White House Stymied as Judge Shields CFPB from Defunding

Paul Riverbank, 12/31/2025Judge halts Trump’s defunding bid, spotlighting CFPB’s fate amid fierce legal and political battles.

Late last week, Judge Amy Berman stepped in, putting the brakes on what the White House was attempting: cutting off cash to the CFPB. In plain terms? The agency can keep its lights on and workers will still see deposits in their bank accounts, at least for a little while longer.

So what kicked off this curious, cloak-and-dagger fiscal brinksmanship? At the heart is a curiously modern setup: unlike most agencies, the CFPB doesn't trek to Congress each year with cap in hand. Since its birth after the financial crash, the bureau's funds have trickled from the Federal Reserve itself (yes, the very same one that's supposed to be above the fray of partisan brawls). Ordinarily, that arrangement steers clear of headaches—but recent Federal Reserve "losses" gave the administration an opening. Trump’s legal team argued, with a certain creativity, that since the Fed was hemorrhaging on paper (thanks to high bank payouts and old, low-interest bonds), there just weren’t “combined earnings” left to send over to the CFPB.

Judge Berman, however, seemed less than convinced. She called the new legal interpretation an "unsupported and transparent attempt" to throttle the bureau’s funding—basically, a legal end-run around prior injunctions. In other words: nice try, but no dice.

Behind the scenes, the stakes went far beyond constitutional grammar. Russell Vought, doubling as White House budget chief and acting head of the CFPB, has been frank about his intent to shrink—or even sink—the bureau. Rules installed under both Biden and the earlier Trump days have been on the chopping block, with much of the staff benched or told to start unwinding years of oversight. The National Treasury Employees Union, representing those staffers, has fought pitch battles in courtrooms to keep people on the job, nabbing a preliminary injunction to stave off massive firings while the clash over funding played out. Judge Berman’s latest ruling steadies the ship, for now.

If you’re wondering where the money mess started, a bit of financial context helps. The Fed has, since 2022, looked rougher on paper—caught in a vice of higher payouts to banks and still nursing a portfolio of low-yielding bonds from rosier times. But accounting footnotes aside, the CFPB's budgets have always come directly from Fed channels, through flush years and lean ones. The administration's argument—that cash flows stop with the Fed’s losses—met resistance both from legal precedent and the day-to-day mechanics of the agency's funding.

Zooming out, this is hardly an isolated fight. Quarrels about who controls the purse strings for agencies like the CFPB have become a staple of Beltway theater. The Supreme Court, for one, waded into the fray not long ago. In Seila Law v. CFPB, justices clipped the wings of the CFPB’s single-director leadership, saying it upset the executive branch’s powers. But even then, they left the Fed’s unique perch unscathed, with Justice Alito remarking, perhaps with a raised eyebrow, about the Board's uncommon status. Justice Kagan, rarely one to let a point slide, jabbed back in her dissent, arguing that the majority read too much into what was supposed to be an aside.

Now, as the latest filings from the White House try to leverage the Fed’s special position (suggesting, perhaps wistfully, that it shouldn’t be a template for other agencies), we’re left staring at a familiar Washington puzzle. Agency independence? Still up for debate. How to fund consumer watchdogs during a time of shifting political winds? No tidy answers yet.

For the millions counting on the CFPB to keep banks and lenders honest—and for the workers inside the agency whose livelihoods hung by a thread—Judge Berman’s decision brings a respite. But in truth, the questions swirling around the bureau’s design and its future are nowhere close to settled. If recent history is any guide, this saga will return—courtrooms, headlines, and all.

If you've spent any time watching Washington tussle over the gears of government lately, the latest courtroom drama involving the Consumer Financial Protection Bureau might feel oddly familiar. For a few tense weeks, the agency and the Trump White House were locked in a spar over funding—an arcane, high-stakes scuffle with real paychecks and consumer protections dangling in the balance.Late last week, Judge Amy Berman stepped in, putting the brakes on what the White House was attempting: cutting off cash to the CFPB. In plain terms? The agency can keep its lights on and workers will still see deposits in their bank accounts, at least for a little while longer.So what kicked off this curious, cloak-and-dagger fiscal brinksmanship? At the heart is a curiously modern setup: unlike most agencies, the CFPB doesn't trek to Congress each year with cap in hand. Since its birth after the financial crash, the bureau's funds have trickled from the Federal Reserve itself (yes, the very same one that's supposed to be above the fray of partisan brawls). Ordinarily, that arrangement steers clear of headaches—but recent Federal Reserve "losses" gave the administration an opening. Trump’s legal team argued, with a certain creativity, that since the Fed was hemorrhaging on paper (thanks to high bank payouts and old, low-interest bonds), there just weren’t “combined earnings” left to send over to the CFPB.Judge Berman, however, seemed less than convinced. She called the new legal interpretation an "unsupported and transparent attempt" to throttle the bureau’s funding—basically, a legal end-run around prior injunctions. In other words: nice try, but no dice.Behind the scenes, the stakes went far beyond constitutional grammar. Russell Vought, doubling as White House budget chief and acting head of the CFPB, has been frank about his intent to shrink—or even sink—the bureau. Rules installed under both Biden and the earlier Trump days have been on the chopping block, with much of the staff benched or told to start unwinding years of oversight. The National Treasury Employees Union, representing those staffers, has fought pitch battles in courtrooms to keep people on the job, nabbing a preliminary injunction to stave off massive firings while the clash over funding played out. Judge Berman’s latest ruling steadies the ship, for now.If you’re wondering where the money mess started, a bit of financial context helps. The Fed has, since 2022, looked rougher on paper—caught in a vice of higher payouts to banks and still nursing a portfolio of low-yielding bonds from rosier times. But accounting footnotes aside, the CFPB's budgets have always come directly from Fed channels, through flush years and lean ones. The administration's argument—that cash flows stop with the Fed’s losses—met resistance both from legal precedent and the day-to-day mechanics of the agency's funding.Zooming out, this is hardly an isolated fight. Quarrels about who controls the purse strings for agencies like the CFPB have become a staple of Beltway theater. The Supreme Court, for one, waded into the fray not long ago. In Seila Law v. CFPB, justices clipped the wings of the CFPB’s single-director leadership, saying it upset the executive branch’s powers. But even then, they left the Fed’s unique perch unscathed, with Justice Alito remarking, perhaps with a raised eyebrow, about the Board's uncommon status. Justice Kagan, rarely one to let a point slide, jabbed back in her dissent, arguing that the majority read too much into what was supposed to be an aside.Now, as the latest filings from the White House try to leverage the Fed’s special position (suggesting, perhaps wistfully, that it shouldn’t be a template for other agencies), we’re left staring at a familiar Washington puzzle. Agency independence? Still up for debate. How to fund consumer watchdogs during a time of shifting political winds? No tidy answers yet.For the millions counting on the CFPB to keep banks and lenders honest—and for the workers inside the agency whose livelihoods hung by a thread—Judge Berman’s decision brings a respite. But in truth, the questions swirling around the bureau’s design and its future are nowhere close to settled. If recent history is any guide, this saga will return—courtrooms, headlines, and all.