The Justice Department has asked Federal Reserve Chair Jerome Powell to clarify whether the central bank has returned to profitability, a determination the Trump administration says could dictate whether the Consumer Financial Protection Bureau may legally receive funding. The exchange comes as the CFPB warns it may run out of money in as little as two weeks and has notified staff of potential job cuts.
The CFPB, unlike most federal agencies, does not rely on congressional appropriations. Instead, it draws its operating funds directly from the Federal Reserve. The Trump administration has argued in court that the CFPB cannot request or receive funding when the Fed reports “no profits,” a position the Bureau’s supporters and several former Federal Reserve officials say is legally and operationally flawed.
Why the DOJ is asking questions now: In a letter included in federal court filings, Assistant Attorney General Brett Shumate wrote that the Office of Legal Counsel concluded the CFPB could not request funding so long as the Fed had “no profits” under 12 U.S.C. § 5497(a)(1). Shumate noted recent reporting suggesting the Fed may have returned to profitability and asked Powell to confirm whether the Fed currently has or soon expects to have “combined earnings” under OLC’s definition.
Shumate also referenced the CFPB’s determination that, at the time of its last funding request, the Fed had no such earnings — leaving the Bureau legally unable to draw new funds. That determination triggered the current warning that the CFPB could soon exhaust its remaining balances.
Courts, workers, and former fed leaders push back: CFPB employees and consumer-advocacy groups have filed lawsuits seeking to force the administration to resume funding requests. Courts have recently rejected arguments that the Fed may only fund the CFPB when running a surplus. In addition, five former senior Federal Reserve officials argued that the administration’s interpretation misunderstands how a central bank operates, noting that the concept of “profit” does not function the same way for the Fed as it does for private firms.
