White House looks to extend Mulvaney's CFPB tenure

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The White House is dragging out the nomination of a permanent director for the Consumer Financial Protection Bureau to ensure that acting CFPB Director Mick Mulvaney calls the shots at the agency until the end of the year or longer, according to sources.

President Trump is expected to name J. Mark McWatters, the chairman of the National Credit Union Administration, as his CFPB nominee close to June 22, according to sources familiar with the situation.

McWatters' nomination has long been rumored, but waiting until late June would also maximize the tenure of Mulvaney, who has moved aggressively to reshape the agency. Under the Federal Vacancies Reform Act, Mulvaney can only serve for six months — a deadline up in late June — unless a permanent successor is nominated. Once that nomination is made, however, the acting appointee can stay in office as long as it is pending, a period that could extend for months.

That would leave Mulvaney in office at least for the remainder of the year given likely Senate delays in approving any CFPB nominee. It might also provide incentive for Democrats to try and move faster on a McWatters nomination, given their opposition to Mulvaney's agenda.

"The Democratic resistance to Mulvaney makes for softer deadlines because at some point the Democrats might have to consider a Republican nominee just to replace Mulvaney," said Charles Gabriel, the president of Capital Alpha Partners, an independent research firm.

Yet Gabriel added that the apparent White House strategy has risks. If the White House fails to name a permanent director by the June deadline, it could face a legal challenge to Mulvaney's appointment. Meanwhile, if a permanent director is nominated but not confirmed by the end of the year, and the Senate changes hands in a Democratic wave in the midterm elections, it is unclear how the administration would proceed.

"If they want to keep Mulvaney there, the best thing to do is to nominate a permanent director before the end of June, but they have to move somebody who they could confirm before November because the Democrats could freeze the nomination," Gabriel said.

The White House did not immediately respond to a request for comment.

The confirmation process for all nominees has become so long and contentious that in this case the White House is using it to their advantage. By keeping Mulvaney in place, they allow him to continue to drastically revamp the agency, pulling back on rulemaking and enforcement activities.

McWatters, by contrast, is viewed as more of a pragmatist than an ideologue. Though he has the support of House Financial Services Committee Chairman Jeb Hensarling, McWatters has also worked directly with Sen. Elizabeth Warren, D-Mass., the bureau’s staunchest defender and a harsh critic of Mulvaney's policies. (They both served together on the Congressional Oversight Panel for the Troubled Asset Relief Program following the financial crisis.)

Still, lawmakers would likely zero in on McWatters' views on the CFPB’s governance, his thoughts on Mulvaney’s actions at the bureau, and how he would navigate "the holy war between banks and credit unions," said Isaac Boltansky, director of policy research at Compass Point Research & Trading.

"Any nominee for the CFPB directorship would face a contentious hearing given that the bureau is such a lightning rod, but I think that McWatters has the background and temperament necessary to win confirmation," Boltansky said.

If McWatters is the eventual nominee, his confirmation process could pry open old wounds that pit traditional banks against tax-exempt credit unions. The agency he currently leads is at times viewed as an advocate for the credit union sector as opposed to a government regulator. As NCUA chair, he requested that the CFPB carve out all credit unions from the agency's regulations.

A CFPB nominee would have to be confirmed by the Senate Banking Committee, a process that could be relatively quick if the nomination won broad support. But a vote on the Senate floor is a different matter. If even one senator requests full debate on the nomination, it would take 30 hours of floor time, which, given the nature of the legislative calendar, could take two weeks. That time is hard to find given the other nominations Senate leaders are trying to move.

Trump picked Mulvaney, who is also the White House budget director, as acting director of the CFPB in late November. He replaced Richard Cordray, who resigned to run for governor of Ohio.

Since coming aboard, Mulvaney has reversed the CFPB's course that had been set in motion by Cordray and Warren. He has reopened the agency's payday lending rule, floated the idea of changing the CFPB's name, temporarily frozen data collection efforts, proposed ending public access to the agency's consumer complaint database and ordered a top-to-bottom review of all of the agency's processes, among other things.

Some in the banking industry initially opposed the idea of McWatters running the CFPB when he was first floated, due to his having backed a proposal that credit unions not be subject to full CFPB oversight.

In a January op-ed in the BankThink blog, Camden Fine, who retired last week as president and CEO of the Independent Community Bankers of America, said, "The CFPB should not be led by the head of an agency that has acted as a cheerleader for the industry under its oversight."

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Dodd-Frank Credit unions Regulatory reform Mick Mulvaney J. Mark McWatters CFPB NCUA Senate Banking Committee