Mick Mulvaney struck a jovial tone as he introduced the political appointees who would run the Consumer Financial Protection Bureau. One was nicknamed Dreamboat, he said in an email. Another was Mumbles. A third had been a “Jeopardy!” contestant.
The levity now seems like a cruel joke to career officials.
One year after Mulvaney’s arrival, he and his political aides have constrained the agency from within, achieving what conservatives on Capitol Hill had for years been unable to do, according to agency data and interviews with career officials.
Publicly announced enforcement actions by the bureau have dropped about 75 percent from average in recent years, while consumer complaints have risen to new highs, according to a Washington Post analysis of bureau data.
Over the past year, the agency’s workforce has dropped by at least 129 employees amid the largest exodus since its creation in 2010, agency data shows.
Created by Congress to protect Americans from financial abuses, the bureau under Mulvaney has adopted the role of promoting “free markets” and guarding the rights of banks and financial firms as well as those of consumers, according to statements by Mulvaney and bureau documents.
Much has been written about Mulvaney’s leadership. This story provides an inside look at one of the Trump administration’s signature successes: how Mulvaney and a team of political appointees used the levers of government to hinder career employees and roll back oversight of private industry. It is based on scores of internal emails and other documents reviewed by The Post, along with interviews with two dozen current and recent employees.
“The bureau is forcing hundreds of staff to sit on their hands while millions of Americans suffer from predatory practices happening right under its nose,” said Seth Frotman, who resigned as CFPB’s assistant director and student loan ombudsman in August.
Even as the agency curtailed its operations, Mulvaney repeatedly said he was making it more efficient, documents show.
“It’s like ‘Alice’s Adventures in Wonderland,’ ” said one official, referring to Lewis Carroll’s fantasy novel, who spoke on the condition of anonymity out of a fear of reprisals.
The Senate this week is expected to confirm a new agency director, Kathy Kraninger, an associate director at the Office of Management and Budget, where Mulvaney splits his time as director. But Democrats have pledged to examine Mulvaney’s tenure at the consumer protection bureau after they take control of the House in January.
Mulvaney and his political appointees declined to be interviewed for this story.
Bureau spokesman John Czwartacki defended Mulvaney’s approach as appropriate and consistent with founding legislation. He cautioned against drawing conclusions from the decline in the number of enforcement actions announced by the bureau, saying that at least eight new cases are underway and that such cases can take months or years to resolve.
Czwartacki released a statement quoting Mulvaney’s plan: “We have committed to fulfill the Bureau’s statutory responsibilities, but go no further.”
Former congressman Barney Frank (D-Mass.), a co-author of the founding legislation, told The Post that the administration is not fulfilling the mission set out by Congress as it is obligated to.
“It’s a blatant dishonesty,” Frank said of Mulvaney’s claim. “He’s accomplishing administratively what he couldn’t do legislatively.”
The political appointees
On his first day as acting chief, Mulvaney walked into the bureau headquarters carrying a box of doughnuts. It was 7:30 a.m. on Nov. 27, 2017.
A press aide tweeted a photo of a near-empty box with the words “big hit at cfpb,” triggering positive media accounts.
Unmentioned was that Mulvaney had actually intended the doughnuts as a gesture for protesters he expected would be waiting for him, a Mulvaney aide told The Post. When protesters did not show up, Mulvaney gave the doughnuts to career staffers.
Mulvaney was already well-known to many inside the agency as one of its fiercest critics.
The former congressman from South Carolina and other conservatives had long called the bureau a threat to free-market capitalism and a symbol of everything wrong with progressive politics in America.
The bureau had been launched by the Obama administration in response to abuses that came to light during the economic meltdown a decade ago. In its first six years, the bureau aggressively pursued lenders and other financial firms, returning more than $12 billion to more than 29 million consumers and imposing nearly $600 million in civil penalties.
