InfoBytes Blog
Filter
Subscribe to our InfoBytes Blog weekly newsletter and other publications for news affecting the financial services industry.
Court Denies Restraining Order Preventing Mulvaney’s Appointment
On November 28, Judge Timothy Kelly denied a request by Leandra English, who was appointed Deputy Director of the CFPB by Richard Cordray on the same day as his resignation, for a temporary restraining order preventing the President from appointing anyone other than English as Acting Director and preventing Mick Mulvaney from serving as the Acting Director (see previous InfoBytes coverage for details).
English’s counsel, in remarks to reporters outside the courtroom, stated they may seek an appeal, may move for a preliminary injunction, or may move for an expedited final decision on the merits.
Legal Battle Begins Over Mulvaney Appointment as Acting Director of CFPB
On November 26, the newly appointed Deputy Director of the CFPB, Leandra English, filed a lawsuit in U.S. District Court for the District of Columbia against President Trump and Mick Mulvaney, the Director of the Office of Management and Budget (OMB), seeking declaratory judgments that English is the Acting Director of the CFPB – and Mulvaney is not – as well as emergency temporary restraining orders preventing the President from appointing anyone other than English as Acting Director and preventing Mulvaney from acting as the Acting Director.
The legal action results from the November 24 resignation of Richard Cordray as the Director of the CFPB and his naming of English as the Bureau’s Deputy Director (previously covered by a Buckley Sandler Special Alert) citing to section 1011(b)(5) of the Dodd-Frank Act (DFA), which provides that the CFPB’s Director may appoint the Deputy Director who “shall…serve as acting Director in the absence or unavailability of the Director.” Following Cordray’s official resignation, the White House issued an announcement appointing Mulvaney as Acting Director under the Federal Vacancies Reform Act of 1998 (FVRA).
On November 25, the Department of Justice (DOJ) Office of Legal Counsel released a memorandum in support of the President’s authority to designate Mulvaney as the Acting Director of the Bureau under the FVRA. According to the DOJ, while Congress recognized there would be cases in which FVRA was not the “exclusive means” for succession, Congress did not intend for the FVRA to be “unavailable” when another statute provides an alternative for succession. Accordingly, the DOJ asserts that, notwithstanding the succession provision in the DFA, FVRA gives the President the authority to, “rely upon it in designating an acting official in a manner that differs from the order of succession otherwise provided by an office-specific statute.” In her complaint, English argues that the succession provision in the DFA controls over the FVRA and that the appointment of a White House official is inconsistent with the CFPB’s independent structure.
Similarly, on November 25, the General Counsel for the CFPB, Mary Mcleod, issued a statement to the senior leaders of the Bureau concurring with the DOJ’s conclusion that “the President may use the [FVRA] to designate an acting official, even when there is a succession statute under which another official may serve as acting.” Mcleod concluded that Mulvaney is the Acting Director of the CFPB and encouraged all Bureau staff to act consistently with that conclusion.
Oral arguments on English’s emergency motion were held on November 27 by Judge Timothy Kelly, a Trump appointee. Judge Kelly did not rule on the motion and granted the government’s request to file papers responding to English’s arguments.
Trump to Select Mulvaney as Interim CFPB Director
According to media sources, President Trump is expected to select Mick Mulvaney, the current Director of the White House Office of Management and Budget (OMB), to serve as the interim Director of the CFPB upon Richard Cordray’s resignation at the end of this month. Mulvaney would keep his current position and serve as both the Director of OMB and Acting Director of the CFPB throughout the interim term.
Executive Order Calls for Agency Reorganization Plan
On March 13, the Trump Administration issued an Executive Order calling for a reorganization of the executive branch to improve its efficiency, effectiveness, and accountability. Specifically, the order, entitled “Comprehensive Plan for Reorganizing the Executive Branch,” mandates that Office of Management and Budget (“OMB”) Director Mick Mulvaney “propose a plan to reorganize governmental functions and eliminate unnecessary agencies (as defined in section 551(1) of title 5, United States Code), components of agencies, and agency programs.” In order to assist Director Mulvaney in this task, the head of each agency is required to—within 180 days—submit to the OMB director a proposed plan “to reorganize the agency, if appropriate, in order to improve the efficiency, effectiveness, and accountability of that agency.”
Notably, the order requires that the OMB Director seek public comment as to potential improvements in “the organization and functioning of the executive branch,” and requires that the OMB Director consider the comments received when formulating a proposed plan that must be submitted to the President 180 days after the deadline for agency submissions. The order also asks agencies to (as consistent with applicable law) consult with persons or entities outside of government with relevant expertise in organizational structure and management.
White House Calls for “Regulatory Reform Task Forces”; OMB Sends Guidance Memorandum to Heads of Departments and Agencies
On February 24, President Trump signed an Executive Order directing the “head of each agency” to establish a “Regulatory Reform Task Force,” led by a designated “Regulatory Reform Officer,” who is responsible for reviewing existing regulations and making “recommendations to the agency head regarding their repeal, replacement, or modification.” Specifically, the Regulatory Reform Task Forces are charged with identifying regulations that: (i) “eliminate jobs, or inhibit job creation”; (ii) are outdated, unnecessary, or ineffective; (iii) “impose costs that exceed benefits”; (iv) create a “serious inconsistency or otherwise interfere with regulatory reform initiatives and policies”; (v) are inconsistent with OMB’s “Information Quality Guidelines”; or (vi) implement Executive Orders or Presidential directives that have been repealed or substantially modified.
