Can Trump Fire CFPB’s Cordray on Day One?

This is Naked Capitalism’s special fundraiser, to fight a McCarthtyite attack against this site and 200 others by funding legal expenses and other site support. For more background on how the Washington Post smeared Naked Capitalism along with other established, well-regarded independent news sites, and why this is such a dangerous development, see this article by Ben Norton and Greenwald and this piece by Matt Taibbi. Our post gives more detail on how we plan to fight back. 431 donors have already supported this campaign. Please join us and participate via our Tip Jar, which shows how to give via check, credit card, debit card, or PayPal.

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She now spends most of her time in Asia researching a book about textile artisans. She also writes regularly about legal, political economy, and regulatory topics for various consulting clients and publications, as well as scribbles occasional travel pieces for The National.

The Wall Street Journal’s Yuka Hiyashi authored a story raising the interesting issue of whether President Trump could fire the head of the Consumer Financial Protection Bureau, Richard Cordray, on day one of his administration.

Readers may recall that in October, a divided three-judge panel of the U.S. Court of Appeals for the D.C. Circuit in PHH Corporation v Consumer Financial Protection Bureau  held that the Consumer Financial Protection Bureau (CFPB) “is unconstitutionally structured.”

As I wrote at the time in this post, despite expansive rhetoric, the decision was actually quite narrow. Allow me to quote from my earlier post:

The plaintiffs, PHH, were clearly swinging for a grand slam here, and argued that because of the constitutional deficiencies in the CFPB’s structure, the Dodd-Frank statute should be struck down. No kidding. Or as a fallback position, that the CFPB should be demolished. From the opinion:

PHH contends that the constitutional flaw means that we must shut down the entire CFPB (if not invalidate the entire Dodd-Frank Act) until Congress, if it chooses, passes new legislation fixing the constitutional flaw.

But the court rejected such draconian relief and instead remedied the constitutional violation narrowly by severing the provision that the CFPB director could only be removed for cause from the remainder of the statute. This means that henceforth, the director of the CFPB serves at the will of the President. This will certainly allow the President greater authority to shape the rule-making and enforcement agenda of the agency, for if in future the President’s agenda for consumer financial protection conflicts with that of the CFPB, the President can remove the bureau’s director and appoint someone presumed to be more compliant.

This seems to suggest that Trump could indeed fire Cordray on day one.  In fact, Forbes in October published an opinion piece suggesting Next President Should Fire CFPB’s Cordray — whoever that President turned out to be.

I’m not sure Hillary Clinton would have taken this advice– for it would certainly have triggered a fierce intra-party fight– but this recommendation on first look seems to be an even better bet now that Trump has been elected. The mere idea of a CFPB — the brainchild of then-Harvard Law School professor Elizabeth Warren  attracted considerable hostility, especially among Republicans, even before it was included in the Dodd-Frank financial reforms. The agency is almost certain to be drastically restructured, whether in a measure directed at it specifically or as part of a more general reconsideration of the financial and securities regulatory framework.

What shape might this restructuring take? Well, alternatives range from outright dismantlement of the agency to more targeted changes that would nonetheless drastically circumscribe the CFPB’s regulatory capability. As  Fortune summarized in this post-election piece:

{Within the CFPB structure],  [a] single director leads both rule-making and enforcement, and can be dismissed only for cause. Furthermore, the agency is funded by the U.S. Federal Reserve system, which means it is not dependent on the typical congressional appropriations process.

The Republican-led House of Representatives Financial Services Committee in September passed legislation without any Democratic votes that would change the name and structure of the agency and would create a five-member commission to govern it.

Republicans also have pushed for the agency to receive funds from Congress to make it accountable to elected leaders.

The same Fortune piece does suggest there is support for the agency, not only among Democrats but also including some bankers, and “Few in the banking industry think the entire agency will be eliminated”– especially given the opposition Warren and other Democrats can be expected to mount. Further:

Even some bankers want to see it stay. Richard Hunt, president of the Consumer Bankers Association, said his group would fight to maintain the CFPB in some form because it consolidates consumer banking rules under one regulator.

Even limited measures would require congressional action. In the interim between Trump taking office and when Congress could pass legislation, firing Cordray would allow Trump to signal he was serious about drastically scaling back the CFPB’s regulatory effectiveness. Fortune also reports that the Trump transition team has been evaluating replacement candidates to head the CFPB.

What Happens Next?

So, I ask again, does this mean Trump will soon fire Cordray?

Not so fast.  Well why not? Allow me to quote again from my October post:

The CFPB will probably choose to appeal this ruling. It has the option of asking for a full en banc review by the D.C. Circuit Court of Appeals, or petitioning for certiorari to the United States Supreme Court. Both of these appeals are discretionary, and each court has the option of declining further review.

