Critics are blasting Mick Mulvaney’s aggressive push to rapidly remake the Consumer Financial Protection Bureau, arguing that his plans threaten to compromise the agency’s independence, while also establishing a blueprint for undermining the autonomy of other financial regulatory agencies.

Mulvaney, the White House budget director who was named the bureau’s acting director last month by President Trump, said Monday that he plans to start hiring political staffers, and to pair them with the career officials who currently head various CFPB divisions.

For "every major branch of CFPB — enforcement, rulemaking, education, legal, maybe somebody in the Northeast division, somebody in the Southeast division, somebody out West," Mulvaney said he would "try to marry [that branch's] senior staffer ... up with a political position."

OMB Director Mick Mulvaney
Of the CFPB's career staff, interim Director Mick Mulvaney said, "A lot of the people were political anyway, even though they’re professional.” Bloomberg News

Those comments poured fuel on an already smoldering legal fight for control of the six-year-old consumer agency. Leandra English, who was named deputy director by outgoing Director Richard Cordray, filed a lawsuit last week seeking to block Mulvaney’s appointment. The Trump administration won the first round of the court battle; the next hearing is scheduled for Dec. 22.

Congress designed the CFPB to be an independent agency in the mold of the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency and the Federal Reserve Board. Those agencies typically have far fewer political appointees than other parts of the executive branch.

At the OCC, the only political appointee is Comptroller Joseph Otting, a spokesman said Tuesday. Members of the FDIC’s board are political appointees, but the agency has just one additional political staffer, according to a spokeswoman. And the Federal Reserve Board has no political staff appointees, though its board members are confirmed by the Senate.

Barney Frank, the former Democratic congressman who co-authored the 2010 law that gave birth to the CFPB, accuses Republicans of trying to shut down the consumer bureau through administrative means.

“They haven’t got the votes to do it politically,” he said during an interview Tuesday. “So obviously what they are hoping to do, if the court upholds their version, is put somebody in charge of the agency who would effectively shut it down.”

Aaron Klein, director of the Center on Regulation and Markets at the Brookings Institution, said that the implications of Mulvaney’s hiring plans go beyond the CFPB. Klein served as a Democratic Senate staffer while the Dodd-Frank Act was being written, and he later worked in the Obama-era Treasury Department.

He said that Mulvaney’s plans “should send shivers down the spine” of anyone who supports independent financial regulation.

Congress has granted financial regulatory agencies independence under an assumption that their work is more technical and less political, according to a recent report from the Congressional Research Service.

“A reduction of presidential influence also constricts one path by which partisan politics might interfere with apolitical technical- and analytical-based decision making by experts,” the report stated.

But congressional Republicans contend that the CFPB — the brainchild of Elizabeth Warren, a Harvard law professor who later became a Democratic senator — was politicized from the start. Cordray’s candidacy in the Democratic primary for Ohio governor is likely to bolster that conviction.

"I further look forward to working with Director Mulvaney to restore true accountability and due process of law to an agency that desperately needs it," House Financial Services Committee Chairman Jeb Hensarling, R-Texas, said in a Nov. 25 statement.

Industry representatives, meanwhile, have welcomed Mulvaney’s leadership.

“We look forward to working with Acting CFPB Director Mick Mulvaney to bring transparent and balanced consumer protections to all customers and small businesses,” Richard Hunt, CEO of the Consumer Bankers Association, said in a Nov. 28 press release. “Many actions conducted previously by the CFPB as well as those that are pending warrant a thorough review.”

During his press conference Monday, Mulvaney — a former GOP congressman and fervent critic of the CFPB — appeared to dismiss concerns that his hiring plans would politicize an independent agency. He suggested the CFPB has been political anyway, judging from its policies, even though its employees are not technically political appointees.

“Come on now, there’s 1,600 people who work here,” Mulvaney told reporters. “It tells you maybe they didn’t think they needed to have political people here because a lot of the people were political anyway, even though they’re professional.”

Mulvaney has already hired Brian Johnson, a former top Republican staffer for the House Financial Services Committee, to assist with day-to-day operations of the CFPB.

When asked about his timeline for adding more political staffers, Mulvaney had a terse reply. “Now,” he said.

Mulvaney also noted that the process of assigning political staffers to career staffers who head divisions has long been used at the Office of Management and Budget, which Mulvaney also heads. He contended that the OMB’s system works well.

But at a public meeting of the Senate Banking Committee Tuesday to consider regulatory relief legislation, Warren said “the whole idea” of the CFPB was to “insulate it from political influence to the extent possible like all banking regulators.”

“For Mr. Mulvaney to come in and see how much he can politicize the operations of the CFPB, takes that agency in exactly the opposite direction and undercuts its ability to do its work on behalf of American consumers,” she said.

Meanwhile, Mulvaney’s simultaneous status as both a senior White House official and the acting director of the CFPB has also stoked criticism of his approach.

One former senior official at the CFPB, who spoke on condition of anonymity, blasted Mulvaney for discarding the principle of independent financial regulation.

“The principle is one that’s very important here, and it’s one that he either doesn’t know about or doesn’t care about,” said the former official, who is now in the private sector. “You need it to be able to make decisions without fear or favor.”

Jeff Hauser, executive director of the Revolving Door Project at the left-leaning Center for Economic and Policy Research, questioned whether Mulvaney’s hiring plans have received sufficient legal vetting. For example, he raised the question of whether there will be an ethics onboarding process for the new political hires.

“I think there are a lot of legal issues that are probably insufficiently thought through,” Hauser said.

A Mulvaney spokesman said he would look into questions about the acting director’s vow to add political staffers, including whether the CFPB’s general counsel has blessed the plan.

Ian McKendry contributed reporting for this article.

Kevin Wack

Kevin Wack

Kevin Wack is a California-based reporter for American Banker who covers the U.S. consumer finance industry.