Among other things, the Order instructs the OMB Director to issue guidance outlining requirements for the incorporation of regulatory reform “performance indicators” into agencies’ annual performance plans and potentially “address[ing] how agencies not otherwise covered under this subsection should be held accountable for compliance with this order. The Order requires that the task forces solicit input from “entities significantly affected by Federal regulations, including state, local, and tribal governments, small businesses, consumers, non-governmental organizations, and trade associations,” and submit a report to the agency head within 90 days.
Thereafter, on February 28, recently-confirmed Director of the Office of Management and Budget (OMB) Mick Mulvaney released a memorandum and attachment for the heads of all offices in the Executive Office of the President (EOP) and Executive agencies, which summarizes the major elements of the legislative clearance function that the OMB, working with other offices, carries out on behalf of the President. The memorandum (OMB Circular No. A-19) details the requirements and procedures for legislative coordination and clearance, while the attachment summarizes the major elements and the essential purposes of the clearance process.
Among other things, the memorandum recommends that, in supporting the “President’s Program,” agencies within the Administration should: (i) submit to Congress legislative proposals needed to carry out the President’s Program; (ii) convey the Administration’s views on legislation that Congress has under consideration; and (iii) recommend approval or disapproval of bills passed by Congress. According to the memorandum, the primary goals of the clearance process are twofold: (i) to ensure that an agencies’ legislative communications with Congress are consistent with the President’s policies and objectives; and (ii) to allow for the Administration to “speak[] with one voice” regarding legislation.
Groups Seek Injunction Blocking Trump's "2-For-1" Regulatory Order
On February 8, three organizations—Public Citizen, the Natural Resources Defense Council, and the Communications Workers of America—sued the Trump administration over the President’s recent Executive Order (as clarified by the OMB’s interim guidance issued on February 2), which directs agencies to identify two regulations for repeal for every rule written (covered in InfoBytes here). The action seeks to have the Executive Order declared unconstitutional and enforcement thereby stayed. Among other things, the complaint asserts that the President’s Executive Order unlawfully forces agencies to make decisions based on an “impermissible and arbitrary choice—whether to issue a new standard at the cost of the loss of benefits of two existing standards.” To repeal “two regulations for the purpose of adopting one new one, based solely on a directive to impose zero net costs and without any consideration of benefits,” Plaintiffs argue, “is arbitrary, capricious, an abuse of discretion, and not in accordance with law.” The case has been assigned to Judge Gladys Kessler of the U.S. District Court for D.C.
OCC Proposes Final Revisions to Stress Test Information Collection
On February 2, the OCC requested comment on proposed revisions to an existing information collection entitled “Company-Run Annual Stress Test Reporting Template and Documentation for Covered Institutions with Total Consolidated Assets of $50 Billion or More Under the [Dodd-Frank Act].” The agency is also giving notice that it has sent the collection to the OMB for review. This information collection is related to the conduct of annual stress tests that the Dodd-Frank Act requires of certain financial companies, including national banks and federal savings associations. Comments on the current notice must be received by March 6, 2017.
New Administration Implements Executive-Branch Hiring Freeze
On January 23, the White House issued a Presidential Memorandum implementing “a freeze on the hiring of Federal civilian employees to be applied across the board in the executive branch.” As explained in the memorandum, “no vacant positions existing at noon on January 22, 2017, may be filled and no new positions may be created, except in limited circumstances.” The freeze does not include or apply to military personnel. The memorandum also instructs, among other things, that “[w]ithin 90 days of the date of this memorandum, the Director of the Office of Management and Budget (OMB), in consultation with the Director of OPM, shall recommend a long-term plan to reduce the size of the Federal Government’s workforce through attrition. This order shall expire upon implementation of the OMB plan.” On January 24, the OMB issued guidance directed at agency heads on how to implement the new administration’s hiring freeze.
Special Alert: Trump Administration Initiates “Regulatory Freeze”
Buckley Sandler Special Alert
On January 20, Reince Priebus, Chief of Staff to President Trump, issued a memorandum to the heads of executive departments and agencies initiating a regulatory review to be headed by the Director of the Office of Management and Budget (“OMB”). Congressman Mick Mulvaney (R-SC) has been nominated to fill that position.
On behalf of the President, the memorandum asks the following of the agency and department heads:
- No new regulations: “[S]end no regulation to the Office of the Federal Register (the ‘OFR’) until a department or agency head appointed or designated by the President after noon on January 20, 2017, reviews and approves the regulation.”
- Withdraw final but unpublished regulations: “With respect to regulations that have been sent to the OFR but not published in the Federal Register, immediately withdraw them from the OFR for review and approval.”
- Delay the effective date of published but not yet effective regulations: “With respect to regulations that have been published in the OFR but have not taken effect, as permitted by applicable law, temporarily postpone their effective date for 60 days from the date of this memorandum” and consider notice and comment to further delay the effective date or to address “questions of fact, law, or policy.” Following the delay, regulations that “raise no substantial questions of law or policy” would be allowed to take effect. For those regulations that do raise such questions, the agency or department “should notify the OMB Director and take further appropriate action in consultation with the OMB Director.”
Rulemakings subject to statutory or judicial deadlines are exempt, and the OMB Director has the authority to grant further exemptions for “emergency situations or other urgent circumstances relating to health, safety, financial, or national security matters, or otherwise.”
Click here to read full special alert
If you have questions about the “freeze” or other related issues, visit our Consumer Financial Protection Bureau practice for more information, or contact a BuckleySandler attorney with whom you have worked in the past.