Can Trump Arbitrarily Take Money From Anyone’s Bank Account?
Nathan Tankus publishes the Notes on the Crises newsletter.
In my last column in Rolling Stone 37 days ago, I explained that the constitutional crisis that Elon Musk and Donald Trump set off by refusing to spend what Congress ordered the executive branch to spend — a process known legally as “impoundment” — had taken an “inconceivably more dangerous” turn. That turn was the incursion by Musk’s so-called Department of Government Efficiency (DOGE) into the Bureau of Fiscal Service, a previously obscure part of the United States Treasury which processes payments on behalf of the federal government. The alarm over this incursion was created by the resignation of the highest ranking civil servant, Fiscal Assistant Secretary David Lebryk, a Treasury employee since 1989.
This key forgotten payments intermediary, the arteries of our government’s fiscal system, was in danger of being used to impound congressionally appropriated funds without even having to take over government agencies. Worse, Musks’ lackeys could accidentally damage or destroy Bureau of Fiscal Service systems in the attempt to control them.
Since that time there has been some good news but a lot of bad news. The good news is the alarmed reporting I did in my newsletter Notes on the Crises, along with Wired’s monumental reporting as well as Talking Points Memo’s coverage, seemed to have been effective. We all identified 25-year-old DOGE employee and former SpaceX employee Marko Elez as the one accessing Bureau of Fiscal Service systems and at various points that week rebutted shifting claims that he merely had “read-only” access to BFS systems or that “read-only” access was remotely acceptable. Elez resigned the Thursday after my initial Rolling Stone article under the official story that his history of racist social media posts had made his position untenable. He was rehired to DOGE the next day and seems to be onto other sensitive systems as of this writing.
Editor’s picks
While DOGE has backed off on installing its programmers because of court injunctions and public blowback, it is still working to directly use control of the Treasury’s payment system to pursue impoundment. In fact, it appears that payments level impoundment had already briefly been in effect before I had even published my February 3 Rolling Stone column. Meanwhile, court documents litigating an injunction over DOGE’s access to the Bureau of Fiscal Service explosively revealed that using the payments system to impound funds and second guess agencies had already gone further and faster than I thought it could. And Musk’s ally from DOGE, Thomas Krause, has been made acting Fiscal Assistant Secretary — taking David Lebryk’s job. So while the worst case scenarios have been put off the table and a court injunction is in place, we remain in the midst of a supercharged constitutional crisis.
What I am revealing now, and in even more technical detail in my simultaneously published article in my newsletter, is that a previously reported incident from a month ago has far more profound implications for what I have been calling the “Trump-Musk Treasury Payments Crisis” than has been understood by the public at large. Indeed, we can now simply call it the “Trump-Musk Payments Crisis.”
On February 11, 2025, the Federal Emergency Management Agency (FEMA), an agency housed in the Department of Homeland Security, removed $80.5 million from New York City’s main bank account, which is an account with Citibank. Well, that’s not exactly accurate. They “debited,” the financial way of referring to “subtracting,” New York City’s “central treasury account” for $80.5 million. According to public statements by Brad Lander, New York City’s comptroller, this could only be covered by a line of credit facility to the tune of $79.5 million. In short they, in essence, sent New York City’s main bank account to negative $79.5 million to rescind routine funding appropriated by Congress to house refugees. Citibank kindly agreed to forgive the overdraft fee.
On February 18, a FEMA-branded letter authored by Cameron Hamilton, a person described in the letter as a “Senior Official Performing the Duties of the [FEMA] Administrator,” was sent to New York City government. The letter explained that the money was “clawed back” because of a range of claims about illegal activity which The New York Post alleged took place in the hotels the city paid to put Venezuelan refugees in. I can’t really communicate to readers what this letter reads like, so I will simply quote an important paragraph to provide the flavor.
The letter expresses “significant concerns” that FEMA “funding is going to entities engaged in or facilitating illegal activities. For example, a substantial portion of your award goes to funding alien housing at the Roosevelt Hotel in New York City. According to media reports, the vicious Venezuelan gang Tren De Aragua has taken over the hotel and is using it as a recruiting center and base of operations to plan a variety of crimes. According to these same reports, these crimes include gun and drug sales as well as sex trafficking, which can reasonably be presumed to be conducted in the hotel itself. One of the groups responsible for these activities refer to themselves as ‘diablos de la 42,’ which means the devils of 42nd St., a street near where the Roosevelt Hotel is located. DHS/FEMA has a responsibility to ensure that it does not make payments that fund criminal activity.”
