If Trump replaces Cordray at CFPB, what happens next?
There has been a lot of speculation about whether President Trump will attempt to replace Richard Cordray as head of the Consumer Financial Protection Bureau, and whether such an attempt would be successful. Some believe Cordray would seek legal action to challenge his removal.
The Washington rumor mill has already focused on potential CFPB successors preferred by the Trump administration, such as Rep. Randy Neugebauer, R-Texas, and George Mason University professor Todd Zywicki. Both are critics of the CFPB, and would likely want to dismantle many of the CFPB's current initiatives.
But who runs the agency in the Trump presidency is only the beginning. Regardless of whom Trump chooses — assuming any effort to replace Cordray is successful — the new director cannot focus solely on reversing Cordray-led policies. This is a still relatively new agency, and there are crucial long-term questions to address about the agency's post-Obama-administration structure.
Perhaps most important is for a future CFPB director to still articulate a strong consumer protection vision in order to blunt attacks by Democrats and ensure that the CFPB is not paralyzed by resistance from staff who are committed to the agency's statutory mission.
A lot of the focus on GOP criticism of the bureau is on its leadership structure. A Trump-selected director would likely support legislation to change the CFPB's oversight structure from a single-director-led bureau to a commission that the director chairs. But there has been little public consideration of how a new CFPB director should structure the bureau's internal organization to facilitate his or her vision and policies. For example, would the agency look to the Federal Trade Commission as a model? The FTC, for example, has a Bureau of Economics playing a more significant role analyzing the economic impact of rules than the CFPB's current analysis efforts.
In addition, the CFPB's press office today arguably operates a quasi-policymaking, political function. Would a new CFPB director reform the press office to take on a more traditional public affairs role?
Is the agency "right-sized" at around 1,600 employees, or are there a more appropriate number of employees for the bureau? If so, who goes and who stays are critical decisions that should not be made haphazardly. If the bureau's leadership structure is changed to a commission, what additional structural and decision-making reforms must be implemented?
The backers of the agency, particularly Sen. Elizabeth Warren, and Cordray have taken an ideological approach to the agency, launching the bureau with what essentially amounted to a blank check. But the agency has grown so big and so fast that it has developed without an overall vision in place for what it should look like when it is fully mature. The director of the CFPB has almost plenary authority to determine the size and organizational structure of the agency. There also has been little consideration paid to how the CFPB fits in with the broader consumer protection function of the federal government. What is the best division of authority between the CFPB and the FTC, for example? The next director — or chairperson — of the CFPB will have the opportunity to address these issues and shape the operation of the bureau well past the end of his or her term.
The next director must also articulate a positive consumer protection vision for the bureau that promotes inclusion, innovation and choice for consumers — simply opposing Cordray's policies will not be enough. Democrats on the Senate Banking Committee could try to make an attempt to fire Cordray part of a larger narrative about Trump's supposed indifference to consumer protection. But a new CFPB director could credibly shoot that down with an articulate consumer protection vision.
Additionally, the next director will have to build the support of the staff. Having a positive consumer protection agenda will help achieve that. For example, that was the approach taken by former FTC Chairman Timothy Muris when he was chosen to lead the commission in the Bush administration, following eight years of Democratic control in the Clinton administration. He built support for a revised approach to consumer protection without starting a counterproductive, ideological war with the staff. Of course, a new CFPB director would likely not see "consumer protection" in exactly the same way as Cordray, but a change in priority and focus could be approached as an opportunity to reassess and improve the functioning of the bureau.
Specifically, while much of the CFPB staff would likely view the change in leadership as a normal occurrence with the handover of power in the White House, there are strong indications that some of the current CFPB staff is likely to resist such change, and may seek to stay at the agency simply to stymie any change. While the new director could seek to identify and reassign, or remove, staff who attempt to undermine reform efforts, attempting to enforce policies by firing employees would be time-consuming and difficult, and could tie up the agency for months if not years.
Furthermore, ensuring the buy-in of the staff would be particularly important under a prolonged hiring freeze in the administration, which would limit the ability of a new director to bring in his or her own people to help effect a change in direction.
The creators of the CFPB established an independent, consumer-protection-focused agency with a powerful director who has almost unprecedented authority over the structure and size of the agency. However, seeking to change the priorities and mission of the bureau simply by carrying out a change in the agency's leadership — without broader thought given to what the bureau should look like, how it can function and how to motivate the CFPB staff — would result in a less functional agency, could harm the economy and further claims that the new administration is indifferent to consumer protection.