Legal News for Tues 12/23 - CFPB Funding Fights, Trump DEI Crackdown Hits Limits, Mercedes $120m Settlement and IRS VDP Reform

This Day in Legal History: Federal Reserve ActOn December 23, 1913, President Woodrow Wilson signed the Federal Reserve Act into law, creating the Federal Reserve System, the central banking system of the United States. The law was the culmination of decades of debate over banking reform, intensified by the financial panic of 1907. The Act aimed to provide the country with a safer, more flexible, and more stable monetary and financial system. It established twelve regional Federal Reserve Banks overseen by a central Board in Washington, D.C., striking a balance between public oversight and private banking interests.The Federal Reserve was given key powers, including the ability to issue Federal Reserve Notes (now the dominant form of U.S. currency), regulate banks, and serve as a lender of last resort during financial crises. This marked a significant shift from the fragmented and largely unregulated banking environment of the 19th century.Critics feared it concentrated too much financial power in the hands of a few, while supporters believed it brought necessary structure and national oversight. Over the decades, the Fed’s role expanded, especially during the Great Depression, World War II, and more recently the 2008 financial crisis and COVID-19 pandemic. The creation of the Fed also represented a broader legal evolution in how the federal government engaged with economic policy.A coalition of 21 Democratic-led states and the District of Columbia has filed a lawsuit in federal court in Oregon to prevent the Trump administration from defunding the Consumer Financial Protection Bureau (CFPB). The states argue that the administration’s decision to stop requesting funds from the Federal Reserve is unlawful and undermines Congress’s constitutional authority. Since returning to office in January, President Trump has taken steps to dismantle the CFPB, including appointing his budget director, Russell Vought, as acting head and halting most agency operations.The CFPB was created in 2011 to safeguard consumers in the financial sector and has recovered over $21 billion for Americans. It is uniquely funded directly by the Federal Reserve rather than through Congressional appropriations. The administration claims the Dodd-Frank Act requires the CFPB’s funding to come from the Fed’s combined earnings, which they argue are unavailable due to the Fed operating at a loss since 2022.The lawsuit highlights that the CFPB is legally required to process consumer complaints from states, and without funding, it cannot fulfill this duty. Plaintiffs also contend that the administration’s move violates the separation of powers by interfering with a congressionally established funding mechanism. Additional lawsuits from a federal employee union and nonprofits are pending in other courts, also seeking to compel the agency to resume funding requests.Democratic-led states sue to block US consumer watchdog’s defunding under Trump | ReutersA new push by the Trump administration to challenge corporate diversity, equity, and inclusion (DEI) initiatives through the Equal Employment Opportunity Commission (EEOC) faces steep legal hurdles. Under EEOC Chair Andrea Lucas, the agency is shifting toward what she calls a more “conservative view of civil rights,” focusing on potential discrimination against white men. Lucas has announced plans to investigate corporate DEI policies and pursue enforcement where race- or sex-based decisions are suspected.However, legal experts emphasize that proving such claims is difficult. Discrimination cases require clear evidence that someone was denied a job or benefit specifically because of their race or sex, not just because they were part of a changing applicant pool. Critics argue that the administration’s narrative misunderstands the legal and practical realities of workplace diversity, which is often designed to prevent discrimination, not perpetuate it.Despite aggressive executive orders targeting DEI, many companies are maintaining or quietly adjusting their programs to remain compliant. Legal audits and program rebranding are common, especially in industries like automotive. DEI advocates point out that the business case for inclusion remains strong, as companies see diverse teams as essential to long-term success.Ultimately, while the administration’s rhetoric may galvanize parts of its base, experts say turning that rhetoric into enforceable legal action will be difficult under existing anti-discrimination laws.Trump’s anti-corporate DEI campaign faces high legal hurdles | ReutersMercedes-Benz has agreed to pay $120 million to settle environmental and consumer protection claims brought by multiple U.S. states over its use of emissions-cheating software in certain diesel vehicles. The settlement resolves the remaining U.S. legal actions tied to the broader Dieselgate scandal, which has affected several automakers. The claims focused on Mercedes’ BlueTEC diesel models, ...