This justification for denying congressionally appropriated funds is extremely legally dubious. This justification for “reversing” the disbursement of already disbursed funds is far beyond legally dubious. It brings up profound and basic issues about the functioning of our society. In a number of ways, the most important element of this story is that it was clearly instigated by Elon Musk.
At 5:00 a.m. the day before the FEMA payments were “clawed back” by FEMA, Elon Musk tweeted: “The @DOGE team just discovered that FEMA sent $59M LAST WEEK to luxury hotels in New York City to house illegal migrants. Sending this money violated the law and is in gross insubordination to the President’s executive order. That money is meant for American disaster relief and instead is being spent on high end hotels for illegals! A clawback demand will be made today to recoup those funds.”
It does not take much of a leap in logic to draw a direct line between this “clawback” to Elon Musk. I have been extremely busy with other reporting, but once I had finished that reporting (and neared the finish line on other work), I began investigating the rescission of congressionally appropriated funds directly from New York City’s bank account.
I devoted so much time to this story because of the full implications it immediately brings to mind to any payments system expert. This is not simply about FEMA’s actions toward New York City’s bank accounts or even about large-scale payments system level impoundment. This story is about the truly electrifying and terrifying question: Can the Trump administration arbitrarily take money from anyone for any reason using control of the payments system? If it can’t, what exactly are the current limits to what the Trump administration can do and how easy is it to break those limits?
To understand why this case brings up such dramatic and mind-boggling questions, readers must understand some things about the payments system they use every day without thinking about it. If you have ever gotten a direct deposit of pay, or really anything else, you have used a system called the Automatic Clearing House system or “ACH.” Social Security payments are ACH payments, as are payments to medical providers. For older readers, if you look at your checkbook you will see an “ACH number” on your checks. Really, it would be easier to list what aren’t ACH payments than what are.
When you make a credit card payment, technically speaking what you are doing is authorizing the credit card company to send an ACH “debit” to your bank account. This debit subtracts the money and when the payment clears, the credit card company “credits” your credit card account and lowers your credit card balance (which is a type of debt). In other words, what is subtracted from your credit card debt is what they subtracted from your bank account. Your assets and liabilities go down by the same amount (except for interest payments and fees of course).
The rules for ACH are mainly determined by “National Automated Clearing House Association” (NACHA, now “Nacha”). The actual payments infrastructure is run by the 12 Federal Reserve Banks along with “The Clearing House,” a clearinghouse originally set up by large New York banks all the way back in 1853.
The Automated Clearing House payment system is one of the foundational building blocks of all payments made in our society. Nearly every payment you make is either an ACH payment or it relies indirectly on accurate and timely ACH payments. Furthermore, any institution you rely on directly or indirectly relies on accurate and timely ACH payments to function properly. If the reliability of Automatic Clearing House payments were to be permanently or indefinitely degraded in a crucial manner, it would fundamentally threaten your access to basic social services, and even privately produced and distributed goods and services. To explain why, we have to understand a fundamental, yet neglected, area of law called “payment finality.”
The idea of “payment finality” is deceptively basic. What it refers to is the point at which a transaction is concluded by full and satisfactory payment. Contracts, for example, are a relationship between two parties. Those parties have a contract relationship for as long as the contract is outstanding. If I hire you to build me a cabinet, we are in a contractual relationship until you deliver a finished cabinet and I deliver your payment in full. If we meet at a street intersection and you deliver me the cabinet, once you receive final payment the transaction is complete.
But what is the “final payment”? For many centuries physical money was the dominant mode of “arm’s length” payment so final payment was when physical money was handed over and safely in the possession of the recipient or “payee.” In fact, as York University law professor Benjamin Geva points out in his 2011 book The Payment Order of Antiquity and the Middle Ages: A Legal History, this is a common definition of money in legal history. Money is that object, or system, that you can make final payment with.
