White House

Why Trump Can't Just Say 'You're Fired' to This Official

The head of the Consumer Financial Protection Bureau has the Constitution on his side.

Richard Cordray.

Photographer: Pete Marovich/Bloomberg

Republicans are putting a great deal of pressure on President-elect Donald Trump to fire Richard Cordray, director of the Consumer Financial Protection Bureau. He should resist that pressure. Any effort to discharge Cordray would be illegal -- and it might even precipitate something close to a constitutional crisis.

Here’s the legal background. Most federal agencies count as “executive,” meaning that their heads serve at the pleasure of the president. But some agencies are “independent” -- meaning that by law, the people in charge of them can be removed only for good cause, which Congress often specifies to mean “inefficiency, neglect of duty, or malfeasance in office.”

The Federal Reserve Board, the Federal Trade Commission and the Federal Communications Commission are independent agencies -- and so is the CFPB. Under the law, Cordray’s five-year term extends until July 2018.

Both Republican and Democratic presidents have not loved the idea of independent agencies, operating outside of their daily control. But in 1935, the Supreme Court unanimously agreed that the Constitution gives Congress the power to create such entities.  The court has stuck with that position ever since -- and for decades no president has even tried to remove the heads of independent agencies.

To be sure, some people believe that the 1935 decision was wrong. Suppose President Trump shares that belief and asserts his authority to fire Cordray. On the day of his removal, Cordray would be within his rights to go to court to seek a judgment that the president acted beyond his constitutional authority.

This would be quite a spectacle. As the law now stands, Cordray would almost certainly win. Things could get pretty ugly. Would a lower court issue an injunction against the president? Would he comply with it?

The Trump administration could make a less ambitious argument. It could concede the legitimacy of independent agencies in general, but attack the independence of the CFPB in particular, because it is headed by a single person (rather than the more usual multimember commission) and because of the sheer breadth of its authority over the economy.

That’s an adventurous argument, but it’s not outlandish. In fact, a three-judge panel of the U.S. Court of Appeals for the District of Columbia accepted it a few months ago.   But it’s just too early for the Trump administration to act on the basis of that ruling. The panel’s decision has been stayed pending the CFPB’s petition for review by the full court. Until its judgment goes into effect, Trump is bound by the law that Congress enacted.

Emphasizing Republican objections to Cordray’s performance, Trump might try one final argument. He might claim that Cordray has been guilty of inefficiency, neglect of duty or malfeasance in office -- and hence that the legal standard for discharge has been met.

Good luck with that one. No one seriously argues that Cordray has essentially failed to show up for work (“inefficiency”), ignored the law (“neglect of duty”) or engaged in corruption (“malfeasance”). Strong policy disagreements are not a lawful ground for dismissing the CFPB director.

If Trump wants to control the agency, he has much better options. He can work with Congress to scale back its powers. His administration can try to convince the federal courts, including the Supreme Court, that the Constitution forbids Congress from making the CFPB independent.

There is even an argument, not yet tested, that the president has the authority to direct the CFPB to consult with the White House before it issues expensive regulations. But discharging Cordray would be beyond the pale.

It is already clear that the Trump administration will ignite more than its share of controversies, and face numerous challenges in federal court. It would be a big mistake for it to choose, right out of the gate, to start a fight that it is overwhelmingly likely to lose.

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

    To contact the author of this story:
    Cass R Sunstein at csunstein1@bloomberg.net

    To contact the editor responsible for this story:
    Katy Roberts at kroberts29@bloomberg.net

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE
    Comments