Judge Rules Against White House in CFPB Funding Dispute
By KEN SWEET, AP Business Writer
In a pivotal decision that could impact the operational future of the Consumer Financial Protection Bureau (CFPB), a federal judge has ruled that the White House cannot halt the agency’s funding. This ruling comes just days before the CFPB would potentially face a funding shortfall, jeopardizing its ability to pay its employees.
Federal Judge Amy Berman determined that the CFPB shall continue to receive its funding from the Federal Reserve. This decision rebuffs the White House’s recent legal argument challenging the legitimacy of the CFPB’s funding mechanism.
The core issue revolves around whether Russell Vought, President Donald Trump’s budget director and acting director of the CFPB, can effectively dismantle the agency and terminate its workforce. Since President Trump took office nearly a year ago, the CFPB has largely been inactive, with its staff restricted from performing their duties. The bureau’s recent activities have mainly focused on reversing its work from previous administrations.
Despite Vought’s intentions to shut down the CFPB, the National Treasury Employees Union, representing CFPB workers, has successfully challenged these efforts in court. Earlier this year, the union secured a preliminary injunction to prevent mass layoffs.
Recently, the White House introduced a novel legal argument, claiming that the Federal Reserve lacks “combined earnings” to fund the CFPB. This argument arises from the Fed’s current paper losses, which are attributed to its inflation-combatting strategies. The Fed’s balance sheet holds low-interest bonds from the pandemic era, necessitating higher interest payouts to banks holding deposits at the Fed. This situation has led the Fed to record a “deferred asset” expected to resolve as bonds mature.
The White House contends that without “combined earnings,” the CFPB’s funding from the Fed is unjustifiable. The CFPB, operational since 2011, including during Trump’s first term, relies on the Fed’s operating budget.
In a November notice to the court, White House lawyers asserted that the CFPB would exhaust its appropriations by early 2026 without additional congressional funding, hinging on the “combined earnings” claim. This legal theory, while circulating in conservative circles since the Fed’s losses began, has yet to be tested in court.
Judge Berman criticized this approach, stating, “It appears that defendants’ new understanding of ‘combined earnings’ is an unsupported and transparent attempt to starve the CFPB of funding and yet another attempt to achieve the very end the Court’s injunction was put in place to prevent.”
A spokeswoman for the White House did not immediately provide comments on Judge Berman’s ruling.
