A federal judge on Sept. 25 rejected the Trump administration’s claim that the Consumer Financial Protection Bureau (CFPB) cannot take money from the Federal Reserve while the central bank is losing money.
Unlike most federal agencies, the CFPB does not live on an annual appropriation from Congress. The 2010 Dodd-Frank law that created the bureau requires the Fed every quarter to send the bureau whatever amount the CFPB director says is “reasonably necessary” to do its job. The payment is taken from the Fed’s “combined earnings” up to a statutory cap tied to the Fed’s 2009 operating expenses and adjusted for inflation.
The Fed raises that money from interest on securities, fees on banks, and other operations—as opposed to a line item from a federal spending bill. Congress created that off-budget draw so the agency would not have to seek funding from appropriators every year.
The fight in this case is over two words. Dodd-Frank directs the Fed to send the CFPB money from the Fed’s “combined earnings.” Then-acting CFPB Director Russell Vought said that phrase means leftover profit, and because the Fed has been losing money, there is nothing to send.
The Fed hasn’t been profitable in recent years.
In March, it said it lost $19.6 billion in 2025, compared to $77.5 billion in 2024, and $114.6 billion in 2023. It turned a $76 billion profit in 2022, and a $109 billion profit in 2021.
Vought had refused to request the agency’s usual draw, saying Dodd-Frank allows the Fed to transfer funds only from “combined earnings,” which the U.S. Department of Justice interpreted to mean profits. Mark Paoletta succeeded Vought on Aug. 1 as acting director.
Democratic-led states sued in December 2025, arguing that Vought’s funding cutoff would hurt their efforts to police lenders and scammers in their own states.
Aiken said that Vought, by using a “clearly erroneous” reading of the law to shut off the spigot, had “arrogated to himself the ‘power of the purse,’ which belongs exclusively to Congress.” That, she said, violated the separation of powers.
The separation of powers is a constitutional doctrine that divides the government into three branches to prevent any single branch from accumulating too much power.
Aiken vacated Vought’s determination that he cannot request funds whenever the Fed’s interest costs exceed income, and his decision not to seek fiscal 2026 funding on that theory. She said the Fed must transfer the amount the director finds reasonably necessary from gross revenues.
Reuters contributed to this report.
