Judge Hears Showdown Over Who Should Lead Consumer Banking Watchdog

WASHINGTON (CN) – A federal judge nominated by President Donald Trump heard oral arguments Monday in the legal battle over who should lead the nation’s top consumer watchdog agency.

After Consumer Financial Protection Bureau director Richard Cordray abruptly resigned Friday, he appointed deputy director Leandra English to serve as the interim director.

Trump, however, appointed Office of Management and Budget director Mick Mulvaney to temporarily take the helm, prompting a federal complaint from English late Sunday seeking to block Mulvaney’s appointment.

The dueling appointments set off a firestorm concerning who should lawfully lead the agency. According to their attorneys, both English and Mulvaney showed up to work Monday morning to serve as the acting director.

Their conflicting positions, backed up by conflicting laws, played out in a jam-packed courtroom late Monday afternoon in front of U.S. District Judge Timothy Kelly – a Trump nominee confirmed by the Senate in September.

Arguing on behalf of Mulvaney, Brett Shumate with the Department of Justice said the Federal Vacancies Reform Act gives the president the authority to name an interim director.

That perceived authority is playing out at the agency itself, which is treating Mulvaney as the acting director, Shumate said.

Mulvaney stepped right into the role, offering a press conference Monday afternoon in what he says is his capacity as the acting director.

Despite his prior expressed criticism of the agency and support for shutting it down, Mulvaney promised the agency would remain open.

“Rumors that I’m going to set the place on fire or blow it up or lock the doors are completely false,” the former South Carolina congressman said.

Still, he promised the agency would be dramatically different under the Trump administration, adding that his opinion of the agency hasn’t changed.

“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, are supposed to pay for it,” he said.

And one of Mulvaney’s first actions Monday was to impose an immediate 30-day freeze on hiring and all new regulations and guidances.

Back in the courtroom, attorney Deepak Gupta with Washington-based Gupta Wessler said the Dodd-Frank Wall Street Reform and Consumer Protection Act contains a mandatory succession plan that the deputy director should fill the interim director slot until the president nominates – and the Senate confirms – a new director.

“The question is what do you do about the conflict between the two statutes,” Gupta told Judge Kelly.

Gupta argued Congress did not intend for the Federal Vacancies Reform Act to apply to the Consumer Financial Protection Bureau.

“There would be no reason to include this mandatory succession language,” Gupta said, adding later: “I think everyone acknowledges there needs to be an answer to this question and there needs to be one soon.”

But Kelly called the temporary restraining order “an extraordinary remedy.”

“One of the things you’re asking me to do is enjoin the president,” he said.

Gupta replied not doing so would allow an ongoing violation of law. The point, Gupta said, is to prevent the president from circumventing the Senate confirmation process.

Shumate countered, noting that granting the requested relief would actually harm Trump by curtailing his Article II powers to appoint whomever he chooses to head the agency.

To prevail on a motion for a temporary restraining order, English must show that she will suffer irreparable harm without the court’s intervention. When Kelly turned to that question, Shumate argued English can’t show sufficient harm to justify the intervention.

“Ms. English is not suffering any irreparable harm,” Shumate said.

Gupta suggested English could be fired, although Shumate downplayed that concern.

“I have no knowledge of that your honor,” Shumate said, though he later said he could not give the court assurances that English wouldn’t be fired.

After the hearing, Gupta told reporters that Shumate’s lack of assurance bothered him.

“That was very disturbing,” he said.

But the attorney said he was encouraged by Kelly’s reception of the issues.

“He did say at one point that these are important issues and understood that there needed to be certainty, that there needed an answer,” Gupta said. “I think that’s one thing everyone agrees on.”

The Department of Justice did not immediately respond to an email seeking comment on the hearing.

Gupta said in the courtroom that he believes the case can be fully briefed by Friday. Kelly declined to issue a ruling from the bench, saying he would wait for the government to file a brief.

 

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