Cordray on Capitol Hill in 2014 (Reuters photo: Jonathan Ernst)

This will be a short-lived conflict — but it’s an opportunity to rein in the CFPB.

Last week, Richard Cordray resigned from his perch as director of the Consumer Financial Protection Bureau (CFPB). He stepped down not because he had completed his five-year term, but because he is expected to run in the Ohio Democratic gubernatorial primary. Before turning off the lights, however, he designated Leandra English as his deputy.


On its face, this staffing decision may seem unremarkable. But it was far from mundane. Under Cordray’s reading of the 2010 Dodd-Frank Act, which established the CFPB, his deputy became acting director upon his resignation — meaning that the Obama era will continue at the agency until President Trump and Congress can install a permanent replacement. Under the Federal Vacancies Reform Act of 1998, by contrast, the choice of an acting director belongs to the president.

Make no mistake: The person derided in conservative circles as King Richard has precipitated a constitutional clash for no purpose other than to resist President Trump’s agenda. Thankfully, this conflict will be short-lived, because the English Queen’s reign will come to brisk end once the Senate confirms a new CFPB director. But that this is happening at all — that Cordray asserts the power to block the president from naming an acting director — underscores the fact that this all-powerful bureau, which operates outside of our separation of powers, is a legal aberration. At bottom, Cordray is merely delaying the inevitable: Sooner or later, the CFPB will be restored to our constitutional order, under the executive’s supervision.

Cordray’s tenure began as it has ended: with a slight of the Constitution. In 2012, following the enactment of Dodd-Frank and the creation of the CFPB, Republicans filibustered Cordray’s nomination as the inaugural director. Undeterred, President Obama purported to appoint Cordray, as well as several members of the National Labor Relation Board (NLRB), during a 72-hour “recess” of the Senate. “I refuse to take no for an answer,” he said. But in 2014, the Supreme Court unanimously told him no. All nine Justices ruled that the NLRB appointments were unconstitutional, and that a three-day break was too short to trigger the president’s powers to make recess appointments. The same reasoning applied equally to Cordray’s own tenure, though it was not challenged in the case. When even Justice Ginsburg agrees that his appointment violated the separation of powers, the director’s tenure could begin on only the flimsiest footing.


Eventually, Senate Republicans confirmed Cordray as part of a pact to keep the filibuster on the table. (This rapprochement was short-lived, as Senator Harry Reid would soon thereafter trigger the nuclear option.) Once installed in his office, with a five-year term ahead of him, Cordray issued a perfunctory statement concluding that all of his previous actions during his illegal tenure were “legally authorized and entirely proper,” but adding that “to avoid any possible uncertainty . . . I hereby affirm and ratify any and all actions I took during that period.” In other words, pay no attention to my illegal tenure. Early on, it was apparent that this emperor had no clothes; over time, Cordray would unilaterally expand his fledgling agency’s authority to regulate large swaths of the economy, with zero accountability to the executive branch.


Indeed, the entire structure of the CFPB is a legal aberration. The Constitution provides that the “executive Power shall be vested in a President of the United States of America.” But the president was never expected to, nor could he, do all the work by himself. Since the earliest days of the Republic, Congress created by statute various departments and established officers to manage them. For example, the first Congress established the Department of the Treasury, and President Washington nominated Alexander Hamilton to be its first secretary. Once confirmed by the Senate, Hamilton then had the authority to take care that the duties of his department were faithfully executed. But it was long understood that agency heads served at the president’s pleasure and could be removed at any time, for any reason or no reason at all.


This settlement would be challenged following the Civil War, when President Andrew Johnson fired President Lincoln’s holdover secretary of war. The House of Representatives impeached Johnson over this decision, charging that he needed Congress’s permission to remove this principal officer. The Senate acquitted Johnson by one vote, but the constitutional question lingered. In 1926, the Supreme Court ruled unanimously that President Johnson was correct and the president’s removal power was unfettered; Congress could not put strings on it.

Such was settled law for barely a decade when, in 1935, the Supreme Court blessed the so-called “independent” agencies, such as the Federal Trade Commission, which are headed by five members. These agency heads — three of the president’s party, two of the opposite party — can be removed only “for cause,” such as neglect or malfeasance, and not at the executive’s pleasure. Although the president can appoint a majority of the commissioners, there is no guarantee they will advance his agenda. And such is the rub of independent agencies.


As Judge Brett Kavanaugh observed for a panel of the D.C. Circuit Court of Appeals in a case challenging the CFPB’s constitutionality, these independent commissions are “in effect, a headless fourth branch of the U.S. government” that, “in the absence of Presidential supervision and direction,” can “pose a significant threat to individual liberty and to the constitutional separation of powers and checks and balances.” What pulls these agencies back from the constitutional brink, the Supreme Court has told us, is that they have historically been headed by five-member commissions — the proverbial “body of experts” — that through collaboration can reduce the risk of arbitrary decisionmaking. The correctness of this New Deal–era decision — often viewed as primarily a rebuke of President Roosevelt’s overreach — is a matter for another day, but such is settled law.

