The top lawyer at the Consumer Financial Protection Bureau sent an email to the agency's supervisory staff telling examiners that if they are not working, they are disobeying orders.
On Tuesday, the CFPB's chief legal officer sent an email to the supervisory staff claiming that he had instructed all legally required supervisory work to resume on March 2.
The email came a day after a federal judge ordered the CFPB's leadership to prove that supervisory work, required by law, is actually being performed.
"I directed ALL CFPB staff to perform all work required by law and that they did not need to seek prior approval to do so," Mark Paoletta, the CFPB's chief legal officer, wrote in the email. "Nothing I have said or written since then contradicts that."
The email communications are a critical paper trail in an
Paoletta's emails appeared to retreat from a stop-work order issued on Feb. 8 telling all CFPB employees to "
On Monday, District Court Judge Amy Berman Jackson, of the U.S. District Court for the District of Columbia,
Berman Jackson also ordered the government and the union to submit
Paoletta and Vought — who both work at the Office of Management and Budget, which Vought directs, in addition to holding top jobs at the CFPB — need a paper trail they can point to showing that statutorily required work such as supervisory exams of large banks and nonbanks is ongoing.
On March 2, Paoletta sent an email to Martinez under the subject heading "All Hands Message Re: Work Required by Law."
"On behalf of Acting Director Vought, I am writing to you to ensure that everyone is carrying out any statutorily required work, as he set forth in his Feb. 8th email," he wrote.
Supervisory examiners and managers, who spoke anonymously for fear of retaliation, told American Banker that credit limits on the CFPB's SP3 travel cards had been cut to $1 or the accounts were closed, making it impossible to book a flight or hotel to travel. The travel cards are issued by the General Services Administration to allow federal agencies to pay for travel expenses.
The CFPB did not respond to a request for comment.
Supervisory staff also were ordered not to communicate with supervised companies and were prohibited from any discussions with their counterparts at the Federal Deposit Insurance Corp., the Federal Reserve or the Office of the Comptroller of the Currency, the employees said.
"All exam work is on hold," one supervisory employee said. "The prohibition on external communications goes beyond supervised entities and we have been required to ignore inquiries from OCC, the Federal Reserve and the FDIC regarding current and future exam work and ongoing monitoring, so risk intelligence is no longer being shared with prudential regulators."
In addition, supervisory managers are receiving calls from bank CEOs, chief risk officers and chief commercial officers asking if supervisory staff can return phone calls. Some of those managers have sought permission from Paoletta but have received no response, an employee said.
"Any representation that approval is being given for supervision staff to engage with entities or prudential regulators is 100% false," the employee said. "We have made requests and have been ignored."
"I can handle thoughtful discussion of policy differences and changes in strategy and focus based on policy priorities," the employee added, "but brazen illegal actions, lying in federal court and complete disregard for reasoned discussion is insane."
In the email sent by Paoletta on Tuesday, he specifically called out Cassandra Huggins, the CFPB's principal deputy assistant director of supervision, who had asked the agency's leadership for permission to restart supervisory exams. Huggins' request was denied by Martinez and she subsequently sent an email to supervisory staff informing them that supervision remained on hold, drawing a rebuke from Paoletta, according to his email.
"Let me be clear to you and the entire supervision office, which I have cc:d on this email: You are authorized and directed to work on matters specifically required by statute," Paoletta wrote.
Huggins' email claiming that supervisory work was denied was
"I am concerned that you sent out an internal agency communication on such an unfounded basis that is false and directly contradicts my March 2nd message without first getting confirmation directly from me," Paoletta wrote. "Your actions severely undermine the Agency leadership's ability to supervise the agency staff and to ensure that statutorily required duties are being performed."
Despite claiming that supervision is being conducted, Paoletta asked Huggins and other supervisory staff to prepare a report describing all pending examination actions, their current status and the name of lead examiners.
"The bureau's new leadership seeks to understand the status of all of the agency's actions so it can align such actions to the Bureau's new priorities consistent with the law," he wrote. "Such information is vital to allowing new leadership to ensure the Bureau is faithfully executing the law."
