one of those critics; after his first day as acting CFPB director, he slagged his new workplace as “an awful example of a bureaucracy gone wrong,” announcing that he was freezing all new hiring, rulemaking and fines. And no matter who wins the legitimacy battle of the moment between Mulvaney and Cordray’s hand-picked temporary successor, Leandra English, Trump will eventually get to pick a permanent director who will surely push for radical changes at the bureau. “Elections have consequences at every agency,” said Mulvaney, who won the first round of the court fight in front of a Trump-appointed judge.

It’s hard to predict what those consequences will be, now that the mortgage meltdown that birthed the bureau is no longer fresh in the public’s mind, and its critics are ascendant in Washington. A federal judge ruled last fall that the CFPB director had such “enormous executive power” that the agency’s structure violated the Constitution, a ruling that is now on appeal.

But regardless of the outcome of that case, Trump’s appointees might not find it so easy to reshape the bureau that Obama’s appointees have had six years to shape. Trump’s CFPB director will be his only Senate-confirmable appointee at an agency with 1,600 career employees (though he's also trying to bring in a few lower-level aides). Those employees were all recruited by Obama’s directors—first a liberal law professor named Elizabeth Warren, who dreamed up the agency and led it during its startup phase before running for Senate in Massachusetts, and then Cordray, the first and only director to hold the job on a permanent basis. Their hires tended to share their belief in aggressive consumer protection. They wanted to help the new sheriff clean up the Wild West.

“The people who come here really feel the mission,” Cordray said in an interview with POLITICO earlier this fall, before he announced he was quitting.

Cordray is not a fist-pounding kind of crusader like Warren, who initially hired him to lead the bureau’s enforcement division. He’s a monotone Midwesterner, an awkward introvert who looks like the page Kenneth from 30 Rock and sounds like he’s about to ask permission to finish his thought. But he made it clear while discussing his tenure that he had stretched that “enormous executive power” as far as he possibly could to protect consumers from scams. He made no apologies for the bureau’s unsuccessful efforts to rein in far-flung targets like college accreditors and payment processors, legal setbacks he chalked up to a conscious strategy to push envelopes to rein in the kind of financial shadiness that helped shred the global economy less than a decade ago.

“I’ve never had any qualms about telling our people, if we have a case involving things people really shouldn’t have been doing, bring the case, right the wrong, and if a judge tells us we can’t, fine,” Cordray said. “There are a lot of bad things that need to be addressed, and we shouldn’t shy away just so we could have a perfect won-loss record.”

Politically, the bureau’s defeats in court have bolstered the industry’s arguments that the bureau itself needs reining in, arguments Trump and his aides are echoing as they seek to dial back its regulatory intensity. But Cordray was trying to build a lasting institutional culture, and he often told his staff he didn’t want to run the kind of agency that wins every fight.

“That means you’re shying away from gray areas, staying well away from the line. It means you’re not willing to be aggressive and take risks,” Cordray said. “If you lose every now and then and you get called overreaching, that probably means you’re getting right up to the proper limits of your authority.”

The bureau’s defenders warn that Trump and other Republicans just want to gut it on behalf of corporate donors who don’t want a tough cop on the financial beat, even though Trump promised to fight Wall Street during his populist campaign. There’s some truth to that. Banks are enjoying record profits, and the mortgage market is healthy and growing. But the critics say the bureau is basically a progressive consumer advocacy group with virtually unlimited power to write rules, issue subpoenas and levy fines, as if Public Citizen or Consumers Union had carte blanche to target and punish firms they didn’t like. There’s some truth to that, too.

The legal fight over the future of the CFPB began on Cordray’s last day in office, when he ventured into another gray area to try to put English, his chief of staff, in charge of the bureau until Trump can get a permanent director confirmed. But the policy fight will continue long after the legal fight is settled. The White House is clearly eager to dismantle a pocket of liberal resistance inside Trump’s Washington, even though polls suggest that the public overwhelmingly supports the bureau’s work. It’s been in existence for less than a decade, but its early leaders have tried to make it dismantle-proof.

“We thought long and hard about this,” recalls Raj Date, the agency’s first deputy director. “We wanted to build something that would endure.”

