WASHINGTON — Senate Banking Republicans can go ahead with cuts to the Consumer Financial Protection Bureau's funding after the Senate parliamentarian approved nearly halving the amount that the bureau can draw from the Fed's total operating budget. 

Last week, the Senate parliamentarian nixed GOP lawmakers' attempt to eliminate the Consumer Financial Protection Bureau's funding in the reconciliation package currently making its way through Congress. 

Senate Parliamentarian Elizabeth MacDonough, who acts as a sort of referee for Senate rules, said last week that a provision eliminating the funding that the CFPB could draw from the Fed didn't pass muster. The decision is part of a broader "Byrd Bath" process on the reconciliation bill, where the parliamentarian decides if provisions comply with the Byrd rule, which requires provisions included in spending bills are, at their core, related to spending. 

The parliamentarian doesn't release her rationale, which makes figuring out why she denied Senate Banking Republicans' initial proposal a matter of speculation. Her decision might suggest that she thought that zeroing out the CFPB's budget that it can draw from the Fed amounted to a policy decision rather than a spending decision, or was otherwise inappropriate to bypass Senate filibuster rules. 

"I guess the Senate Banking Committee's thinking was that the problem was that their number was zero, and another number would be OK," said Ian Katz, a managing director of Capital Alpha Partners. 

This latest attempt by Senate Republicans though, which came out in a proposal yesterday, would lower the amount the CFPB can draw from the Fed's operating budget to 6.5% from 12%. That measure passed muster with the parliamentarian. That's a big victory for Republicans, who have long sought to weaken the CFPB. This is the first time one of their attempts at a funding cut has crossed a major hurdle, and opens the door for future cuts. 

"After working closely with my colleagues on the committee and across the Republican conference, as well as the Senate Parliamentarian, we're in a position to advance legislation that helps deliver on President Trump's mandate to cut waste and duplication in our federal government and save hardworking taxpayer dollars," said Senate Banking Committee Chairman Tim Scott, R-S.C., in a statement. "The committee's language decreases the Consumer Financial Protection Bureau's (CFPB) funding cap without affecting the statutory functions of the Bureau."

But the issue is still very much a live one as lawmakers head into a vote-o-rama this weekend to try and iron out details to a major reconciliation package, which President Donald Trump has dubbed his "big, beautiful bill." 

They will have to contend with actually voting on the cut. Sen. Elizabeth Warren, D-Mass., the ranking member of the Senate Banking Committee who helped create the CFPB before she was elected to Congress, said that Democrats will introduce an amendment as part of this weekend's vote-a-rama on the budget package. 

"Donald Trump and Republicans tried to shut down the CFPB by gutting its entire operating budget to 0%. We fought back and won," Warren said in a statement "Now, Senate Republicans will bring to the floor a proposal that slashes the agency's available budget so they can hand out more tax breaks for billionaires and billionaire corporations. The CFPB has returned $21 billion to scammed American families — and Democrats will introduce an amendment on the floor to strip this out of the bill." 

With the amendment, Warren hopes to force a vote on CFPB funding, which despite its unpopularity with the financial industry, still polls well with the general public — even among Republican voters. 

"The whole distinction in the Senate is between, are we just doing budget or are we also doing policy?" Warren told American Banker before the parliamentarian approved the CFPB's funding cut in the Senate Republicans' proposal . Effectively killing the CFPB's ability to fulfill its obligations is "ultimately a policy decision. You know the one thing Republicans have never done, as much as they want to kill off that agency, they've never actually brought a bill to the floor and debated it."

That 6.5% number could also change as the process continues. It closely mirrors the 5% draw limit in the House Financial Services Committee's version of the same bill, which will eventually have to be reconciled with the Senate version and go through the same process. 

That exact number is still up in the air to a certain extent as the two bills need to be brought together. A Democratic banking aide pointed out that the 6.5% cap is a 46% cut of the available budget as opposed to the 70% cut in the House bill. 

While the funding fight has the potential to hobble the CFPB for a long time, in the short-term, at least, the Trump administration has more powerful tools to make the bureau ineffective. 

Its acting Director Russ Vought, who also leads the Office of Management and Budget and is key to the Trump administration's thinking around drastically undercutting federal agencies, has effectively paused all non-statuatorily mandated work at the bureau (and potentially some statutorily required work, depending how a federal lawsuit about the Trump administration's dismantling of the agency shakes out) and requested zero dollars from the Fed just days after he arrived at the bureau. 

"The real focus is you have Russ Vought who has requested zero dollars for the most recent appropriations," said Peter  Idziak, senior associate at Polunsky Beitel Green who advises on CFPB issues. "It's unclear how much the max cap changing would really affect the day-to-day operations of the CFPB right now."