In 2016, the Republican Party’s platform referred to it as a “rogue agency” and compared its director to a dictator. Mulvaney was blunt in his loathing, once saying: “I don’t like the fact that CFPB exists.”
On his first day as acting director, Mulvaney toned down his rhetoric during meetings with senior staffers at the agency, just across the street from the White House OMB, where he would spend most of his time, according to his official calendar.
In one of the first of many “All Hands” emails, Mulvaney praised his new employees for a gracious reception. “Quite honestly, I was expecting one of the . . . most challenging? . . . days of my career, and thanks in large part to the effort you folks put in, the day was a real pleasure,” he wrote to the staff.
At the same moment, career employees said, Mulvaney was already beginning to use his new authority to redirect the agency, announcing a temporary halt to the creation of new policies and to hiring.
He was also recruiting the bureau’s first team of political appointees to monitor each division, control the workflow and keep him posted. The first hired was Brian Johnson, a congressional aide to Rep. Jeb Hensarling (R-Tex.), chairman of the House Financial Services Committee and one of the bureau’s leading critics in Congress. According to his résumé, Johnson had helped draft legislation that aimed to curb the operation, a proposal that never gained congressional support.
Johnson was hired quickly, documents show. “Mick wants this to happen by the end of the day,” a Mulvaney aide wrote in a Nov. 30 email, one of many obtained through a public records request by a left-leaning nonprofit, Allied Progress.
Johnson was followed by nearly a dozen other appointees, some receiving salaries of up to $259,500. They had little experience in consumer protection enforcement or managing large groups of people, their résumés show. But many had a common profile, having worked for the financial sector or against the bureau. Two others had also worked as Hensarling aides, one of them a former financial lobbyist, according to their résumés. A third was a lawyer who once argued that the bureau was “unconstitutional” while representing a bank accused of deceptive practices, legal documents show.
From the start, career employees felt whipsawed by mixed signals.
In early December, for instance, Mulvaney asked for anonymous suggestions from career staffers on “how we can improve our own operations,” according to another “All Hands” email. Days later, announcing that the bureau had serious cybersecurity problems, Mulvaney ordered a halt to the collection of consumer data, throwing into limbo the bureau’s search for patterns of abuse by the financial industry.
For weeks, investigators were blocked from even plugging in hard drives that sat on their desks. Eventually, Mulvaney told bureau employees that an outside review had determined the system was secure.
On Dec. 21, the same day Mulvaney joked about nicknames of his first appointees, career employees took note of a subtle but significant change to language describing the agency’s mission in news releases. In addition to protecting consumers, the bureau was now “regularly identifying and addressing outdated, unnecessary or unduly burdensome regulations,” the new language said.
Mulvaney said he expected to be at the bureau only a short time, until President Trump picked a permanent director. But in less than a month, he had officially turned the bureau’s mission sharply in a new direction.
The new industry-friendly approach became apparent just weeks later, when bureau lawyers were ordered to abandon a pending lawsuit. The suit had accused four payday lenders of setting up operations on Indian reservations to get around state lending laws. The bureau alleged they deceived consumers and charged annualized rates of up to 950 percent.
On Jan. 18, after years of work on the case, a bureau lawyer filed paperwork with a single sentence, declaring the lawsuit “voluntarily dismissed.”
Mulvaney faced intense scrutiny from the news media and criticism from Democrats and advocacy groups.
But he remained steadfast.
“We don’t just work for the government, we work for the people,” he wrote in an “All Hands” email later that month. “And that means everyone: those who use credit cards, and those who provide those cards; those who take loans, and those who make them.”
'It has all ground to a halt'
Christopher D’Angelo sat with Mulvaney in the director’s conference room. It was late January, and D’Angelo was doing his best to persuade the bureau director to back away from a plan that was sending shock waves through the bureau’s corridors, according to a briefing memo prepared for D’Angelo that was described by a person familiar with the meeting.
The plan, which had not been publicly announced, called for dismantling the Office of Fair Lending and Equal Opportunity, the operation responsible for protecting minorities from financial discrimination.