The CFPB owes its existence to a 2007 article Warren wrote for the journal Democracy, arguing that consumers needed a federal agency to regulate defective mortgages the way the Consumer Product Safety Commission regulates defective toasters. Plenty of regulators had at least some responsibility for consumer protection, but it wasn’t the top priority for any of them. The Wild West mortgage chaos that fueled the 2008 financial implosion made Warren look prescient and elevated her academic idea of a new agency to the top of the political agenda.

But she did change her mind about one point in her article, concluding the agency should be run by a single powerful director rather than a bipartisan commission. The toothless Federal Election Commission and even the Securities and Exchange Commission had convinced her that governance by committee wouldn’t produce aggressive oversight. One fellow Democrat recalls warning her that a single director would be risky. With a commission overseeing the agency, it would still have some pro-consumer Democratic influence during an anti-consumer Republican administration, but with power concentrated in one appointee, the agency would be more vulnerable to wild pendulum swings after every change in leadership. She replied that with a new agency, it was more important to have full control from the start.

“She said, the key is to staff the agency from the beginning with like-minded committed people,” says the Democrat, who now works in an industry that deals with the bureau. “She wanted to create a culture that would last.”

During the post-crisis debate over Wall Street reform, snuffing out the idea of an independent consumer agency was the financial industry’s No. 1 priority, and business interests were blanketing Congress with lobbying muscle and political donations that consumer advocates could only fantasize about. But the Obama White House and Democratic leaders refused to budge, in part because they thought cracking down on shoddy mortgages and other scams would be the only part of Wall Street reform that ordinary Americans could understand. They compromised on how to regulate derivatives, how to wind down failing megabanks, and other complex reforms, but they actually strengthened the bureau’s mandate during the legislative process, giving it sweeping powers to write and enforce rules, keeping its funding outside the political process and putting a single leader in charge.

The initial leader was Warren, who quickly began hiring like-minded talent like Cordray, who had just lost a reelection campaign for attorney general of Ohio, and Date, a Wall Street investment banker who had launched a consumer finance think tank. She brought in Holly Petraeus, a veterans advocate whose husband, David, was a decorated general, to oversee veterans issues, and Gail Hillebrand, an advocate with Consumers Union, to run consumer education. One bureau official recalled getting annoyed reading criticism of an early CFPB mortgage regulation by the National Consumer Law Center’s Diane Thompson; a few months later, Thompson became the top lawyer in the CFPB’s office of regulations. There were former industry leaders from corporations like Capital One and Nextel in senior leadership, too, but only ones who expressed enthusiasm for the mission.

Ron Rubin, a Republican who worked at the bureau in its early days and later became a critic, complains that its senior leaders used “mission-driven” as a euphemism for “liberal,” filling up its ranks with Obama loyalists. And whether or not the bureau had a political litmus test, it certainly had a political aura. Warren used to gather her team outside the agency’s elevator bank and give passionate speeches about the importance of being a voice for the voiceless, and going after corporate wrongdoers who had cheated with impunity for too long.

“She was so inspirational,” Holly Petraeus says. “She talked about how the free market didn’t regulate itself, and we were finally going to look out for people getting ripped off. There’s a life cycle in agencies, and we wanted to be creative and innovative right away, before we started hardening into bureaucracy.”

The bureau promptly began churning out new rules of the financial road, starting with regulations cracking down on the skimpy underwriting and outright fraud that helped drive the mortgage crisis. It also launched a series of investigations, often targeting industry leaders in order to maximize the impact on the rest of the industry. Its first enforcement action levied massive fines against several of the biggest Wall Street behemoths, whose call centers had tricked customers into buying credit monitoring and other unnecessary “add-ons” for their credit cards. One former official compared the approach to a new inmate who wants to project toughness on his first day inside, so he picks a fight with the biggest bully in the prison yard.

“We wanted to send a message: There’s a new cop on the beat,” he recalls. “Pushing the envelope is a loaded phrase, but that’s absolutely what we did.”

