NEW YORK (AP) — The White House cannot stop funding the Consumer Financial Protection Bureau, a federal district court judge ruled Tuesday, just days before the office’s funds were likely to have dried up and the consumer finance agency had no money to pay its employees.

Judge Amy Berman ruled that the CFPB can continue to get its funds from the Federal Reserve, even though the Fed operates at a loss, and that the White House’s new legal argument about how the CFPB gets its funds is invalid.

At the center of this case is whether Russell Vought, President Donald Trump’s budget director and acting director of the CFPB, can effectively close the agency and lay off all of the bureau’s employees.

The CFPB has been largely inoperable since President Trump took office nearly a year ago. Most of its employees are prohibited from doing any work, and most of the office’s operations this year have been to undo work it did during President Biden’s administration and even during Trump’s first term.

Vought itself has made comments in which it has made clear that its intention is to effectively close the CFPB.

Office of Management and Budget (OMB) Director Russell Vought listens as President Donald Trump speaks at a Rose Garden Club luncheon at the White House on October 21, 2025.
Office of Management and Budget (OMB) Director Russell Vought listens as President Donald Trump speaks at a Rose Garden Club luncheon at the White House on October 21, 2025.

ANDREW CABALLERO-REYNOLDS via Getty Images

The National Treasury Employees Union, which represents CFPB workers, has been successful in court to stop mass layoffs. The union sued Vought earlier this year and won a preliminary injunction halting the layoffs.

In recent weeks, the White House has used a new line of argument to potentially circumvent the court’s restraining order. The argument is that the Fed has no “combined earnings” at this time to fund the CFPB’s operations. The CFPB obtains its funding from the Federal Reserve through scheduled quarterly payments.

The Federal Reserve has been operating at paper losses since 2022 as a result of the central bank’s attempt to combat inflation. The Federal Reserve is keeping bonds on its balance sheet from a period of low interest rates during the COVID-19 pandemic, but it currently has to pay higher interest rates to banks that hold deposits at the central bank.

The entrance to the headquarters of the Consumer Financial Protection Bureau (CFPB) photographed on February 10, 2025.
The entrance to the headquarters of the Consumer Financial Protection Bureau (CFPB) photographed on February 10, 2025.

Anna Moneymaker via Getty Images

The Federal Reserve has been recording a “deferred asset” on its balance sheet that it expects to pay off in the coming years as low-interest bonds mature off the Fed’s balance sheet.

Because of this loss on paper, the White House has argued that there is no “combined revenue” for the CFPB to draw on. The CFPB has operated since 2011, including during President Trump’s first term, drawing on the Federal Reserve’s operating budget.

White House lawyers submitted a notice to the court in early November, arguing that the CFPB would run out of appropriations in early 2026, using the “combined revenue” argument, and does not expect to get additional appropriations from Congress.

This legal argument about combined profits is not entirely new. It has floated around conservative legal circles since the time the Federal Reserve began operating at a loss. However, it has never been proven in court.

“It appears that defendants’ new understanding of ‘combined profits’ is a transparent and baseless attempt to defund the CPFB and yet another attempt to achieve the end that the Court’s injunction was intended to prevent,” Berman wrote in an opinion.

A White House spokeswoman did not immediately respond to a request for comment on Berman’s opinion.