Todd Blanche, the acting attorney general, said on Tuesday he was withdrawing a proposal to create a $1.8 billion fund to compensate people claiming to be victims of unfair prosecution, amid a revolt among Republicans who saw it as an ethical and political disaster.
“We’re not moving forward with the fund, period,” Mr. Blanche told members of a House Appropriations subcommittee. He repeated himself to make clear that he meant the fund proposal would be permanently withdrawn.
His statement could break an impasse with Senate Republicans, who had demanded the fund be scrapped as a precondition for passing a major immigration enforcement bill. Opponents had described the proposal as a slush fund for allies of President Trump.
But Mr. Blanche said he would leave in place an order he signed last month that would, in effect, block the I.R.S. from investigating Mr. Trump, his family and his businesses for existing tax violations.
“Nothing has changed with that,” said Mr. Blanche, who added that the tax order would not shield Mr. Trump and his associates from future investigations.
Outraged Democrats accused Mr. Blanche, the president’s former defense lawyer, of cutting a sweetheart deal that would let the president and his family avoid a potential $100 million penalty.
“So the blanket immunity is, is not something that you’re going to move back on?” asked Representative Rosa DeLauro, Democrat of Connecticut who accused Mr. Blanche of prioritizing the president’s financial interests over the public good.
“You do not belong in this job,” she added.
While Mr. Blanche has now taken the fund off the table, much political damage has already been done. In addition, the unusually favorable tax deal provides Democrats with a potentially potent line of attack in the midterm elections — that Republicans support shielding a billionaire president from tax penalties at a time when many Americans are struggling financially.
Democrats repeatedly requested that Mr. Blanche commit to rescind, in writing, his order creating the payout fund.
“You started it, you established it in writing, so it just makes sense to rescind it in writing,” said Representative Grace Meng, Democrat of New York.
“I’m not committing to put anything in writing,” he said, adding that he would abide by his word and would take the request under advisement.
The testimony came a day after the department committed to abiding by a federal judge’s order pausing the fund’s implementation until at least June 12, a decision some administration officials privately said could provide an off-ramp to unwind the plan.
Mr. Blanche, appearing last month before the Senate Appropriations Committee, had offered few details about how it would be implemented, and declined to guarantee that the money would not be doled out to those who ransacked the Capitol on Jan. 6, 2021.
Mr. Trump had discussed backing off the plan to establish the fund, bankrolled by taxpayers, which was announced last month immediately after he agreed to settle a $10 billion lawsuit he had filed against the I.R.S. over the leak of his tax returns.
Mr. Blanche has said he did not directly participate in the secretive negotiations that led to the settlement.
He had privately expressed concerns about a deal. But he determined that the plan, created by a subordinate and Mr. Trump’s private lawyers, including Boris Epshteyn, passed legal muster and assented, according to officials briefed on the talks.
Critics have accused the acting attorney general, Mr. Trump’s former lead defense lawyer, of sacrificing his department’s independence to serve a president he still views as a client.
In a wide-ranging podcast interview with the Fox News host Sean Hannity released on Tuesday, a relaxed Mr. Blanche systematically attacked all the prosecutors who had overseen cases against the president, offering an unapologetic defense of his pursuit of Mr. Trump’s campaign of retribution.
Mr. Blanche, ditching his standard suit for a polo shirt, assailed the former special counsels Robert S. Mueller III and Jack Smith, who had handled federal investigations into Mr. Trump. Mr. Blanche also attacked state and local prosecutors, including Alvin L. Bragg, the Manhattan district attorney, and Letitia James, the New York attorney general, who had pursued cases against Mr. Trump.
Mr. Blanche openly talked about the so-called grand conspiracy investigation that seeks to tie many of those inquiries together in a single purported plot to deprive Mr. Trump of his rights, breaking sharply with a Justice Department policy that bars the public discussion of ongoing inquiries, particularly those involving grand juries.
“There is a grand conspiracy investigation, correct?” Mr. Hannity asked, in an interview recorded over the Memorial Day weekend.
“Yes, absolutely,” Mr. Blanche responded. “One hundred percent.”
Mr. Blanche then revealed information about two grand juries, which typically sit in secret, hearing evidence in the case. He agreed with Mr. Hannity that one had been empaneled in Florida and the second in another state.
Mr. Blanche even disclosed some targets of the grand conspiracy case by name: James B. Comey, the former F.B.I. director; John O. Brennan, the former C.I.A. director; and James R. Clapper Jr., the former director of national intelligence.
“Let’s talk about individuals,” Mr. Hannity said. “Comey? Brennan? Clapper?”
“Yeah,” Mr. Blanche said.
Nonetheless, Mr. Blanche and other senior officials have tried to blunt Mr. Trump’s attempt to monetize his grievances by obtaining government compensation for the leak of his tax returns.
The fund proposal allowed the president to drop his suit while creating a mechanism to provide payments to supporters who claimed they were also targeted unfairly.
“What we did was entirely legal and appropriate,” Mr. Blanche told Mr. Hannity. “And again, the Trump family gets nothing.”
But that proposal prompted a revolt among Senate Republicans, some of whom berated Mr. Blanche during a contentious meeting at the Capitol last month.
On Monday, the department had signaled that it was re-evaluating the situation, but stopped short of pulling the plug, saying in a statement that it would abide by the ruling in the U.S. District Court for the Eastern District of Virginia temporarily suspending payouts.
But that initially did little to ease the concerns of Republican senators, who reacted with revulsion to a plan they viewed as an ethical minefield and a potential political liability in midterm elections already made treacherous by Mr. Trump’s declining popularity.
Democrats pledged to attach amendments to legislation that would defund the effort, adding to demands by Republicans for the Trump administration to kill the plan outright.
Annie Karni contributed reporting.
Glenn Thrush covers the Department of Justice for The Times and has also written about gun violence, civil rights and conditions in the country’s jails and prisons.
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