D’Angelo was an associate director, a seasoned veteran who had been at the bureau from the start. He argued that the move could cripple the agency’s ability to investigate discriminatory lending, as well as subvert the intent of Congress and damage the bureau’s reputation, the person said.
For the career staff, the meeting, which has not been previously reported, was a test of Mulvaney’s willingness to heed the advice of specialists. He was unmoved. Five days later, he announced the overhaul, saying he would strip enforcement powers from Fair Lending and fold it into the bureau’s administrative operation. “These changes are intended to help make the Bureau more efficient, effective, and accountable,” Mulvaney wrote in an announcement.
D’Angelo declined to comment.
Some career staffers told The Post that they were losing whatever hope they had in the new political team. And far from becoming more efficient, they said, they were increasingly bogged down with what they considered make-work.
Senior bureau officials received instructions to write detailed memos justifying their cases and programs, current and recent employees told The Post. The memos eventually involved work by dozens of lawyers, policy specialists and others and took hundreds of hours to complete, they said.
After delivering the documents, they waited weeks to hear feedback from Johnson and other political leaders, staffers said.
There was still work to do. Mulvaney and his team inherited scores of ongoing cases, but those now moved forward at a glacial pace, as political appointees micromanaged every stage in a way that had previously never occurred, employees said.
“It has all ground to a halt,” a bureau lawyer told The Post. “It’s sort of ‘Hurry up and wait.’ And it’s very much by design. They want everyone to leave.”
Mark Totten, a law professor at Michigan State University, found what he called a “precipitous drop” in the total number of administrative and judicial enforcement actions under Mulvaney, even those that have not been announced.
Some of the cases that did go forward were drained of vigor, with penalties that fell far below what career regulators recommended, employees said. The new pattern gave rise to a phrase among staff: “The Mulvaney Discount.”
In one case, career staffers recommended an $11 million fine for a South Carolina lender, Security Finance, for allegations that it improperly pressured consumers to buy insurance and approached borrowers at their homes and jobs to collect on debts, according to two people familiar with the discussions.
The recommendation went to a political appointee named Eric Blankenstein, the former private-sector lawyer who once described the bureau as “unconstitutional” in legal papers. Blankenstein ordered the staff to abandon some of their initial complaints and pushed to slash the fine, which was eventually lowered to $5 million. The company agreed to pay the penalty.
In another case, bureau lawyers sought a settlement with National Credit Adjusters that would have returned $60 million to consumers after the debt collection company allegedly impersonated law enforcement officers while collecting debts, according to two career staffers.
Blankenstein scrapped the recommendation for payments to consumers, and the bureau levied fines against the company and its chief executive totaling just $800,000. National Credit Adjusters said at the time that it was pleased with the agreement and would demand that its partner companies follow the law.
Blankenstein did not respond to messages seeking comment.
Czwartacki, the spokesman, suggested in a statement to Reuters that the bureau had unfairly targeted lenders. The news agency had previously reported the reductions in fines but had not detailed Blankenstein’s role.
“The enforcement arms of government should not be used in order to shake down the productive sector just because we can, especially when the legal case is shaky at best,” he said.
As the staff came to terms with the decline in enforcement actions, they faced what senior officials described as another perplexing decision. On March 22, Mulvaney adopted a new seal that changed the agency’s name. The new name, the Bureau for Consumer Financial Protection, scrambled a widely used acronym that the agency had spent tens of millions of dollars to promote.
Mulvaney had privately pressed for the name change early in his tenure, saying he wanted to more closely hew to language in the agency’s founding legislation, but his appointees worried about the optics, internal emails show.
“There are myriad implications to a piecemeal name change, all of which to me would signal to the press that we’re not making thoughtful and coordinated decisions,” one political aide, Emma Doyle, wrote to Czwartacki, Johnson and others.
“Without a coordinated strategy that lets the public and the press know what we are changing (or not changing) and when (and knowing any associated cost of doing so), we risk looking like we haven’t thought this through,” the email said.