Consequently what defined physical objects as “currency” was that they could be proffered as final payment. The idea of final payment is easier with physical items that you hand over, which becomes property of the recipient once you hand it over. Unfortunately, we no longer live in the world of cash. We live in the world of accounts.
In the world of accounts, a disturbing question hangs over us: When is a payment truly final? Or as famous New York philosophers Yogi Berra and Lenny Kravitz might say, “It ain’t over til’ it’s over.” If, in theory, my account can always be subtracted from — if my account can always be “debited” — is a transaction ever really final? When there is an “operational” possibility the government, or any key actor in the payments system, can simply debit accounts payment, “finality” always has a hanging thread of doubt. Under our current technological and administrative arrangements, the only protection against this possibility is a layer of laws and norms which constrain — even asphyxiate — this distressing prospect. In other words, we socially and legally construct payment finality as “truth.” Yet, the fabric of these social and legal constructions are far more fragile than most people imagine.
Which brings me back to ACH. Given the complexity, and relative obscurity, of this area of law and the immense amount of reporting and research I already had to do for this story, I decided to commission a full-length legal memo on the “Federal Government Use of the Automated Clearing House System.” The attorney I commissioned, Ashley Burke, did an excellent job and I have uploaded “Notes on the Crises Legal Memorandum No. 1” to my website to make it widely available and free to anyone who is in need of detailed legal analysis in this suddenly crucial area of law. Ashley is, of course, not responsible for any of the claims I make in this article and can’t attest to the accuracy or reliability of my reporting. Nor can her memo be construed as legal advice.
You can read more about the details her memo helped me in summarizing in my longer Notes on the Crises piece. Unfortunately, my longer piece, and Ashley’s memo can be summarized in one dispiriting sentence: There is nothing in payments law that provides a clear or unambiguous check on the Trump administration’s actions if they decide to weaponize the federal government’s legal authority over the ACH system.
It is hard to explain how explosive degrading — let alone destroying — the legal reliability of payment finality is. Mark Flood, a research scholar at the Center for Financial Policy at University of Maryland with two decades of financial regulatory & policy experience in Federal Government tells me: “Uncertainty about payment finality has the potential to degrade insidiously the performance of the financial system. If there is generally a non-zero chance that even settled payments might be reversed, then the most liquid of assets (cash balances) could lose reliability and therefore value: $1 of ‘cash in the bank’ may no longer be regarded as worth $1.”
Along similar lines, a former Federal Reserve Lawyer tells me: “Our monetary system depends on a strong concept of payment finality. Exceptions must be reserved for only truly extraordinary cases.”
“From what I understand of the facts of this case,” the lawyer continues, referring to the reversal of routine FEMA payments that had fulfilled congressional appropriations, “this is not an extraordinary situation. Reversing of final payments, in a stable financial system, should never be in the ordinary course of business.” The Trump administration debiting New York City’s account without notice for reasons of Presidential priorities rather than an actual erroneous or duplicate payments IS, of course, extraordinary
These quotes may read as subtle to many lay readers. I can tell you that to payment experts — hell, as a payments expert — these quotes make our eyes widen with alarm. Part of what I have been trying to accomplish with my reporting these past six weeks is to serve as a translator for the panic many experts truly feel, but do not feel at liberty to express openly.
So if the bank-based payment system or payments law does not provide constraints, are there others? At first glance, it might seem like there are. Administrative agencies can’t just decide to debit accounts. They have to get payment reversals or separate debit transactions certified at a central point. Readers of Notes on the Crises or my previous Rolling Stone article are already dreading what they correctly suspect is coming next. The body that certifies debit transactions is… the Bureau of the Fiscal Service. With DOGE’s Thomas Krause as Fiscal Assistant Secretary, it is unlikely, to say the least, that the Bureau of the Fiscal Service will be blocking such requests from agencies. (If you are a current or former Bureau of the Fiscal service employee familiar with the situation, please get into contact.)
A current Bureau of the Fiscal Service employee, when told about the circumstances in this case, replies that “who makes the decision [at BFS] to reverse [ACH payments] probably just bows to the king [Trump].”
