Why Judge Jackson Is Wrong: The CFPB Cannot Be Lawfully Funded When the Federal Reserve Has No Profits

The article “Why Judge Jackson Is Wrong: The CFPB Cannot Be Lawfully Funded When the Federal Reserve Has No Profits” argues that the CFPB’s current funding from the Federal Reserve is unlawful whenever the Fed is operating at an overall loss, and that Judge Amy Berman Jackson’s contrary ruling in National Treasury Employees Union v. Vought misconstrues both the Dodd‑Frank statute and constitutional limits on appropriations.​

Core statutory dispute

• Dodd‑Frank provides that the CFPB may draw its budget “from the combined earnings of the Federal Reserve System,” subject to a cap tied to the Fed’s 2009 operating expenses.​

• Judge Jackson held that “combined earnings” means all revenue the Fed takes in, even if total expenses exceed that revenue, so CFPB funding can continue during periods when the Fed runs a net loss.​

• The article, echoing an Office of Legal Counsel (OLC) opinion and commentary by Hal Scott, contends that “combined earnings” is best read as profits (net earnings), not gross revenue, so if the Fed has no overall profit there is nothing from which the CFPB can legally draw.​

Why the article says Judge Jackson is wrong

• Text and structure: The authors say ordinary accounting and statutory usage treat “earnings” at a system level as net income, and that Congress knew how to authorize funding from “revenues” or “assessments” when it wanted to, but instead chose “combined earnings” as a narrower, profit‑based source.​

• Federal Reserve framework: Under the Federal Reserve Act, Reserve Banks use income to pay expenses, dividends, and surplus, and then remit remaining net earnings to Treasury; the article argues that Dodd‑Frank piggy‑backs on that net‑earnings concept, so “combined earnings” necessarily means what is left after expenses.​

• Accounting reality: Since 2022, the Federal Reserve System as a whole has been operating at a loss, meaning no positive net earnings; yet the Fed has reportedly transferred roughly $1.9 billion to the CFPB during this loss period, which the article characterizes as contrary to Dodd‑Frank’s source limitation.​

• Constitutional concern: The authors say that allowing CFPB draws even when the statutory source has no profits effectively severs the Bureau’s funding from the identified source and creates a serious Appropriations Clause problem, because Congress authorized only a specific stream (combined earnings), not an open‑ended claim on Federal Reserve resources.​

• Deference and precedent: Relying on the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo (2024), which cuts back on deference to agency statutory interpretations, the article argues that courts cannot lean on past Fed/CFPB practice to expand “combined earnings” beyond its best textual meaning.​

Relationship to the Supreme Court’s CFPB decision

• In 2024, the Supreme Court held in CFPB v. CFSA that the CFPB’s basic funding mechanism—drawing up to a capped amount from the Fed’s combined earnings—is constitutional under the Appropriations Clause, focusing on the fact that Congress specified both source and purpose.​

• The article stresses that this decision assumed a lawful statutory source existed; it did not decide what happens if the Fed has no profits, so the “no profits, no funding” theory is presented as a separate, still‑open statutory constraint, not a renewed facial attack on the structure upheld by the Court.​

Practical and litigation implications

• OLC has now formally concluded that, as long as the Federal Reserve System has no combined profits, the CFPB “may not legally request funds” from the Fed and must instead seek appropriations from Congress if it needs additional money.​

• Despite this, multiple judges (including Judge Jackson) have rejected the “no profits” theory when defendants tried to use it to defeat CFPB enforcement actions, while state attorneys general and other parties are pursuing litigation to force the Bureau either to request Fed funding or to acknowledge its limits.​

• The article’s bottom‑line position is that continued transfers to the CFPB while the Fed is in a cumulative loss position are both statutorily unauthorized and constitutionally suspect, and that any extra funding the Bureau needs should come via explicit congressional appropriations rather than stretching the “combined earnings” language.