It takes real skill to bankrupt a government agency, particularly one that is barely functioning. Yet that’s exactly what Russell Vought is trying to do. Vought, you might recall, is the acting Director of the CFPB, and last February he made a big show of declining to draw down funds for the CFPB from the Federal Reserve System, claiming that the Bureau had more than adequate funds on hand. Vought then embarked on a campaign to fire most of the CFPB’s workforce, resulting in significant attrition, even if his efforts remain tied up in court. But now Vought—and remember that this is the guy who also runs the Office of Management and Budget—is claiming that the CFPB will run out of money in early 2026. He claims that the CFPB, relying on a newly issued opinion from the Department of Justice’s Office of Legal Counsel, can only draw down funds on the Federal Reserve System when the system runs a profit, which it is not currently doing.

Three observations about this incredibly cynical play.

1. This is a mess solely of Vought’s creation. The CFPB’s prior legal position was that it has a right to draw on the revenues of the Fed, rather than the profits. That legal interpretation did not need to be disturbed, but Vought wanted to starve the CFPB of funding, so he asked the OLC to issue an opinion on the issue (and I’m sure that if OLC felt it couldn’t have given him the opinion he wanted, no opinion would have been issued).

2. Even if one were charitably inclined toward Vought, then the best that could be said for him is that he is a grossly negligent steward of the agency. Instead of grandstanding last February and refusing to take a draw on the Fed, Vought should have been looking ahead at the risk that the Fed would not be running of a profit, and therefore should have made the draw. But let’s be real–Vought has always wanted to asphyxiate the agency because it offends his anti-government sensibilities.

3. The OLC opinion letter is–and I use this term technically–utter hogwash. It’s hard not to read the opinion without feeling it strain to achieve a pre-ordained result, rather than trying to honestly reason through a tricky legal issue. It is not a good faith opinion.

Through a lot of sophistry, the OLC ultimately concludes that the term “net earnings” means “net income,” but the term “earnings” on its own somehow doesn’t mean “income,” but rather means “profits.” Come again?

For years I have been training law students to think that profits are, by definition, net income. That’s what the whole “net” means. That’s what we all teach when we cover calculation of expectancy damages in 1L Contracts. And this isn’t just ivory tower stuff. My first time speaking in court was litigating a bankruptcy claim objection against a creditor who was claiming breach of contract damages of gross profits, i.e., income, when they were only entitled to net profits, i.e., net income.

Beyond the linguistic flimflam, the OLC does not have a satisfactory response to the observation that its conclusion is absurd: do we really think that Congress set up a system in which consumer protection will be funded only in those years when the Federal Reserve System runs a profit? How about only in those years when the moon is in the Seventh House and Jupiter aligns with Mars?

The Bureau cannot play Joseph and stockpile funds in the fat years in anticipation of future lean years. The statutory provision authorizing its funding has a formula that does not allow allow for intentional stockpiling for funds by the Bureau: 

the amount determined by the Director to be reasonably necessary to carry out the authorities of the Bureau under Federal consumer financial law, taking into account such other sums made available to the Bureau from the preceding year (or quarter of such year).

The funding formula actually decreases the allowed draw to the extent that the Bureau has stockpiled funds.

The OLC’s response to this is that “Congress also provided a safety mechanism should the Bureau experience funding shortfalls,” namely seeking an appropriation. That’s incorrect. The OLC confuses the idea of extra funding with alternative funding. The Bureau may seek appropriations only as an extra, not as an alternative. We can see this in the statutory provision regarding CFPB appropriations:

(A) In general. The Director is authorized to determine that sums available to the Bureau under this section will not be sufficient to carry out the authorities of the Bureau under Federal consumer financial law for the upcoming year.

(B)Report required. When making a determination under subparagraph (A), the Director shall prepare a report regarding the funding of the Bureau, including… the extent to which the funding needs of the Bureau are anticipated to exceed the level of the amount set forth in subsection (a)(2).

Now this is the key:  an appropriations request by the Bureau requests the Bureau to determine that its funding needs exceed “the level of the amount set forth in subsection (a)(2).” 12 U.S.C. § 5497(a)(2) is a funding limit based on a percentage of the Federal Reserve System’s 2009 operating expenses. It is not based on the “combined earnings of the Federal Reserve System,” which is the term used in subsection (a)(1). In other words, the CPFB cannot request Congressional appropriations unless its funding needs exceed 6.5% of the Fed’s 2009 operating expenses, irrespective of whether the Fed runs a profit.

The connection of appropriations to the section (a)(2) limit on the Fed’s 2009 operating expenses shows that the appropriations provision is about extra funding, not alternative funding. The distinction matters because it shows that the OLC’s interpretation of “combined earnings” as meaning “profit” rather than “combined income” would produce an absurd result, namely that in years where the Fed has no profit the Bureau has no funding because it is not in fact authorized to seek Congressional appropriations unless it would need funding exceeding 6.5% of the Fed’s 2009 operating expenses, which is does not. 

Even if the OLC were correct and Congressional appropriations were set up as an alternative, rather than extra funding stream, the OLC’s position is ridiculous. It asks us to engage in the charade—during the longest ever shutdown no-less—that we have a functional government. The whole point of Federal Reserve funding for the CFPB was so that it would not need to be subject to the appropriations process and the whims of a necrotic Congress.¹

OLC has long had a measure of respect and credibility for its independence. It had the reputation of trying to get the answer right, not just give the administration what it wanted. But with opinions like this, the OLC has squandered that reputation. Today no one should give it any particular deference or respect. It is just another political apparatchik office. But maybe this sort of JV legal analysis is what we get when we don’t pay our civil servants. I hope this funding question gets a chance to be properly litigated.

[Updated Nov. 12]

1. For what it’s worth, the fiction of a functioning legislative branch of government is central to the entire Republican argument against the administrative state:  just stop the delegations to unaccountable agencies and let the popularly elected branch of government make the decisions. Does anyone, however, really think that Congress is up to the job? Could this Congress even run a lemonade stand, much handle the details of 21st century government? ↩︎