Adam Levitin argues that eschewing the U.S. Supreme Court option at the moment and asking for review by the D.C. Circuit Court of Appeals is the more prudent strategy:

The smart move for the CFPB would seem to be to seek en banc review, in that the particular three-judge panel in this case was an unusually conservative panel that is not representative of the DC Circuit overall. The reason not to go directly to the Supreme Court is that if the court splits 4-4, then the lower court ruling stands. Accordingly, it seems better to try and get a favorable ruling en banc from the DC Circuit that could then be reviewed by the Supreme Court than have an unfavorable DC Circuit panel ruling reviewed by the Supreme Court. To be sure, there is some risk to the CFPB from appealing–it could lose with a broader remedy on appeal, but that seems very unlikely. This is probably as bad as it gets, and as noted above, it’s really not so bad.

This is indeed what has now occurred, with the CFPB petitioning for en banc review on November 18. Yet as reported by the Wall Street Journal, “On Nov[ember] 23, the court took an unusual step of asking the solicitor general to give his opinion on whether to have a rehearing, and he is scheduled to do so by Dec[ember] 22.” Since the solicitor general represents the Department of Justice– which will still be part of the Obama administration at that time– and that administration created the CFPB, the solicitor general is almost certain to recommend a rehearing. Twenty-one current and former members of Congress and a group comprising ten consumer advocacy groups filed amicus brief’s in support of the CFPB’s petition for rehearing, as Barbara Mishkin elaborates further in here.

Why Is this Significant?

Let us now assume that the solicitor general does what I predict, and subsequently, the full D.C. Circuit  does elect to hear the case, leaving the issue before the court when Trump is inaugurated on January 20. Over to the Wall Street Journal again:

“As a practical matter, I would expect that any reasonable White House counsel’s office would refrain from trying to change the facts on the ground while the case is before the D.C. Circuit,” said Deepak Gupta, a former CFPB lawyer who on Tuesday filed a friend-of-the-court petition in support of the agency on behalf of various consumer groups. “I don’t think the courts would take kindly to that sort of move.”

The Journal did find a legal expert, Aditya Bamzai, an associate law professor at the University of Virginia, who suggested that Trump might still fire Cordray on this set of facts before the D.C. Circuit disposes of the issue.

CFPB Authority to Decline

Whether or not Trump fires Cordray before the D.C. Circuit renders a final decision, two key  measures– rules limiting or banning outright mandatory arbitration clauses in consumer financial contracts and rules concerning payday lending–remain pending. (I discuss the mandatory arbitration issue at greater length here.)

As Barbara Mishkin in summarizes in this post:

Arbitration. The CFPB released its proposed arbitration rule in May 2016 and the comment period ended on August 22, 2016. The Fall 2016 agenda indicates that the CFPB “is reviewing and considering comments on the proposed rule” as it “considers development of a final rule for early 2017.” The agenda gives a February 2017 estimated date for a final rule. In recent days, we have heard speculation that the CFPB will issue a final rule before Donald Trump’s inauguration as President on January 20. As we discussed in a recent blog post, a final arbitration rule or other new final rules issued by the CFPB (and potentially any final rules issued since late May 2016) could be nullified by Congress under the Congressional Review Act (CRA). The CRA establishes a special set of procedures that allow Congress to pass a joint resolution disapproving a rule which cannot be filibustered in the Senate and can be passed by only a simple majority vote.

Payday, title, and deposit advance loans. The CFPB released its proposed rule on payday, title, and high-cost installment loans in June 2016 and the comment period ended on October 22, 2016. While there has also been speculation that the CFPB will attempt to finalize a rule by January 20, that possibility seems more remote given the unprecedented level of comments (approximately one million) received by the CFPB and the complexity of the proposed rule. The Fall 2016 agenda does not give an estimated date for a final rule.

The bottom line: Whether Cordray goes sooner or later, the CFPB has failed to issue final rules in two highly-touted areas in good time to protect them from being rolled back under the CRA.  Even if the CFPB were to issue final rules in both areas before January 20, the incoming Congress would certainly nullify them using the CRA procedures. The failure to act in these two signature areas means Cordray will leave behind a  disappointing legacy.

Print Friendly, PDF & Email


  1. Pearl


    Donald Trump will never be able to learn all of the Acronyms of our governmental agencies by Day One! It will take him until February, at least, for him learn what “CFPB” stands for. Unless it’s shiny.

    I hear he’s thinking of combining the FBI, CIA, NSA, and DHS and re-naming them “those spying places.”

    Rumor has it that he hasn’t appointed an Attorney General yet because he’s having trouble finding a billionaire that’s both a general and an attorney.

