Consumer Financial Protection Bureau Director Richard Cordray has managed to keep his job for more than two weeks into a Trump administration, despite repeated calls by House Republicans for him to be fired.
With President Donald Trump now testing the extent of his executive power with the travel ban, some experts said the president is being advised to hold off on firing Cordray to get the Supreme Court to rule on the extent of the president's executive powers.
"Trump is learning now with this immigration tussle that he doesn't have all the powers that he thought he had as president," said Peter Wallison, a lawyer and the Arthur F. Burns fellow in financial policy studies at the American Enterprise Institute. "I suspect that nothing will be done by Trump [on firing Cordray] until we have a response from the court of appeals."
Yet there is mounting pressure by Congressional Republicans for Trump to act. House Financial Services Committee Chairman Jeb Hesnarling, R-Texas, said on CNBC Tuesday that he "would certainly encourage the president to say to Mr. Cordray, 'You're fired." Sen. Ben Sasse, R-Neb., a member of the Senate Banking Committee, wrote an op-ed on Tuesday that also called on Trump to act.
"In a country of 320 million Americans, we don’t have room for any kings," Sasse wrote. "A federal court ruled this unique structure unconstitutional and said its director must be removable by the president. It’s time to fire Richard Cordray." (The paper's own editorial board repudiated that idea at the same time.)
Sasse was referring to a closely watched appeals court case, PHH Corp. v. CFPB, in which a three-judge panel ruled in October that the CFPB's single-director structure is unconstitutional because it limits the president's authority to remove the head of an independent agency.
The issue is whether Trump will fire Cordray soon, or hold off for now as the court case — which is stayed pending appeal — plays out.
Following are five ways in which the case could turn out:
D.C. Circuit Denies Appeal
Cordray could end up leaving the CFPB with little fanfare if the U.S. Court of Appeals for the D.C. Circuit denies the bureau's appeal in the PHH case. Some expect the D.C. Circuit will decide on a rehearing in a few weeks.
If the D.C. Circuit affirms the three-judge panel's decision that a sitting president has a legal basis for removing the director of an independent federal agency, then Cordray likely would either resign or be fired immediately.
The smart money now appears to be on the Trump administration holding off until the D.C. Circuit rules on the case.
"[Trump] may be hoping that the PHH case will resolve the issue for him," said Alan Kaplinsky, who leads Ballard Spahr's consumer financial services group. "If the panel's opinion gets affirmed, Trump will clearly be able to remove Cordray without cause and put his own person in there. If he can do it in that fashion, he won't get a lot of pushback."
Moreover, Cordray said last month that he would abide by whatever the court decides.
"Ultimately when the matter is finalized and the court's final decision is rendered, we will accept and embrace and implement that decision," Cordray said in a public interview.
The Justice Department Declines to Appeal
If the D.C. Circuit denies the appeal, Cordray would theoretically have recourse to appeal to the Supreme Court. But that would take cooperation by the Justice Department — which Cordray is unlikely to get now that it is under the Trump administration.
The Dodd-Frank Act, which created the CFPB, gave the bureau the authority to pursue its own litigation but only up to the Circuit Court level.
One of the easiest ways to get rid of Cordray would be if the D.C. Circuit denied the appeal and Trump asks Cordray to resign. The Justice Department could simply drop the CFPB's appeal, resolving the case without going to the Supreme Court.
"If there's no more case, then there would be no more controversy," said Richard Horn, a former CFPB senior counsel who runs his own law firm.
Cordray Could Be Fired, and Then Sue
If Trump decides to fire Cordray before the D.C. Circuit rules on whether to hear the CFPB's appeal, the president would have to provide a list of reasons why Cordray should be removed for cause.
The Dodd-Frank Act specified that the head of the agency could only be removed for "inefficiency, neglect of duty or malfeasance."
Though several lawyers have said a so-called for cause dossier is being prepared by the Trump administration, invoking the provision could set off yet another round of protests against the president.
Moreover, removing Cordray for cause likely would result in a protracted and potentially nasty legal battle, in which Cordray might sue for reinstatement. Some have suggested that if Trump fires Cordray, the CFPB director could be barred from going to his office, which would spark protests by the Democrats' progressive base.
"Cordray has told his staff that if he's fired for cause he will fight it," said Myriam Gilles, vice dean and law professor at Cardozo School of Law. "He has to be feeling like he's living on borrowed time."
Firing Cordray while the PHH case remains undecided would also throw the CFPB into uncertainty about who is in charge.
If Cordray were to sue, Justice would be put in the position of defending the president's authority to fire agency heads, and would push for the case to go to the Supreme Court. But that would take a long time, lawyers said.
Trump would pick a successor as the CFPB's acting director, but a protracted court case could cast a pall over the agency, and Democrats could fight the confirmation of a new director. While Republicans may want the case to be heard by the Supreme Court, there are quicker ways for that to happen.
Justice May Accelerate a Supreme Court Appeal
As a proponent of executive power, Trump and Republicans may be hoping for the Supreme Court to make the final decision on whether the president has the power to fire the head of an independent agency.
As a result, the Justice Department could appeal the case to the Supreme Court after an appeals court decision in an effort to get a ruling faster. The administration may be especially interested in such a move if Judge Neil Gorsuch, Trump's pick for the Supreme Court, is confirmed to the high court.
"Ultimately, the point that this president would want to resolve for himself and all future presidents is to get a Supreme Court decision that a Congress cannot create subordinate officers of the president that are able to defy the president on policy," said Wallison. "This gives them the opportunity to settle once and for all, and get a ruling from the Supreme Court, that restrictions on the dismissal of a subordinate officer are unconstitutional."
The Appeals Court Rules in Favor of CFPB
Of course, if the D.C. Circuit takes the CFPB's appeal on the constitutional issue, then it is unclear if Trump would wait for a ruling that could go in Cordray's favor or be further emboldened to fire Cordray for cause. At that point, it's anybody's guess if Trump moves to fire Cordray for cause or stands down entirely. One option that some are advocating behind the scenes is to leave Cordray in as director until his term expires in July 2018, avoiding providing Democrats with more ammunition. But with partisan tensions at a high, that may be wishful thinking.
"If they get a bad decision on appeal or rehearing, it is unclear procedurally if they could withdraw at that stage," Horn said.