White House budget director Mick Mulvaney moved quickly Monday to take control of the government’s consumer watchdog agency, sidelining a liberal bureaucrat who claims she is the rightful head of the office and declaring a 30-day freeze on new regulations and hiring.
Mr. Mulvaney, installed by President Trump as acting chief of the Consumer Financial Protection Bureau, showed up for work early with a large welcome bag of doughnuts.
He also told staff to ignore orders from longtime agency operative Leandra English, whom the agency’s outgoing director tried to hand-pick as his successor late Friday.
“Please disregard any instructions you receive from Ms. English in her presumed capacity as acting director,” Mr. Mulvaney told employees.
Later, at a news conference, Mr. Mulvaney said “elections have consequences at every agency, and that includes the CFPB.”
“Anything in the pipeline stops for at least 30 days,” he said.
Ms. English, meanwhile, traveled to Capitol Hill to meet with Senate Minority Leader Charles E. Schumer of New York and Sen. Elizabeth Warren of Massachusetts, the leading Democrats who sought to boost her bid to claim the top office.
The two sides also battled in federal court, where Ms. English’s backers tried to get assurances that Mr. Mulvaney wouldn’t try to fire her. The government could offer no guarantees.
“The agency needs certainty. The markets need certainty,” said Deepak Gupta, Ms. English’s attorney. “Everyone needs to know who is the director in this bureau.”
The CFPB, established by the 2010 Dodd-Frank legislation after the 2008 financial collapse, has extraordinary, independent powers to police Wall Street and financial institutions. The bureau has drawn cheers from Democrats and some consumer advocates, but Republicans, businesses and even a key federal court contend the CFPB is too powerful.
The White House on Monday portrayed the CFPB as a bloated bureaucracy that was failing in its mission to help consumers.
For example, a Government Accountability Office report in November 2016 showed that the CFPB maintains a slush fund of more than $100 million from penalties imposed on businesses as a reserve for consumer claims, and it often determines that there are no victims to be compensated in the cases it investigates.
“We’re going to make sure that the consumers are actually being protected, which is what the agency was created for,” said White House press secretary Sarah Huckabee Sanders.
Mr. Mulvaney showed up for work at the CFPB’s office in Washington early Monday determined to show he is in charge of the agency. Aides tweeted a photo of him at work at his CFPB desk at 7:56 a.m.
His first memo to employees suggested that Mr. Mulvaney was in the midst of writing greetings to the staff when a dueling memo from Ms. English forced him to send out a more urgent missive.
“I was working on an introductory email just now to thank all of you for the very smooth transition this morning as I assume the role of Acting Director; I hope to finish that email shortly,” he wrote. “However, it has come to my attention that Ms. English has reached out to many of you this morning via email in an attempt to exercise certain duties of the Acting Director. This is unfortunate but, in the atmosphere of the day, probably not unexpected.”
He added, “I apologize for this being the very first thing you hear from me. However, under the circumstances I suppose it is necessary. I look forward to working with all of you. If you’re at 1700 G St. today, please stop by the fourth floor to say hello and grab a donut.”
In another sign that Mr. Mulvaney was in control, the CFPB’s press office was forwarding inquiries Monday to his primary base of operations, the White House Office of Management and Budget.
The CFPB’s general counsel told employees that Mr. Mulvaney should be considered their boss.
“It is my legal opinion that the president possesses the authority to designate an acting director for the bureau,” Mary McLeod wrote in a memo. “I advise all bureau personnel to act consistently with the understanding that Director Mulvaney is the acting director of the CFPB.”
Brett Shumate, a Justice Department lawyer who argued on behalf of the Trump decision in court Monday, said Mr. Mulvaney is ensconced in the director’s office and is serving as acting director, while Ms. English is deputy.
He told Judge Timothy Kelly, a Trump appointee to the federal bench, that Ms. English has no right to the director’s post, so there is no actionable case that needs a speedy ruling.
“There is no emergency,” Mr. Shumate said.
The legal battle turns on the complexities of the Federal Vacancies Act, which generally gives a president the power to name acting chiefs when a post is empty, and the Dodd-Frank law, which says in the case of the CFPB that the deputy director acts as director when the top post is empty.
Judge Kelly worried that he might be overstepping the bounds of court authority if he gave direct orders to the president in this case.
“That’s an extraordinary remedy,” he said.
“This is an extraordinary case,” Mr. Gupta replied.
The White House said the agency under Mr. Mulvaney, who once advocated its abolishment, will operate “much better than it has in the past.”
“We’re not going to put political ambitions as the No. 1 priority,” Mrs. Sanders said.
Ms. Warren, though, said the CFPB has “put the power on the side of the consumer” by returning about $12 billion to consumers in cases of fraud or deceptive business practices.
“Mick Mulvaney, in my view, has no legal authority to sit over there and run the CFPB,” she said on MSNBC. “The statute is very clear. There’s no vacancy here for the president to be able to fill.”
She plans to attend a protest rally with progressive activists Tuesday outside CFPB headquarters to demand that Mr. Mulvaney step aside.