    And those flash cards aren’t working–he still can’t remember how many sides make up the Pentagon.

    Overheard at the State Department this morning: “Uh….Clean up on aisle Asia.”


    Could we have a “Naked Capitalism Lite” thread–just for our own sanity? We could keep it civil and clean. Probably.

    I think we need a valve that will release some pressure……

    1. MyLessThanPrimeBeef

      Learn to play the saxophone.

      Priority number one, before anything else.

      Next, boxers or briefs. The geometry lesson of pentagon can come later.

      1. Pearl


        We made each other smile!

        Smiling. Haven’t done it in weeks.

        Feels good.

        Let’s do this more often.

        1. aab

          I would be deeply grateful if we had no more eroticised Presidencies in my lifetime. There was a lot of creepy stuff with Barack and Michelle, as well.

          1. Jerri-Lynn Scofield Post author

            Agreed– I’d be much happier if the President were to keep his private life private. Also, am I alone in hating all the first lady, first family, first dog, first pet rock stuff? Don’t know exactly when all this started– probably w/ Jacqueline Kennedy. Although w/ respect to dogs, it goes back further, at least to FDR’s little dog Fala.

            1. aab

              No. I loathe all of it. It seems like it was really weaponized on behalf of the Obamas, too. I understand people being grateful we had neither a dry drunk or nor an open sexual predator in the White House, but the cult-building looked like it was going to be the go to approach by the Democratic machine and get worse under Clinton II.

              It’s a logical approach in a world with an incredibly powerful Executive Branch, a centralized corporate media apparatus, and a ruling class whose courtiers are trained almost exclusively in messaging rather than making or doing anything productive. If you want to control federal resources on behalf of corporations and plutocrats from the White House while ceding every other branch and level of government, conning the victims of your preferred policies into voting for a Trojan Horse candidate, hagiography is a vital tool.

              But I think we would be better off as a nation with less of it.

              1. Jerri-Lynn Scofield Post author

                And there’s been a follow through on that hagiography w/ this silly promotion of Michelle as a future presidential candidate– as if being married to a President (or a blood relation), somehow qualifies you for the position.

                I also didn’t mean to disparage the little dog Fala. In confirming the spelling of Fala’s name before I commented above, I found this:

                Witty, anything but hagiographic–I hope you enjoy the clip as much as I did.

        1. Michael Fiorillo

          That’s the wrong sequence.

          I’m as clueless as everyone else about what to do, but I do know that the first thing is to stop with the snarky references to their stupidity. That has shown itself to be a loser.

          1. aab

            I agree. Claiming the righteousness of intelligence is part of the meritocracy myth, which is profoundly false. But even more to the point, the people who constantly gloat that they’re smart and their opponents are stupid have lost at every level of government. While they intentionally lose some things, they certainly didn’t intend to lose against Trump. Who’s stupid — the long shot candidate that the entire status quo ganged up against, or the people who lost to him? No Clinton supporter should ever be allowed to call anyone else stupid ever again.

            Trump’s not stupid. Neither is Bannon. Neither is probably a rocket scientist, but then they’re not building rockets. Calling them stupid is easy, and allows liberals who want just about the same policies with nicer language to evade that little problem.

    2. Matt

      I have my reservations about Trump, but I had to do some personal reflection on how my feelings about him came about after I saw the Washington Post Article trying to label Naked Capitalism as a Russian propaganda website. I know without a doubt that this website is not russian propaganda, but the MSM wanted me to think it is. What other messages coming from the MSM should I be questioning? I decided to go to the Podesta Wikileaks emails to see what else is going on privately behind the scenes.

      I turns out that CNN, MSNBC, New York Times, Washington Post, Politico, NPR, ABC and a few other sources were violating journalistic standards on a regular basis in the ways that they colluded with the Establishment politicians. In this case, it was Hillary Clinton, but I am sure there are sever other Establishment politicians that collude with these MSM outlets. Coincidentally, I did not see anyone from Naked Capitalism colluding in these emails.

      Now I am noticing that all of these MSM media sources named in the Wikileaks cover the exact same news with the exact same opinion pieces at the exact same time. It is obviously coordinated behind the scenes, like what was exposed in the Wikileaks.

      I am going to keep an open mind about Trump now and take everything with a grain of salt that I see on the MSM. Afterall, Trump is now going to keep some aspects of the affordable care act. He is not even president and he is working tirelessly to prevent good paying jobs from leaving America, and I even saw a video of him waving the Gay Pride flag. I would have voted for Bernie had he won the primary, but a lot of what I see trump trying to do are things that Bernie was trying to do on his platform as well, like preventing jobs from leaving the country and withdrawing from the TPP. I think we need to give Trump a shot.

