A federal judge in Washington, D.C., delivered a sharp rebuke Tuesday to the Trump administration’s plan to eliminate the Consumer Financial Protection Bureau, rejecting its reasons justifying cutting off the agency’s funding.
Judge Amy Berman Jackson wrote that the agency can keep receiving funding from the Federal Reserve, even though the Fed has operated at a loss for three years, Politico reported.
The bureau draws money directly from the Fed at the director’s discretion, a funding mechanism established when Congress created the agency. White House budget chief Russ Vought, who is also acting CFPB director, challenged this arrangement and attempted to halt the money flow.
Vought’s legal team argued that tapping Fed funds violates the CFPB’s original charter because the central bank operated at a loss.
However, the judge found his reasoning unpersuasive, characterizing the funding crisis as deliberately engineered, and noting that the Fed consistently supported the bureau for more than a decade, regardless of profitability. The judge stated the “lapse” in funding was “manufactured by the defendants” and rejected it as a justification for abandoning the agency’s responsibilities.
A federal appeals court in Washington, D.C. scheduled oral arguments for February to address broader legal questions. In the interim, the district court’s order ensures the CFPB continues receiving funds. The Federal Reserve returned to profitability in December, further undermining the administration’s core argument for the funding freeze.
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