Appeals Court Upholds Block on Trump Admin OMB Loan Freeze

The United States Court of Appeals for the 1st Circuit on Wednesday upheld U.S. District Judge John McConnell Jr.'s ruling, maintaining a block on the Trump administration's goal of freezing federal loans and grants made through an Office of Management and Budget memo, The Hill reported.

Three Democrat-appointed judges — Chief Judge David Barron and circuit Judges Lara Montecalvo and Julie Rikelman — ruled on the lawsuit led by Kentucky Gov. Andy Beshear and were joined by 22 Democrat attorneys general.

In January, then-acting OMB Director Matthew Vaeth drafted a memo to inform federal agencies that funding for grants and loans would be put on hold while the administration reviewed them to confirm they aligned with Trump's agenda. The OMB oversees the federal budget.

The White House attempted to dial back the memo but not the intention with press secretary Karoline Leavitt saying executive orders on funding review issued by the president "remain in full force and effect and will be rigorously implemented by all agencies and departments."

Then in March, McConnell out of Rhode Island extended a block by U.S. District Judge Loren AliKhan on the Trump administration's attempt to freeze payments for federal grants and other congressionally approved government programs from taking effect. McConnell wrote that the spending freeze "fundamentally undermines the distinct constitutional roles of each branch of our government."

"The interaction of the three co-equal branches of government is an intricate, delicate, and sophisticated balance — but it is crucial to our form of constitutional governance," McConnell wrote.

"Here, the Executive put itself above Congress. It imposed a categorical mandate on the spending of congressionally appropriated and obligated funds without regard to Congress's authority to control spending."

On Wednesday, the 1st Circuit Court ruled the states would incur too many damages in the form of debt and future projects.

"Even if we were to set aside the harms to the Plaintiff-States' residents, the District Court still found a number of harms that the Plaintiff-States themselves would irreparably suffer. These harms included the obligation of new debt; the inability to pay existing debt; impediments to planning, hiring, and operations; and disruptions to research projects by state universities," Barron wrote, according to court filings.

In her original ruling, AliKhan blasted the administration for its attempt at such a massive pause in funding, writing, "In the simplest terms, the freeze was ill-conceived from the beginning. Defendants either wanted to pause up to $3 trillion in federal spending practically overnight, or they expected each federal agency to review every single one of its grants, loans, and funds for compliance in less than twenty-four hours. The breadth of that command is almost unfathomable."