Trump administration asks Fed to clarify CFPB funding availability

By Douglas Gillison

WASHINGTON, Dec 17 (Reuters) - The U.S. Justice Department has called on Federal Reserve Chair Jerome Powell to clarify whether the central bank has stopped losing money, which President Donald Trump's administration has said prevents it from funding the sole federal watchdog for consumer financial protection, according to court records. The request comes as the U.S. Consumer Financial Protection Bureau says it could exhaust its remaining funds in as little as two weeks and has warned staff of impending job cuts. The agency is facing legal demands in two federal lawsuits demanding that it resume requesting its funding. Trump and other senior officials have called for the agency's outright elimination, which workers and the agency's defenders say is illegal, but CFPB leadership also revealed preparations suggesting the agency could continue some functions.

FED RETURNING TO PROFITABILITY?

Unlike most federal agencies, the CFPB draws its funds from the Fed rather than appropriations from Congress.

In a letter to Powell on Tuesday, Assistant Attorney General Brett Shumate said a recent Justice Department opinion had concluded the CFPB could not request funding so long as the Fed had "no profits."

"There has since been reporting that the Federal Reserve System is returning to profitability and may have or may soon have combined earnings" under the administration's definition, the letter said, asking Powell to say whether the Fed in fact had such earnings and anticipated continuing to have profits in the coming weeks.

The Federal Reserve did not immediately respond to a request for comment.

Lawyers for CFPB workers seeking to reverse Trump's potential dismantling of the CFPB, as well as pro-consumer non-profits, have rejected the Trump administration's arguments and called on courts to direct it to resume CFPB funding. Federal courts have also recently rejected the view that the Fed can only fund the CFPB when operating at a surplus.

In a recent legal opinion, five former top Fed officials also refuted the administration's position, saying it failed to understand the way the central bank operates.

"The very concept of 'profit' does not translate neatly to the context of a central bank, since the primary purpose of a central bank is not to make money in the way a private business does, nor does the failure to generate 'profit' adversely affect the Federal Reserve's ability to operate," they wrote. (Reporting by Douglas Gillison in Washington Editing by Rod Nickel)