White House rescinds memo on freezing federal grants and loans

Alys Davies, Kayla Epstein, and Max Matza
BBC News

The White House says it has rescinded a memo authorising a federal freeze on hundreds of billions of dollars in grants and loans, which sparked widespread panic among millions of people who rely on government aid.

It comes after a judge temporarily halted the order on Tuesday, only hours after it was signed by President Donald Trump and the memo announcing it was issued by the Office of Management and Budget (OMB).

The judge paused the order until next Monday, after a lawsuit was filed by a group of organisations representing grant recipients.

The new letter issued on Wednesday states "OMB Memorandum M-25-13 is rescinded."

It is unclear what prompted the apparent U-turn.

In a statement, White House Press Secretary Karoline Leavitt said the administration was still pursuing a freeze.

"This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo," she said. "Why? To end any confusion created by the court's injunction. The President's EO's on federal funding remain in full force and effect, and will be rigorously implemented."

The BBC has asked the White House to clarify how it plans to continue in light of Trump's decision to rescind the memo as well as the judge's injunction.

Earlier this week, the acting head of the White House budget office had instructed agencies to "temporarily pause all activities related to obligations or disbursement of all federal financial assistance".

The office said the move was intended to give the new administration time to assess what grants and loans were in step with their agenda.

But the order prompted widespread confusion about which agencies and programmes would be impacted. An online portal used to access federal funds was briefly taken offline and aid groups warned about a suspension in services.

In response to the latest development, Democrats abruptly shifted a news conference scheduled for Tuesday on the subject of Trump's move to end birthright citizenship to one condemning the decision to freeze all federal funding instead.

"What they're basically doing is being lawless - to hurt families, to help their billionaire friends," Senate Democratic Minority Leader Chuck Schumer told reporters after the order was rescinded.

He added that Republicans will continue to attempt to block future funding, and were only stopped this time due to an "outcry" from the public.

"I don't think this would have happened, except for the outcry throughout America. And we in the Senate are working with our constituents to show that outcry. We're going to keep fighting," he added.

Schumer also said that Trump should next rescind his nominee to lead the OMB.

The order was one of several Trump has issued since taking office, aimed at cutting the size of the government and slashing federal spending. Other orders target transgender rights and the automatic citizenship granted to anyone born in the US.

Also on Tuesday, the Trump administration offered federal workers an option to resign and continue to receive pay for eight months, in an effort to further reduce the size of the federal workforce.

On Tuesday, Leavitt had said the halt in funding would allow governments to cut back spending for "woke" gender issues and diversity programmes.

Several states had reported issues accessing funds through Medicaid, a government health insurance programme for low-income people. The White House later said the programme would not be affected.

It also said Social Security benefits would not be affected, nor would any programme "that provides direct benefits to individuals", including Supplemental Nutrition Assistance Program, known as SNAP or food stamps.

Although the order has been blocked for now, the White House believes that the original memo served its purpose by prompting federal agencies to take steps to comply with the president's executive order.

"We are glad that this memo has been rescinded. The chaos unleashed by the uncertainty and lack of adequate notice yesterday should never have happened," said Diane Yentel, president and CEO of National Council of Nonprofits - one of the groups suing the White House over the order.

"Nonprofit organizations throughout the country and the people they serve can breathe a sigh of relief now that the White House has, at least for now, backed off its reckless and harmful plan to halt all federal funding for critical programs from homelessness and housing assistance, to disaster relief and rebuilding, to rape crisis centers and suicide hotlines," her statement on Wednesday added.

In an earlier press conference on Tuesday, Ms Yentel said that if implemented, the order would severely impact food and housing programmes for military veterans, shelters for survivors of domestic violence, childcare assistance.

Bernd Debusmann Jr contributed to this report

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