  2. jfleni

    The “Banana Republicans” have been foaming at the mouth ever since CFPB was
    formed. Despite the Banana Republicans complaints, many people were helped by their efforts.

    Examples: A credit card company confused two different people with the same first and last names and demanded very substantial payments; writing to the company caused the result that the company sent a newly created (false!) record of payments and debits to the (original) wrong person saying “Here are the details, pilgrim, pay up and or we sue”! The CFPB just forced them to do the proper verification. Result: a letter of apology.

    Another example: A defunct bank was looking for money for a non-existent debt.

    CFPB got the debt canceled, and notified the debtor.

    The Banana Republicans think they have a perfect right to STEAL, and they will in a heartbeat.

  3. cripes

    i agree with everyone.

    Yes, the crowd Trump is dragging into his White House orbit is a wrecking crew. Like James Watt, each appointee is selected for their qualifications to destroy the agency they administer. Except the amred force and national security crew, which are selected to destroy everything else.

    On the other hand, humor is a powerful tool to belittle, diminish, demean and de-legitimize the mis-leader; a naked emperor is an object of ridicule.

    Still, we are entering an unusual phase where I suspect that power will, increasingly if not for the the first time, be employed without regard to popular consent or approval.

    Paul Street has an excellent piece on this in Counterpunch: where mass media mind control doesn’t suffice, brute force will do, expect more of this:

    1. rd

      We are at an interesting point of being over- and under-regulated simultaneously. We get massive multi-phone book laws with Encyclopedia Britannica sized regulations. Yet these seem designed to simply be complex locking giving competitive edges to large companies without necessarily addressing the fundamental issue that requires regulation.

      Things like murder, robbery etc. tend to be fairly simple principle-based statutes that are principle-based. Did you commit the act, will a jury find you did it in self-defense, was it pre-meditated, did it occur due to negligence? These are all basic questions that lead to different outcomes.

      However, many forms of regulation designed to protect the public from corporations have been turned into Byzantine labyrinths of paperwork and detailed technical requirements that require office buildings of people to address which means most small business can’t comply. Despite that we end up with Macondo well failures, Wells Fargo fake accounts, sub-prime mortgage crisis and subsequent fraudulent foreclosures etc. And all we usually hear is how difficult it is to prosecute these cases. Meanwhile our prisons are filled at record incarceration rates with poor people who got caught with a baggy of weed.

      We need to allow business to function without a lot of interference in many basic, fundamental ways. However, we also need fundamental principle-based regulation that provides adequate protection for the public, customers, and employees. Most of the regulations that “killed coal” were related to preventing secondary impacts from smog and acid rain, safer working conditions for workers (17 miners were just killed in “free market” China), etc. Do we want to go back to a time when the public and workers are just consumables to be used by corporations? Is that when America was great?

      So we need to look hard at regulating smart. What are the key things that need to be protected and why? When Alberta issued Directive 074 to the oil sands mining industry to require them to address the massive fine tailings problem they have, it was 14 pages long. It basically said here is the problem and the schedule you have to meet for a fix. They then required submissions from the companies where they would propose how to address the issue. Glass-Steagal was also a short bill and it successfully prevented financial crises for 60 years. It was repealed and essentially nothing pout back in place and a massive financial crisis occurred within a decade. The replacement was a massive Dodd-Frank bill. We should be able to do something in between Glass-Steagal and Dodd-Frank that is principle-based without too much onerous reporting.

      1. Fiery Hunt

        Don’t go getting all straight-forward and logical now, rd.
        There’s too many rice bowls to be smashed in that there direction…

  4. Stupendous Man - Defender of Liberty, Foe of Tyranny

    The attitude of “I can get away with whatever you can’t stop me from doing” has flourished. It has been rewarded, too.

    So I’m no longer surprised by what an entity tries to, and does, get away with.

    I’m more surprised that pitchforks, and rakes, are still languishing in barns, and other out buildings.

  5. Zelun

    This is an example of why the CFPB needs to be dismantled outright.

    This is an outrageous and very sad story.

    More than 14,000 complaints … yet, nothing is done to protect the public, especially not this dear elderly couple. I don’t know them, but I talked to the reporter and they were permanently ousted from their home on September 30, 2016. Now they are facing more litigation. They deserve complete protection from this in the last years of life.

    1. Outis Philalithopoulos

      Not sure if I understand your point: per the article you cite, “according to the [CFPB], Nationstar Mortgage has registered 14,013 mortgage servicing-related complaints, the fifth most behind […].” The couple you mention “wants Nationstar Mortgage held accountable.”

      Why does this story imply that the CFPB should be “dismantled outright”? Do you feel like they went easy on Nationstar? If so, there isn’t anything to that effect in the article.

Comments are closed.