President Trump missed a narrow window of opportunity to fire CFPB Director Richard Cordray, according to lawyers

President Trump and Consumer Financial Protection Bureau Director Richard Cordray appear locked in a game of chicken over his continued leadership of the agency.

The president appears to be waiting for Cordray to quit of his own accord so he can run for political office, rather than firing him and giving ammunition to the Democrats. Cordray, meanwhile, appears intent in staying as long as he can to fill out his term, which expires in July 2018, and may privately want Trump to fire him so that it gives a boost to his possible political ambitions.

Both sides are facing a deadline. If Cordray does want to run for Ohio governor — widely rumored but not certain — he would need to soon throw his hat into the ring. If Trump wants to fire Cordray, however, it makes little sense to wait until his term is nearly over, considering the likely political blowback it would engender.

With a critical court hearing related to the issue scheduled for next month, it’s not clear who will blink first. Following are four issues in the standoff.

Can Trump still fire Cordray outright?

The Trump administration had a narrow window to fire Cordray outright when the president first took office, but that opportunity is probably gone, according to lawyers.

Though Republicans are still urging Trump to fire Cordray “for cause,” the standard established under the Dodd-Frank Act, the administration would face a tougher legal standard considering the pending case of PHH Corp. v. CFPB. In that case, a three-judge panel struck down the “for cause” language last year, arguing the president could fire the CFPB director at will, but that decision was scrapped by the D.C. Circuit on Feb. 16 ahead of oral argument on an appeal, which is scheduled for May 24.

Lawyers say Trump could have moved quickly between his inauguration and the decision to let the appeal go forward, but he missed his chance.

"What you have at this point is a law that is in effect that says you can only remove the director of the CFPB for cause, as defined in the statutes," said Deborah Meshulam, a partner at DLA Piper.

Still, that doesn’t mean the Trump administration isn’t considering the idea. White House economic czar Gary Cohn gave Cordray an ultimatum to resign from the CFPB within a few weeks, according to an article last week by Politico.

Yet moving now might alienate the court or even eliminate the need for the case, which Republicans are hoping will give the president more power over the CFPB.

"From a strategic standpoint, you could risk the position in court if you take a precipitous step," Meshulam said. "It’s possible that this case challenging limits on presidential power could be mooted if they fire Director Cordray for cause."

Moreover, there is a "high threshold" to fire Cordray for cause, which is defined as "inefficiency, neglect of duty or malfeasance in office," she said. "It's hard to do a ‘for cause’ removal."

Does Cordray really want to run for Ohio governor?

The banking industry has long suspected that Cordray, former attorney general for Ohio, intends to run for governor of the state. While it’s not clear whether that’s the case, several House Republicans at a recent Financial Services Committee hearing cajoled him for his political ambition, suggesting he wasn’t qualified while also urging him to quit and run for office.

During a meeting with community bankers last month, Cohn even told Trump that he expected Cordray to quit soon and run for office.

Cordray remains a popular figure in Ohio, and several analysts have suggested he would instantly become the front-runner for the Democratic nomination if he does run for governor.

Under state law, Cordray has to file for the Ohio primary by Feb. 7, yet in practical terms, he would almost certainly have to declare before then. Generally speaking, it takes at least a year to raise funds for a gubernatorial race. That means Cordray would need to announce by November if he intends to run for office.

There is also the question of whether Cordray wants to be dismissed by Trump ahead of an election.

Though Ohio went for Trump in the presidential election, the president remains a controversial figure, and being his enemy could help Cordray’s political fortunes, particularly among the progressive base. Cordray risks little by being fired by the president and may have much to gain.

Will the D.C. Circuit give Trump another chance?

There is also the question of what the D.C. Circuit will ultimately decide. It is scheduled next month to revisit the PHH case on an "en banc" basis, allowing the full appeals court of 11 justices to hear oral arguments.

The court already delivered several questions to lawyers on both sides asking if the CFPB's single-director structure is consistent with the Constitution and, if not, how the court would solve the problem.

It’s not clear how the decision will go — or when a final judgment will be rendered. Most analysts expect a ruling by the fall. If the decision goes against the CFPB, it again gives Trump cover to fire Cordray, even if the agency seeks to appeal the case again. If it goes for the CFPB, the results are less clear, depending in part on how aggressive Trump’s team wants to be and whether Cordray wants to leave.

Is the CFPB in limbo while this plays out?

To some extent, the CFPB is in dire straits, facing a Congress that can overturn any rule it issues with the Congressional Review Act, which requires only a majority vote. If lawmakers do overturn a decision, the CFPB could not revisit the same subject without congressional approval, raising the stakes dramatically.

While that limits the agency in some ways, it can continue to move aggressively on the enforcement front.

Last week Cordray sued the subprime mortgage servicer Ocwen, an indication that the agency has no intention of backing off its policing of financial firms.

"This latest move by Cordray amounts to a not-too subtle ‘Foxtrot Yankee’ to the Trump Administration," Christopher Whalen, chairman of Whalen Global Advisors, wrote in the Institutional Risk Analyst blog.



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