A former BFS employee tells me: “The circumstances you describe from the FEMA-New York situation sound highly unusual. Payment finality except in extraordinary and clearly-defined circumstances [is] critical to a functioning and credible payment system. Once a payment is finalized, agencies would normally need to use legal remedies outside the disbursement process to seek recovery of improper payments.”
That last sentence is a key point. The objection here is not to using any legal mechanism to retrieve an “improper” payment. It’s to the use of the “payments mechanism” as a general-purpose tool, as opposed to the conventional legal avenues.
From my vantage point, it doesn’t seem like the New York City government is pursuing this issue in the manner required by its eye-popping seriousness. Reasons for this could include fear of a larger confrontation with the Trump administration or specific fear that the Trump administration would revive Biden-era federal corruption charges against Mayor Eric Adams that Trump’s Justice Department caused a firestorm by seeking to drop, but with the possibility of refiling. Paul Clement, a legal expert and former solicitor general under George W. Bush, has advised federal District Judge Dale E. Ho in Adams’ case that he should permanently dismiss the charges so they do not hang over Mayor Adams like “the proverbial Sword of Damocles.”
It is thus very important to these circumstances that the New York City Comptroller Brad Lander is an independently elected official who can advocate for the city’s interests, as well as the American people’s interests more generally, separately from Mayor Eric Adams. Brad Lander has put out public statements in the last month openly stating that his advocacy regarding the recovery of funds has compelled “reversals” of New York City government’s decisions in this matter and led to the city filing suit over Trump’s “money grab.”
Chloe Chik, spokesperson for the New York City Comptroller, says, “While we cannot comment on the specifics due to ongoing litigation, as the city’s chief financial officer, the comptroller’s office has accounting oversight of the city’s ledgers, including city bank account activities. Because of our role in monitoring the city’s cash balances, the comptroller’s office was able to uncover the overdraft associated with the $80.5m clawback.”
The comptroller’s office and its legal counsel are involved in the New York City lawsuit, but do not have final say over it. The intragovernmental conflict over this case in New York City concerns me because I worry that the most foundational legal issues in this case may not be resolved, or even seriously litigated, in the city’s lawsuit over this matter. See my newsletter for more details on the New York City government angle to this story.
One of the reasons this story has been so difficult to report and has taken as long as it has is that it has been extremely difficult to find sources willing to be quoted, or really even vaguely characterized. My February 3 articles in Rolling Stone and in my newsletter invoked a great deal of alarm but because of the policy implications rather than people’s personal safety. Former and current Bureau of the Fiscal Service employees were willing to give many anonymous quotes that I published that week. The circle of people who truly understand these payment issues is smaller, more prominent, more risk-averse and have far greater informed alarm.
Payments law is a kind of “source code” for all other parts of law. As we’ve seen in the tidal wave of litigation over the first 51 days of the second Trump administration, the Trump administration’s actions have violated a multitude of laws and generated a gigantic constitutional crisis over the seizure of Congress’ power of the purse by the presidency. Yet, this crisis remains unresolved, because court injunctions move far slower than a fast moving and imperial presidency. Courts can’t “unspill” spilled milk. Injunctive relief is OK at stopping things, it’s far, far worse at stopping things before they happen. Using the Treasury’s intragovernmental payments system to do impoundment creates an extremely dangerous crisis and opens up the possibility of using the payments system to subordinate the Judiciary.
The possibilities I’ve laid out in this article are somehow even more dangerous than using the payments system to impound congressionally appropriated spending. As I was finalizing this article Wednesday afternoon, the news broke that Citibank — in a separate case — had made a court filing providing evidence that the FBI had demanded that it freeze bank accounts associated with an Environmental Protection Administration grant program, including a New York state government bank account.
The pattern across my previous reporting, my current reporting, the reporting of others and this late-breaking FBI-EPA-Citibank situation suggest that the Trump administration is testing the waters in order to gain far greater control of the United States entire payments infrastructure — control great enough to bend Donald Trump and Elon Musk’s enemies to their will at a speed far faster than courts could ever conceivably contain.
We are entering waters beyond the scale of constitutional crises and nearly every expert in this shallow pool feels ill-equipped to speak about it publicly for a variety of reasons. I’m having trouble imagining circumstances more dangerous.