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CFPB descends into chaos as two acting directors struggle for power

Aggressive emails, donuts and restraining orders

The power struggle continues at one of the nation's most powerful institutions, the Consumer Financial Protection Bureau.

This past weekend, the CFPB erupted into chaos as two leaders are now appointed as acting director – and no one knows who to follow.

And both acting directors are now striving to assert their domination.

One director was nominated by former CFPB director Richard Cordray on his way out the door Friday. He promoted his chief of staff Leandra English as acting director to “ensure a smooth transition.”

But President Donald Trump didn’t agree with Cordray’s pick, or his right to choose anyone, and nominated Mich Mulvaney, who currently serves as director of the Office of Management and Budget and has long been outspoken about his dislike for the CFPB, as the acting director just hours later.

Now, as the debate is spilt down political lines as to who should lead the bureau, the two acting directors struggle to assert their power.

And it seems Mulvaney is not above bribery:

Meanwhile, English sent out an email to CFPB staff, welcoming them back after thanksgiving and signing it as “acting director.”

Shortly afterward, Mulvaney retaliated, saying in an email to CFPB staff,

“It has come to my attention that Ms. English has reached out to many of you this morning via email in an attempt to exercise certain duties of the Acting Director. This is unfortunate but, in the atmosphere of the day, probably not unexpected,” he said.

“Please disregard any instructions you receive from Ms. English in her presumed capacity as acting director.” Mulvaney also asked CFPB employees to report any additional professional communications from English to the general counsel’s office.

“I apologize for this being the very first thing you hear from me. However, under the circumstances I suppose it is necessary. If you’re at 1700 G Street today, please stop by the fourth floor to say hello and grab a doughnut.”

As evidence that his email was successful, Mulvaney’s spokesperson tweeted out an image of his empty donut boxes.

So naturally, English responded by taking out a restraining order on Mulvaney…and the president. In the order, she refers to Mulvaney as, “the person claiming to be acting director of the Consumer Financial Protection Bureau.”

But what is the hold up, and the reason for all the confusion? With most political bureaus, the president has the right to choose the acting director until the Senate is able to confirm the new leader, however, the CFPB is different.

According to Democratic Senators, who are backing English, the Dodd Frank Act specifies that in the absence of a director, the deputy director would take over until the Senate confirmed a new director.

Sen. Elizabeth Warren, D-Mass., pointed out one line in Dodd Frank which gives the CFPB direction in absence of the director.

“There is established the position of Deputy Director, who shall – be appoint by the director; and serve as acting director in the absence or unavailability of the director.”

One expert explained that the developing drama only shows the flaws to the current CFPB model, and argued that a bipartisan board would be a better option.

“The current drama surrounding who currently runs the CFPB highlights why the sole-director model is flawed,” said Brian Knight, Mercatus Center at George Mason University senior research fellow. “Instead of a smooth change in leadership that acknowledges the duly-elected President and Senate we have ambiguity and chaos, which is harmful to both consumers and financial service providers.”

“Contrasting this to the relatively smooth transitions seen at the regulator commissions shows another reason why bipartisan commissions provide more stable, balanced, and reliable leadership,” Knight said.

But despite the recent events, one expert pointed out that ultimately, despite what happens over the next few weeks, Trump will have the final say over who becomes the next CFPB director.

“However, regardless of this week's political noise over the CFPB, we think investors should remember that the Trump administration will eventually nominate someone to be the full-time director,” a Keefe, Bruyette & Woods report prepared by analysts Brian Gardner and Michael Michaud stated. “That person is likely to be in office within the next few months.”

“The only question is about timing, and once a Trump nominee is in place at the CFPB, we expect the enforcement regime will change quickly, recently finalized rules such as the prepaid card rule and the payday lending rule will be delayed and either revised or scrapped, and other rules, such as mortgage lending regulations, are likely to be revised,” the KBW report explained.

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