The United States Senate has confirmed President Trump’s nomination of Kathleen Kraninger to be Director of the Bureau of Consumer Financial Protection (“BCFP” or the “Bureau”) on a party-line vote of 50 to 49.
Kraninger most recently served as Program Associate Director for General Government in the Office of Management and Budget (“OMB”), in which capacity she reported to OMB Director (and Acting BCFP Director) Mick Mulvaney. She previously served as Deputy Assistant Secretary for Policy at the U.S. Department of Homeland Security (“DHS”).
A native of Pittsburgh, Kraninger earned her undergraduate degree from Marquette University in 1997 and her J.D. from Georgetown University Law Center in 2007. Kraninger has served as a staffer for the Senate Appropriations Committee’s Subcommittee on Homeland Security, the House Appropriations Committee’s Subcommittee on Homeland Security, and the Senate Homeland Security and Governmental Affairs Committee.
At her confirmation hearing before the U.S. Senate Committee on Banking, Housing, and Urban Affairs on July 19, 2018, Kraninger outlined four goals. The Bureau should:
(1) be fair and transparent;
(2) work closely with other financial regulators and the states on supervision and enforcement;
(3) recognize its duty to protect sensitive information; and
(4) be accountable to the American people.
That hearing provided little substance regarding Ms. Kraninger’s views on consumer protection issues, thanks both to the nominee’s careful parrying of questions and to the Democratic Senators’ focus on her role in the Trump Administration, including the issues of the hurricane relief effort in Puerto Rico and the separation of migrant children from their parents. Democratic Senators also took issue with Kraninger’s lack of experience in consumer finance and consumer protection, to which she responded by highlighting her extensive policy work and management experience.
Arguably the strongest statements against Ms. Kraninger throughout the nomination came from Senator Elizabeth Warren (D-Mass.), who last week circulated a letter urging her Senate colleagues to oppose the nomination. Sen. Warren asserted that Ms. Kraninger has “no relevant consumer finance experience” and would continue the course set by BCFP Acting Director Mick Mulvaney, which the letter characterized as partisan and inadequately protective of consumers. Moreover, the letter urged Senators to hold Ms. Kraninger responsible for the Trump Administration’s “catastrophic” response to Hurricane Maria and the “humanitarian catastrophe” of the child border separations crisis.
Similarly, Senate Banking Committee Ranking Member Sherrod Brown (D-Ohio) released a staff report last week criticizing Mulvaney’s leadership and casting Ms. Kraninger as likely to stay that course. In concluding the report, Senator Brown’s staff asserted that “President Trump should nominate a serious candidate, with real consumer protection experience and a genuine commitment to the Bureau’s mission.”
Kraninger’s confirmation is a milestone in the Republican takeover of the Bureau that began in earnest with the resignation of Director Richard Cordray on November 24, 2017. President Trump promptly named a staunch BCFP critic, OMB Director Mick Mulvaney, as Acting Director. Mulvaney has brought on key staff to serve as Policy Advisors throughout the Bureau, and named Brian Johnson (a former top aide to House Financial Services Committee Chair Jeb Hensarling) as Acting Deputy Director.
Under the Dodd–Frank Act, a duly confirmed Bureau Director serves a five-year term, and may be terminated by the President only for “inefficiency, neglect of duty, or malfeasance in office.” 12 U.S.C. § 5491(c)(3). However, the constitutionality of this limitation on presidential power remains a high-profile legal question. Early this year, the D.C. Circuit Court of Appeals, sitting en banc, held that the structure of the BCFP is constitutional, but a dissent by then-Judge Brett Kavanaugh argued that the Bureau is “unconstitutionally structured” and that the appropriate remedy would be to allow the President to dismiss the Bureau Director at will. More recently, U.S. District Judge Loretta A. Preska (S.D.N.Y.) agreed with then-Judge Kavanaugh’s conclusion that the Bureau’s structure is unconstitutional, but disagreed that the remedy could be limited to increasing the President’s authority over the Director. That case has been appealed to the Second Circuit Court of Appeals. In addition, the Fifth Circuit is examining this constitutional issue in an appeal from a decision in which the Southern District of Mississippi upheld the constitutionality of the BCFP by adopting the reasoning of the D.C. Circuit en banc decision. These cases could lead to the kind of Circuit split that would pave the way for the Supreme Court to rule on the constitutionality of the Bureau.
Notably, some of Ms. Kraninger’s strongest detractors in Congress have taken the position that the President cannot remove the BCFP Director at will. In September 2018, current and former members of Congress filed a brief in the pending Fifth Circuit case arguing in favor of the Bureau’s structure. Signatories included Senator Sherrod Brown, Senator Warren, and House Financial Services Committee Ranking Member Maxine Waters. In 2017, those three members of Congress, along with others, filed a similar brief in the earlier D.C. Circuit case. Accordingly, it may be difficult for those members to insist Director Kraninger be fired if a new President takes office in early 2021.