@media ( min-width: 300px ){.newspack_global_ad.scaip-1{min-height: 100px;}}@media ( min-width: 728px ){.newspack_global_ad.scaip-1{min-height: 90px;}}

A legal office in the White House, at the behest of Office of Management and Budget director and Project 2025 architect Russ Vought, has decided to redefine the word “earnings” in order to bankrupt the largely dormant Consumer Financial Protection Bureau. The continuing resolution to fund the government would bar the White House from firing any workers at CFPB, however, despite this new claim that it cannot legally obtain any money to pay them.

In a notice filed in the ongoing federal court case between the agency and the union representing the workers it wants to fire, the CFPB, currently led by its acting director—also Vought—claims that the Office of Legal Counsel (OLC), which writes legal opinions for the executive branch, has determined that the agency cannot request any further money from the Federal Reserve to finance ongoing operations, meaning that all funds will be exhausted by “early 2026.”

More from David Dayen

It’s yet another attempt to dismantle an agency that Congress established by statute, based on tortured textual readings. This comes at a time when credit card, student loan, and automotive loan delinquencies are at or near record highs since the CFPB was established in 2010. As unemployment increases, having a zombie regulator of consumer debt would be catastrophic. But that’s what Vought has determinedly sought for months.

Under the statute that created CFPB, the Bureau receives its funds not from congressional appropriations but from a transfer from the Fed, which previously had responsibility for numerous consumer financial protection laws. The CFPB requests funds on a quarterly or annual basis, and the Fed transfers the funds, available “from the combined earnings of the Federal Reserve System.”

@media ( min-width: 300px ){.newspack_global_ad.scaip-2{min-height: 100px;}}@media ( min-width: 728px ){.newspack_global_ad.scaip-2{min-height: 90px;}}

The current Supreme Court deemed the funding structure of the CFPB lawful in 2023.

Earlier this year, Vought declined to seek a draw from the Fed because he said CFPB had an adequate amount of funding. Since then, funding for CFPB has been cut roughly in half by the One Big Beautiful Bill Act, which reduced the cap on the amounts CFPB can draw from the Fed.

But recently, Vought has put forward the rather outlandish notion that “the Federal Reserve currently lacks combined earnings from which the CFPB can draw,” and asked OLC for an opinion on the subject. The OLC’s response, which was filed with the court, notes that since 2022, costs at the Federal Reserve (including operating expenses, and interest on excess reserves to depository institutions) have exceeded revenue (mostly from securities and interest income and service fees for things like check clearing). In 2024, the Federal Reserve lost about $77.6 billion.

Since the Fed is losing money, there are no “combined earnings” (“combined” meaning all of the 12 Federal Reserve Banks across the country) from which CFPB can draw its portion, according to OLC. “If the Federal Reserve has no profits, then it cannot transfer money to the CFPB,” the memo says.

The Prospect in your inbox

Subscribe for analysis that goes beyond the noise.

The OLC memo puts forward a strained definition of “earnings” as solely “profits,” even though earnings could also mean gross earnings. Indeed, in the Fed’s financial statement, it posts the loss as “net earnings,” meaning it had to modify the term in order to accurately define it. The statute only says “combined earnings,” and reading it to suggest that the CFPB may draw on Fed funds to prevent financial scams only in years when the Federal Reserve is a moneymaker defies all logic. Incidentally, the Federal Reserve Board of Governors would have to close up shop if this argument about combined earnings is correct, yet somehow Russ Vought and the OLC are not demanding the immediate elimination of the sole monetary policy body in the United States.

Even within its memo, OLC defines “net earnings” as “net income” but then just defines “earnings” as “profits,” rather than income, which the Federal Reserve has more than enough of to fund CFPB.

@media ( min-width: 300px ){.newspack_global_ad.scaip-3{min-height: 100px;}}@media ( min-width: 728px ){.newspack_global_ad.scaip-3{min-height: 90px;}}

This is not a new theory. For a few years now, former Harvard professor Hal Scott has claimed that the “combined earnings” language in the CFPB statute means that it cannot receive money when the Fed operates at a loss. Georgetown Law professor Adam Levitin has previously made quick work of this argument. “It’s hard for anyone to fairly get to Scott’s reading of the statute without being seriously motivated,” he wrote. “It is not a call to heed the law, but a call for the President to ignore the law based on his own arbitrary whim, usurping the powers of both Congress and the judiciary.”

Every court that has encountered this argument has declined to take it up. The Supreme Court also deemed the funding structure of the CFPB as lawful in 2023, and did not redefine “combined earnings” as net earnings or profits in the course of that opinion.

Levitin has reserved similar scorn for the OLC’s legal maneuvering. “OLC has long had a measure of respect and credibility for its independence,” he wrote. “But with opinions like this, the OLC has squandered that reputation … It is just another political apparatchik office.”

Many of the CFPB’s functions are statutorily obligated, and failing to adhere to them would violate the constitutional requirement that the executive branch take care that the laws are faithfully executed. What little deregulatory work Vought is eagerly engaged in would also have to stop.

The OLC memo suggests that CFPB could simply request appropriations from Congress. This is, of course, something that conservatives have long called for, to make CFPB dependent on Congress and therefore put at the whim of powerful men fattened by bank contributions. The whole point of the CFPB’s funding structure, which again was found constitutional by the current John Roberts–led Supreme Court, was to insulate CFPB funding from politics.

To be sure, under Vought the agency has been all but shut down, with the majority of its staff no longer doing any work. Vought has attempted to fire the vast majority of CFPB employees over the past several months but has been stymied by the courts. This OLC memo is the latest attempt to achieve that mass firing by putting the CFPB into bankruptcy.

There is a problem for Vought, however. The continuing resolution to end the government shutdown includes a section prohibiting the Trump administration from carrying out any reductions in force through the duration of the funding approved, which ends January 30. According to the text, this prohibition holds “without regard to the source of funding.” In other words, even though CFPB has not received any money from congressional appropriations, the prohibition means that CFPB staff could not be fired.

That puts Vought’s team in a tricky situation. They cannot fire any CFPB staff, yet they claim they will run out of money in early 2026. Even if they could take money from the Fed, the halving of the statutory cap means that the agency can’t fund the current staff levels. Yet it can’t fire anyone either.

Attorneys and former CFPB employees suggest that the court that’s hearing the case is unlikely to buy the argument that a Fed that fails to turn a profit cannot fund CFPB, and that they read the Vought/OLC effort as an attempt to get around the injunction on firing staff that is currently in place. In response, the National Treasury Employees Union, which represents CFPB staffers, could file a motion to force CFPB to request funds from the Fed as emergency relief.

Thanks to you, we hit our fall fundraising goal! Independent journalism takes resources, and your support makes it possible for us to keep exposing corporate power and defending democracy. We’re so grateful to everyone who chipped in.

If you missed the campaign, it’s never too late to sustain this work — your support matters year-round.

Recommended Reading