President Trump’s decision to name budget director Mick Mulvaney as acting head of the Consumer Financial Protection Bureau may have grabbed headlines this past fall, but the real groundwork for change is just now being laid.

Mulvaney has made several key hires in recent weeks, including top employees from his budget office and two former staffers for Rep. Jeb Hensarling, R-Texas, chairman of the Financial Services Committee.

Whether or not these staffers have policy views that exactly match their bosses, the announcements carry a symbolic significance, given the sharp criticisms that both Mulvaney and Hensarling have lobbed at the consumer agency over the years.

Mick Mulvaney, OMB director and acting director of the CFPB
With new hires coming aboard, Mulvaney, the bureau's acting director, will have the manpower he needs to begin making real changes to the CFPB. Bloomberg News

But these appointments are more than just symbolic. As more top staff come online, those bent on overhauling the agency will be better equipped to do so.

Naming Mulvaney to the acting director position — a move that continues to be contested in court —was like “the first landing crew establishing a beachhead,” said Chuck Gabriel, president of Capital Alpha Partners. “You bring in these staffers and now you’re truly taking control.”

As Sen. Elizabeth Warren, D-Mass., who founded the bureau, is fond of saying: Personnel is policy. The staff being brought on now will be instrumental to establishing the framework for change that a Senate-confirmed director is likely to take up.

“These new hires are going to be very actively working and conferring around town, so that they can have a list of options and a briefing book ready for day one, when a permanent director is confirmed,” said Brandon Barford, a partner at Beacon Policy Advisors.

It’s expected that whoever takes over the agency permanently will stay the broad course outlined by Trump, who has long called for sidelining the CFPB. But what exactly a slimmed down form of the agency might look like remains to be seen — and it is likely to be shaped by these early recruits.

To be sure, the consumer agency has had a target on its back since its inception, and it was perhaps inevitable that the bureau would undergo a substantial transformation under a GOP administration. Already, much of the bureau’s work has come to a standstill. The agency’s very mission statement has been altered in public documents, with a new emphasis on “identifying and addressing outdated, unnecessary or unduly burdensome regulations.”

For Trump critics, the recent hires under the acting director present all the more reason for concern.

“Placing staff for bureau opponents Jeb Hensarling or Mick Mulvaney into senior positions at the consumer bureau is by definition politicizing an independent agency,” Ed Mierzwinski, the federal director of the consumer program at U.S. Public Interest Research Group, said in an email.

Mulvaney has also said he plans to pair political appointees with senior career staff — an unusual move for the CFPB and the other independent regulators.

While the term “regulatory capture” is most often used to describe the influence of business interests on an agency, it can also refer to ideological influence. It’s possible the agency may soon be captured by those who wish it simply didn’t exist.

For now, those working at the bureau continue to face significant uncertainty. There’s the ongoing judicial challenge to Mulvaney’s temporary appointment, along with an outstanding case over the constitutionality of the agency’s leadership structure. That’s on top of lingering questions about who will be nominated to run the bureau permanently.

Yet with more staff coming on board who are likely to be sympathetic to the Trump administration, a picture of the future begins to come more sharply into view. Just as Warren’s hiring decisions when she set up the bureau helped to shape the CFPB’s approach and tone in the years that followed, Mulvaney’s actions could prove equally consequential.

Just this week, Mulvaney announced plans to reconsider the payday rule and conduct a broad public review of the CFPB’s activities. He has told the Federal Reserve he needs no additional funding for the second quarter of 2018. Already, it seems the pace of change under the new regime is beginning to accelerate.

“These hires make it more likely that changes will occur — and they will occur more rapidly — because one individual can’t do everything,” said Alan Kaplinsky, a partner at Ballard Spahr.

Victoria Finkle

Victoria Finkle

Victoria Finkle is editor of American Banker's op-ed blog, BankThink.

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