Republicans have long criticized the Consumer Financial Protection Bureau for what they say are politicized tactics targeting financial institutions.
A federal judge ruled Tuesday that the White House cannot lapse its funding of the Consumer Financial Protection Bureau (CFPB), a watchdog that has long drawn the ire of congressional Republicans.
In a ruling, U.S. District Judge Amy Berman Jackson wrote that the CFPB should continue to receive its funding from the Federal Reserve despite the central bank operating at a loss. The Trump administration has argued that the CFPB should be dissolved because how it gets its funds is invalid.
The CFPB has largely been inoperable since President Donald Trump was sworn into office nearly a year ago. Its employees are mostly forbidden from doing any work, and most of the bureau’s operations this year have been to unwind the work it did under President Joe Biden and even under Trump’s first term.
The head of the White House’s budget office, Russell Vought, is currently the acting head of the CFPB. The White House earlier this year issued a “reduction in force” for the CFPB, which would have furloughed or laid off much of the bureau.
In November, the Trump administration’s attorneys said in a court filing that a Department of Justice (DOJ) memo had concluded there were no legally available funds at the Federal Reserve for the CFPB to request.
The memo, which was issued by the DOJ’s Office of Legal Counsel, stated that “if the Federal Reserve has no profits, it cannot transfer money to the CFPB.”
“Because the only lawful source of funding from the Federal Reserve has dried up,” the memo added, “the proper method for obtaining additional funds is to request them from Congress pursuant to the Appropriations Clause, not to draw funds from the Federal Reserve without a congressional appropriation.”
The White House has also said that the CFPB cannot lawfully draw funds to fund its operations from the Fed if the Fed does not have “combined earnings” to allocate to the bureau. Without additional funds, the CFPB is expected to deplete its operating funds completely in January.
But in her order, Jackson wrote that the government “manufactured” arguments to allow for a lapse in funding for the CFPB.
“Neither the statute, the injunction, nor the Fed’s willingness to pay has changed; the only new circumstance is the administration’s determination to eliminate an agency created by Congress with the stroke of pen, even while the matter is before the Court of Appeals,” she wrote in her order.
