White House budget director Mick Mulvaney on Nov. 27 announced a 30-day freeze on hiring and regulations at the Consumer Financial Protection Bureau. (Reuters)

A federal judge refused to block President Trump’s choice of budget director Mick Mulvaney from serving as acting director of the prominent federal consumer watchdog agency on Tuesday, denying a request by Leandra English, the No. 2 official at the Consumer Financial Protection Bureau, to serve in his stead.

In denying English’s request for a temporary restraining order, U.S. District Judge Timothy J. Kelly acknowledged that the case raised consitutional issues. Former CFPB litigation counsel Deepak Gupta, who represented English, said she would weigh her next step.
“There needs to be an answer from the courts,” he said after the ruling. “There needs to be a final answer.”

The Trump administration applauded the decision and said it supports its contention that Mulvaney is the rightful acting director.

“It’s time for the Democrats to stop enabling this brazen political stunt by a rogue employee and allow Acting Director Mulvaney to continue the Bureau’s smooth transition into an agency that truly serves to help consumers,” White House spokesman Raj Shah said in a statement.

Kelly, a Trump appointee who joined the federal court in Washington in September, ruled after departing chief Richard Cordray resigned Friday and promoted English, his chief of staff, to deputy director and named her his successor as acting director. Trump responded by naming Mulvaney, triggering an unusual power struggle after English filed a lawsuit late Sunday.

English argued that the 2010 Dodd-Frank act that established the agency after the financial crisis laid out a specific plan of succession authorizing the deputy director to take over until a White House nominee is confirmed by the Senate. English also argued that a sitting White House head of the Office of Management and Budget could not hold two hats by simultaneously heading the independent financial regulator.

Deputy Assistant Attorney General Brett Shumate had argued that Trump had authority under an earlier law, the 1998 Presidential Vacancies Reform Act, and cited supporting opinions by the Justice Department’s Office of Legal Counsel and the CFPB’s general counsel.

The hearing followed two chaotic days when the rival appointees claimed to lead the bureau. On Tuesday, Mulvaney started a new Twitter account — @CFPBdirector — and posted a picture of himself at a desk with an American flag in the background. “Busy day at the @CFPB. Digging into the details,” the tweet says.

Meanwhile, English said too she was busy running the department. “Today, I plan on spending the day at CFPB headquarters taking calls and meetings with external stakeholders and bureau staff,” English said in a statement Tuesday.

The CFPB was created after the financial crisis to target unfair or abusive practices by financial institutions offering consumer products, including credit cards, mortgages and loans.

Republicans have sought to rein in the agency for years as part of efforts to roll back banking industry regulations, saying it is unaccountable to elected officials and harms economic growth by unfairly burdening companies.

Elizabeth Warren (D-Mass.) , along with protesters, held a rally outside the Consumer Financial Protection Bureau headquarters on Nov. 28. (Reuters)

The Trump administration got its chance to wrest control Friday, when longtime director Richard Cordray resigned and promoted his chief of staff, English to deputy director, saying she would serve as acting director until the Senate confirmed his permanent replacement.

Trump hours later announced that Mulvaney would take the job.

Democrats and consumer advocates have supported the CFPB’s aggressive actions against big financial institutions, and in her lawsuit, English said Congress intended the bureau to be independent of political pressure from the White House.

Asked by Kelly on Monday why the court should undertake the “extraordinary remedy” of blocking the president from exercising the power of his office, English’s attorney said, “I don’t deny it’s extraordinary. This is an extraordinary case.”

English’s attorney, Gupta, formerly the bureau’s senior litigation counsel, argued that English properly took over under an explicit plan of succession set out by the Dodd-Frank law when it created the CFPB, providing for a deputy to serve as acting director until a successor is confirmed.

Appointing Mulvaney, a “sitting White House official” and an outspoken critic of the bureau, to lead the agency would run counter to Congress’s intent and explicit provisions, Gupta said.

Gupta said English was not requesting that the president be barred from appointing a new bureau director subject to Senate confirmation, but that he be blocked from “appointing or recognizing” a temporary chief, and that Mulvaney be prohibited from taking charge.

Gupta asked that the judge rule as “expeditiously as possible” in a way that could be immediately appealed. “Everyone needs to know who is director of the bureau,” Gupta said.

Gupta said that English also carried out bureau business Monday, going into the bureau Monday morning, emailing employees, and meeting with lawmakers including Sens. Elizabeth Warren (D-Mass.) and Sherrod Brown (D-Ohio) in her capacity as acting director through the afternoon.

Arguing for the government, Brett Shumate, deputy assistant attorney general for federal programs, said that the Federal Vacancies Act, enacted in 1988, gave the president the authority to appoint Mulvaney, citing a Friday memorandum by the Justice Department’s Office of Legal Counsel, and a memo distributed Monday by the bureau’s current general counsel.

Mulvaney was at the bureau Monday, issuing orders, meeting with senior aides and reviewing transition briefing materials, Shumate said, and the imposition by a judge of a different leader would only sow more confusion and disruption.

Asked by Kelly if the government would agree that English would not be fired to remove some of the urgency from the matter, Shumate said, he could not “give any representation or assurance on that score.”