There was a big fuss when Obama nominated Cordray rather than Warren to be the CFPB’s permanent director in July 2011. And after Republicans said they wouldn’t confirm Cordray or anyone else, there was another big fuss when Obama gave him a recess appointment in January 2012. Cordray didn’t get much national attention again until he quit last month, most likely to seek the Democratic nomination for governor of Ohio, but by all accounts he continued to push the envelope and pick fights with bullies. He cracked down on mortgage redlining, foreclosure relief scams, deceptive mortgage servicers, illegal overdraft fees, payday lending debt traps, deceptive debt collectors, fraudulent prepaid cards, predatory student loans, inaccurate credit reports, unauthorized wireless charges, and a host of other tricks that separate Americans from their cash. He went after giants like Wells Fargo for opening unauthorized checking accounts, Navient for steering student loan borrowers into unattractive options, and Citi for giving mortgage borrowers the runaround. Financial leaders have howled, but he considers their opposition a badge of honor.

“It comes with the territory,” said Cordray. “When you do things that create change and crimp some people’s approach, because they can’t get away with things they used to get away with, you’re going to earn your share of resistance.”

But some of that resistance has come from judges who have chided the bureau for overstepping its authority. One judge blocked the bureau’s effort to investigate for-profit diploma mills by subpoenaing their accreditation agency, dismissing it as a “fishing expedition” and sarcastically rejecting the bureau’s contention that the accreditor somehow had a role in student loans: “Please.” Another judge threw out the bureau’s flimsy case against a back-office payment processor and complained of its “willful disregard of the Court’s instructions,” citing a pattern of obstruction that included a CFPB witness at a deposition reading from a cheat sheet for more than an hour instead of answering the question before him.

Cordray’s final defeat was the congressional repeal of his “forced arbitration rule,” which would have ensured that consumers could sue financial firms in court rather than getting locked into mandatory arbitration proceedings. He even wrote a letter begging Trump to veto the bill, to prevent American families from getting “cheated out of their hard-earned money and left helpless to fight back.” But despite campaigning as a populist, Trump has governed as a corporatist, and gleefully signed the repeal in front of bank lobbyists and Republican lawmakers, while venting about Cordray’s hostility to business.

Congress may strike down another Cordray rule shaking up the high-interest payday lending industry. But financial leaders say their real hope for the Trump era at the bureau is a less antagonistic approach to supervision and enforcement. They would also like to see Mulvaney remove its complaint database from public view, so that companies are no longer tarred by allegations without due process. They say the aggression of the CFPB has made consumer credit more expensive and less efficient, forcing lenders to invest in lawyers and compliance officers and then pass the costs along to their customers.

“There’s such a gotcha mentality over there,” says Richard Hunt, the head of the Consumer Bankers Association. “You won’t find a single bank that didn’t at least double their compliance costs, if not triple or quadruple. People pay for that.”

But one thing you don’t hear financial leaders say anymore is that the CFPB should be abolished, even though they once warned that its creation would cripple financial services in America. The Wall Street reform law of 2010 transferred authorities from seven federal agencies over 18 consumer protection laws to the CFPB, and it’s hard to imagine how they could be transferred back. The critics complain about the way the bureau is structured and its adversarial approach to business, but they no longer clamor for its demise.

“Now that it’s here, it’s here to stay,” says Alan Kaplinsky, an attorney who represents numerous companies that have battled the bureau. “It’s got too much power, and it doesn’t always let the facts get in its way. But nobody’s really suggesting that it should be dismantled anymore.”

Even Mulvaney pledged that the Trump administration will keep the CFPB in business. “Rumors that I’m going to set the place on fire or blow it up or lock the doors are completely false,” he said on Monday. At the same time, he warned that anyone who’s expecting the status quo to continue “is simply being naive.” Clearly, envelopes will no longer be pushed in pursuit of corporate wrongdoers. Authorities will no longer be stretched in the name of giving a voice to the voiceless. Unfinished rules on overdraft fees and abusive debt collectors might well remain unfinished.

But the bureau still has 1,600 employees, and most of them are determined to stick with the mission long after the furor over who's in charge has faded. One CFPB official predicted that while Mulvaney and his eventual successor could conceivably block new progress in consumer protection, they’ll have a hard time undoing much of the progress that’s been made over the past six years.

“We’re just going to keep doing our jobs,” the official said.