• by Thom Forbes , November 28, 2017

As yet another scandal unfolded at Wells Fargo yesterday, two contenders for the temporary leadership of the Consumer Financial Protection Board asserted their right in federal court to lead the agency set up to protect consumers from fraud perpetrated by banks and Wall Street.

On Friday, outgoing CFPB director Richard Cordray appointed Leandra English, who had been serving as the agency’s chief of staff, to lead the agency as the deputy director until the Senate approves a permanent successor appointed by the President. Cordray did so under a provision of the Dodd-Frank legislation creating the agency in 2010 that states that the deputy director “shall be appointed by the Director and serve as acting Director in the absence or unavailability of the Director.”

Hours later, President Trump overruled that decision and instead named Mick Mulvaney as the temporary head of the CFPB. The director of the White House Office of Management and Budget has been a vocal critic of the agency (“sad, sick joke”) who sponsored bills to dismantle it when he was a Republican congressman from South Carolina. His appointment had been rumored since shortly after Cordray announced he was stepping down earlier this month.

Then, “Sunday evening, English filed a motion for an emergency temporary restraining order to block the Trump administration from ousting her from the agency,” reports Jonathan H. Adler for the Washington Post.

“Interestingly, English is being represented by private counsel. According to Reuters, CFPB general counsel Mary McLeod, who was appointed by Cordray in 2015, thinks the Trump administration has the stronger legal claim and has written a memo to this effect,” Adler continues.

On Monday morning, Mulvaney strolled into the CFPB offices carrying a bag of Dunkin’ Donuts as English took her case to Judge Timothy J. Kelly, a Trump appointee at U.S. District Court for the District of Columbia. 

“The dueling afternoon developments followed a morning of high drama that Mulvaney acknowledged caused consternation among CFPB staffers Monday,” writes Jim Puzzanghera for the Los Angeles Times.

“Folks asked questions, very candidly. I told them, ‘Look, I'm not here to shut the place down because the law doesn't allow me to do that,’” Mulvaney told reporters. “‘That being said, we're going to run it differently than the previous administration.’”

Meanwhile, “at a hurriedly called and packed-to-the-gills hearing, Judge Kelly voiced his concerns, noting that lawyers for the president could not definitively say whether Ms. English was protected from losing her job. The judge also said that neither set of attorneys had addressed whether Mr. Mulvaney … ‘can wear two hats,’” Katie Rogers reports for the New York Times. 

“Yet the judge remarked that he was essentially being asked by Deepak Gupta, Ms. English’s lawyer, to overrule the president’s power to appoint a new director,” Rogers continues. “‘That’s an extraordinary remedy,’ Judge Kelly said, before asking Mr. Trump’s lawyers to respond to Ms. English’s complaint with their own brief by the end of the evening.”

Whatever the ruling, it is sure to be challenged and the CFPB will be left dangling in the winds of Washington dysfunction.

“Once the court decides on whether to grant Ms. English’s requests, appeals could quickly follow. But until the temporary leadership situation is sorted out, the CFPB may be hobbled as regulator. Any enforcement actions or rulemaking that would ordinarily require a signoff from the agency’s head could be challenged in the courts,” points out Lalita Clozel for the Wall Street Journal.

“‘People will be sitting in their offices reading things and working on things but [not] doing anything about them,’ said Karen Shaw Petrou, managing partner of policy-analysis firm Federal Financial Analytics Inc. ‘Other than moving the flower pots or changing the coffee in the machine, this is a standstill.’”

And just when we thought the bottom of the barrel had been reached regarding the frauds at Wells Fargo, employees of its foreign exchange group “have been intentionally overcharging customers to inflate their bonuses,” writes Fortune’s Hallie Detrick, following up on a story the Wall Street Journal’s Emily Glazer broke last night. 

“Current and former bank employees say its pricing practices were rooted in a culture and compensation system that looked to maximize revenue. Bonuses were defined as 10% of revenues exceeding revenue targets,” Glazer reports.

And while those directly impacted are not the consumers the CFPB was set up to protect, it does impact the littler guys. 

“Current and former employees say Wells Fargo’s foreign-exchange customers are largely midsize businesses that don’t tend to trade in large volumes. As a result, those clients don’t have the same insight into the market as larger firms that are more-active traders,” Glazer writes.