The change created still more work that career staffers said distracted them from the consumer protection mission. Some were instructed to begin altering the name on PowerPoint presentations, white papers and other documents. About a dozen staffers were asked to serve on a “Name Correction Working Group,” internal records obtained by The Post show.
Critics described the name change as a costly stunt aimed at undermining the bureau’s identity. They note that the legislation uses both names.
“This is a bizarre waste of time and money that has no redeeming social or policy value,” said Christopher Peterson, a law professor at the University of Utah and a consumer protection specialist who served as a senior adviser to CFPB’s director for four years ending in 2016. “There’s nothing in the law that prohibited the bureau from using the original name.”
In a report Monday, the Hill newspaper said the name change could cost the agency up to $19 million and financial firms up to $300 million, expenses for changing the name on internal databases and regulatory documents, according to an agency analysis.
In a statement to The Post, Mulvaney said the agency “does not comment on such internal deliberations, and certainly not on unvetted preliminary assumptions and estimates.”
“I will note that cost to date of adherence to the statutory name has been negligible,” he wrote. “I also welcome newfound concern from some quarters about the potential burden of Bureau activity upon regulated industry; I’d call that progress.”
Unmoved by criticism
As political appointees took control of the bureau, leaks to the news media about internal operations became commonplace. In response, Mulvaney began threatening career employees with investigations and disciplinary action.
“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,” Mulvaney wrote to the staff in an April email. “I also recognize that those folks might be interested in undermining my leadership here, or in quite simply just trying to make me look bad. Again, that doesn’t worry me too much.”
He added: “I have referred these matters to the Inspector General (IG) for investigation. I am encouraged by the progress the IG has made on previous leaks and am confident that they will be able to get to the bottom of these as well.”
Tensions between the political team and the civil servants exploded Sept. 26 after The Post reported that Blankenstein more than a decade ago had questioned in a blog whether using the n-word was inherently racist and claimed the majority of hate crimes were hoaxes.
Staffers were stunned because Blankenstein oversees the bureau’s fair-lending operation responsible for protecting African Americans and other minorities from financial discrimination. The staff called on Mulvaney to remove Blankenstein and reverse the decision to dissolve the Fair Lending Office as part of his ongoing plans to overhaul the agency, according to internal email.
The director of the office, Patrice Ficklin, told Mulvaney and others in the bureau that she was alarmed by the blog posts, writing in an email that they “reminded me of debates we’ve had with Eric on supervisory and enforcement matters.” She wondered whether Blankenstein truly intended to carry out Mulvaney’s “repeated yet unsubstantiated commitment” to fair lending.
Ficklin did not respond to requests for comment.
“The suggestion that a racial slur is intended to do anything other than demean and oppress on the basis of race undermines constructive discourse and is inconsistent with the consumer protection and fair-lending mandates of the Bureau,” D’Angelo, the associate director who had argued against dismantling the Fair Lending Office, wrote in an Oct. 1 email to hundreds of employees in the supervision, enforcement and fair-lending division.
Within hours, Blankenstein apologized for the writings, a turnabout from the defiant statement he issued when The Post revealed them, when he said he was being attacked for “governing while conservative.”
Over the ensuing weeks, Democratic lawmakers, consumer advocacy groups and the employees’ union jumped into the fight, calling on Mulvaney to reverse course on the Fair Lending Office and push Blankenstein out.
Mulvaney addressed the controversy in a meeting with senior managers and in an email to staffers. He called racial discrimination “abhorrent” and said it would not be tolerated, according to a recording of the meeting obtained by The Post.
But he was defiant in the face of the criticism.
“Be assured I am not going to let any outside group dictate how I structure or manage the Bureau,” he wrote Oct. 11. “Our focus must always remain on doing our jobs, enforcing the law, and working together to do a great job for the American people.”
Andrew Ba Tran contributed to this report.