March 31, 2017 / 8:34 PM / 5 months ago

Democrats try to counter Trump's attack on U.S. consumer watchdog

WASHINGTON, March 31 (Reuters) - Democrats are trying to counter Republican President Donald Trump's boldest move yet to defang the U.S. consumer financial watchdog, with 40 current and former lawmakers on Friday defending the agency in court.

Two weeks ago the Trump administration took the unusual step of arguing a federal agency does not hew to the Constitution when it filed a legal brief opposing the Consumer Financial Protection Bureau's appeal of a ruling that its structure is unconstitutional.

The ruling also had said the president should have the power to fire the agency's head at will. Under the 2010 Dodd-Frank Wall Street reform law that created the CFPB to protect individuals against financial fraud, the president can only fire the director for cause.

On Friday that law's authors, former representative Barney Frank and former senator Chris Dodd, as well as the most powerful Senate Democrat, Chuck Schumer, and the most powerful one in the House, Nancy Pelosi, shot back.

Congress carefully considered how to establish an agency to protect Americans' finances after the 2007-09 crisis and recession, they argued in the brief, which also was signed by the House Financial Services Committee's top Democrat, Maxine Waters.

"Lawmakers determined that it needed two key attributes to fulfill its mission: independence, and the ability to act promptly and decisively in response to new threats to consumers,” they wrote.

The CFPB director is currently Obama appointee Richard Cordray, hailed by consumer advocates for taking action against predatory lenders but criticized by Wall Street executives and Republicans for wielding too much power.

Democratic lawmakers and states' attorneys general previously asked to represent the CFPB in the appeal, which was filed while Barack Obama was president, over concerns Trump would undermine its position but they were rebuffed. The CFPB can represent itself in legal cases except those before the Supreme Court, putting Trump in a rare predicament: he cannot withdraw the appeal.

The flurry of briefs filed by CFPB defenders this week in the U.S. Court of Appeals for the District of Columbia Circuit show civil rights and consumer advocates are gearing up for the next battle.

If the court agrees the agency is unconstitutional, Trump is expected not to take the case to the Supreme Court, fire Cordray and put a more sympathetic director in. If the court reverses the ruling, Trump's Justice Department could argue against the agency at the Supreme Court. (Reporting by Lisa Lambert; Editing by Bill Trott)

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