Traditionally, if a single person heads an agency, that person is removable at will, while members of commissions are removable only for cause.

Enter the CFPB. Following the financial crisis of the late 2000s, President Obama and congressional Democrats sought to make a truly independent agency to protect consumers and financial markets. As a matter of policy, we can debate how laudable that goal is. As a constitutional matter, however, the CFPB is neither fish nor fowl: It is headed by a single director who can be removed only for malfeasance. Traditionally, if a single person heads an agency, that person is removable at will, while members of commissions are removable only for cause. The CFPB is a freak hybrid that combines both attributes in a single, powerful position. “No independent agency exercising substantial executive authority,” Judge Kavanaugh noted, “has ever been headed by a single person. Until now.”


Faced with this unprecedented authority, the three-judge D.C Circuit panel ruled that the CFPB was “unconstitutionally structured,” though there was a divide on the remedy. Judges Kavanaugh and A. Raymond Randolph stopped short of striking down the entire CFPB; rather, they saved the law by holding that the president can remove the director at will. Judge Henderson, who dissented in part, would have resolved the case on narrower statutory grounds. That decision, however, would not stand, as a majority of the judges on the D.C. Circuit voted to rehear the case. After the election, the Department of Justice reversed its position, as the Trump administration agreed with Judge Kavanaugh that the director must be subject to removal. Cordray would now have to defend himself in court, which brings us to the most recent developments.

As had long been expected, in mid November, Cordray announced he would resign from the CFPB “before the end of the month.” Also as expected, President Trump announced that, pursuant to the Federal Vacancies Reform Act, he would appoint OMB director Mick Mulvaney to serve as the acting head of the CFPB while a full-time director is nominated and confirmed. In the normal course, Cordray would have stepped down and allowed the president to fill the slot, both temporarily and permanently. But we are not living in normal times.

Instead, on November 24 — hours before he stepped down — Cordray tapped Leandra English as the deputy director. In a separate memorandum to his staff, Cordray declared that upon his resignation, English would “become the acting Director.” His rationale was at once transparent and naked: “In considering how to ensure an orderly succession for this independent agency,” Cordray wrote, “I determined that it would be best to avoid leaving this key position filled only in an acting capacity.” Appointing English for the position, he concluded, “would minimize operational disruption and provide for a smooth transition.”

Balderdash. Trump had already announced his intent to tap Mulvaney as director. Cordray’s justification was to ensure the Obama-era mission would continue, even with a new administration in town. Insisting that he — and not the president — gets to decide the “orderly succession for this independent agency” underscores how right Judge Kavanaugh was. Alas, like Sally Yates before him, Cordray could not simply resign. Instead, he sought to resist President Trump, and make it as hard as possible for the incumbent president to implement his own agenda.


Now the courts must determine whether Mulvaney or English is the proper head of the agency. There is an open question as to whether Dodd-Frank, which states that the deputy director shall serve as acting director in the director’s “absence or unavailability,” supersedes the operation of the Federal Vacancies Reform Act. Advocates on both sides of the debate cite competing strands of legislative history to make their case. As Justice Scalia would often remind us, Congress does not vote on committee reports and the like, so not much weight should be placed on those sources.

Here, the tie-breaker must be the separation of powers. Reading Dodd-Frank as Cordray does crystalizes the constitutional abomination that is the CFPB: The president can’t remove the director unless the latter engages in some act of malfeasance, and the president is utterly powerless to appoint an acting director as well. This cannot stand. Cordray, a former Jeopardy! champion, should know the appropriate decision-maker here: Who is the president?

Thousands of pages of briefing will be for naught. And that nullity is precisely what King Richard’s final act has wrought.

Perhaps the most unfortunate aspect of this ordeal is that once President Trump’s permanent CFPB nominee is confirmed, this tempest in a teapot runs out of steam. The controversy will be moot, and whatever case law might be developed during this interregnum will ultimately be vacated. Thousands of pages of briefing will be for naught. And that nullity is precisely what King Richard’s final act has wrought.


Once a permanent director of the CFPB is confirmed, however, he or she can settle the pending litigation about the scope of the agency’s authority. First, the CFPB should officially agree with Judge Kavanaugh and admit that the “for cause” provision in Dodd-Frank is unconstitutional. Second, the CFPB should acknowledge that there is risk inherent in litigating this position up to the Supreme Court — the entire agency could be declared invalid., not merely saved by rewriting the removal provision. Third, to avoid that risk, the director should agree that he or she can be removed at will by the president. Fourth, to settle the litigation, the CFPB should attest to this understanding in what is known as a consent decree. Fifth, the district court should approve that settlement, which would then be binding on all future CFPB directors.

In other words, all future presidents would be able to fire the head of the CFPB for a good reason, a bad reason, or no reason at all, and future directors would be bound by the consent decree to accept their termination. With this stratagem, the most egregious aspect of the CFPB would be remedied, and the protection of consumer finance could be brought within our constitutional order.

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The Tragic Downfall of the CFPB