Appeals Court Questions Dual Roles of Consumer Bureau’s Director

Mick Mulvaney, director of the Consumer Financial Protection Bureau and the White House budget office, painted himself as a humble bureaucrat and reformer before the Senate Banking Committee on Thursday.

The White House budget director, Mick Mulvaney, privately fumed on Thursday that his own staff had been leaking confidential information “to make me look bad,” hours after a federal appeals court questioned whether he could legally run the Consumer Financial Protection Bureau while simultaneously heading the budget office.

The United States Court of Appeals for the District of Columbia Circuit expressed support for the president’s legal right to appoint an interim director of the consumer agency. But two of the three jurists — Patricia A. Millett and Judith W. Rogers, both Democratic appointees — raised doubts about Mr. Mulvaney’s dual roles, citing the legal provision that created the bureau.

The legal question surrounding Mr. Mulvaney’s appointment stems from a case brought by Leandra English, a former top consumer bureau official who was installed late last year as acting director by the agency’s departing director, Richard Cordray. President Trump bypassed Ms. English and instead installed Mr. Mulvaney, the Office of Management and Budget director, to run both agencies. Ms. English sued, claiming she was legally entitled to the title of interim director.

The questions about his dual roles came as Mr. Mulvaney was on Capitol Hill for a second day, offering a feisty defense of his controversial tenure at the watchdog agency.

For two hours, Mr. Mulvaney parried questions from Senate Democrats on the Banking Committee about why enforcement actions against shady businesses appeared to have stalled under his watch and why the members of the staff that he installed were receiving such handsome salaries — in some cases more than $200,000 per year.

Mr. Mulvaney defended his actions as lawful, painting himself as a humble bureaucrat and reformer.

“I’m not seeking to undermine the mission of the bureau,” Mr. Mulvaney insisted, adding that he no longer wanted it to be a regulatory “black hole.”

Just hours after testifying, Mr. Mulvaney unleashed a blistering memo to bureau staff members that accused some inside the agency of leaking the outlines of a proposed $1 billion fine against Wells Fargo. The potential fine was reported by Reuters on Monday.

“I am extraordinarily concerned that some of these leaks might have come from bureau employees,” he wrote, according to a copy of the memo forwarded by a person on the distribution list.

Mr. Mulvaney’s memo seemed to offer at least partial confirmation that the Reuters report was grounded, describing the leaked material as “confidential” information.

“I recognize that there may well be some (a few? a lot?) of people who work here who aren’t happy that I’m working here. That’s fine,” Mr. Mulvaney wrote. “I also recognize that these folks might be interested in undermining my leadership here, or in quite simply looking to make me look bad.”

He has instructed the bureau’s inspector general to investigate leaks, he said.

Mr. Mulvaney said he was not seeking to stifle legitimate whistle-blowers, but added that he would “support any disciplinary and other actions taken against any bureau employees” found to have divulged information about investigations.

“The bureau does not play games,” he concluded.

The question of Mr. Mulvaney’s legal ability to run the consumer bureau stems from the provision in the 2010 Dodd-Frank law that created it. The statute mandated that the bureau, which draws its funding from the Federal Reserve, retain complete independence from other federal agencies — particularly the Office of Management and Budget, which oversees rule-making for the executive branch.

The appeals court, which fast-tracked the case, is expected to release a final ruling — which could order Mr. Mulvaney’s ouster — within the next few weeks, according to a person with knowledge of the case.

If that happens, Justice Department lawyers, who maintain that Mr. Trump has the right to appoint Mr. Mulvaney under the 1998 federal Vacancies Reform Act, are likely to appeal the case directly to the Supreme Court.

At that point, Mr. Trump would face a tough choice: Keep Mr. Mulvaney in the post under a legal cloud, pending an appeal, or replace him with another appointee who would most likely face a ferocious confirmation fight.

“Of all the people in the federal government, Donald Trump chose the one person, Mick Mulvaney, who isn’t supposed to run the bureau under the law,” said Deepak Gupta, Ms. English’s lawyer and a former lawyer at the watchdog agency.

A spokesman for Mr. Mulvaney did not immediately respond to a request for comment.

Mr. Mulvaney, who has frozen new enforcement cases since taking over the bureau, is required to step down by June 22, under the vacancies law. But he could stay in the job if Mr. Trump nominates his successor, remaining in place until a new director is confirmed by the Senate.

While Republicans on the Senate Banking Committee largely praised his work, Democrats were unimpressed.

Senator Elizabeth Warren, the Massachusetts Democrat who helped create the bureau, confronted Mr. Mulvaney with examples in which he called for the abolishment of the bureau and argued that it was clear from his leadership that he was trying to tear it apart.

“You’ve taken obvious joy in talking about how the agency will help banks a lot more than it will help consumers, and how upset this must make me,” Ms. Warren said. “You’re hurting real people to score cheap political points.”

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