The White House cannot lapse in funding for the Consumer Financial Protection Bureau, a federal district court judge ruled on Tuesday, days before the bureau’s money would have likely run out and left the consumer finance agency without funds to pay its employees. In the ruling, Judge Amy Berman ordered that the CFPB should continue to receive its funding from the Federal Reserve, even though the central bank has been operating at a paper loss. The court said the White House’s latest legal argument about the CFPB’s funding mechanism did not stand.
Berman ruled on whether Russell Vought—described in the case as acting CFPB director and the administration’s budget director—could effectively shut down the agency and lay off bureau employees. The AP report said the CFPB has been largely inoperable since President Donald Trump took office nearly a year earlier, with employees mostly forbidden from doing work and much of the bureau’s activities centered on unwinding work done during the prior administration and during Trump’s first term.
The dispute has been tied to the National Treasury Employees Union, which represents workers at the CFPB. The union sued Vought earlier this year and, the report said, largely succeeded in court to stop mass layoffs and furloughs while the legal process continued. A preliminary injunction kept those actions from moving forward as the parties litigated.
In recent weeks, the White House used what the court and AP described as a new line of argument to try to get around the injunction. The administration argued that the Federal Reserve had no “combined earnings” available at the moment to fund the CFPB’s operations, given that the CFPB’s funding comes from expected quarterly payments from the Fed. The AP report said the CFPB has historically received its operating budget from the Federal Reserve, including since 2011 and during Trump’s first term.
The government’s position drew on the fact that the Federal Reserve has been operating at a paper loss since 2022, which AP said is linked to the Fed’s efforts to combat inflation. AP reported that the Fed holds bonds from a period of low interest rates during the COVID-19 pandemic but pays higher interest rates to banks that hold deposits with the central bank, leaving the Fed recording a “deferred asset” that it expects will be paid down as those lower-rate bonds mature over the next few years.
Berman said in her opinion that the administration’s “combined earnings” theory was unsupported and framed the development as an effort to avoid the need to decide the case on the merits. She wrote that it appeared to be an attempt to starve the CFPB of funding and another effort to reach the end the court order was designed to prevent.
The opinion also described how the White House made this argument as a response to the injunction. The AP report said White House lawyers sent a notice to the court in early November contending that the CFPB would run out of appropriations in early 2026 and that Congress was not expected to provide additional appropriations. The court set a timeline that includes a trial scheduled for February 2026 on whether the union can sue Vought over the layoffs.
Jennifer Bennett of Gupta Wessler LLP, which AP reported as representing CFPB employees, said in response that the court made clear Vought could not justify abandoning the agency’s obligations or violating a court order by manufacturing a lack of funding. A White House spokeswoman did not immediately respond to a request for comment on the opinion.