On January 27, 2025 — one week into the second Trump term — the Office of Management and Budget issued Memorandum M-25-13, directing all federal agencies to "temporarily pause all activities related to obligation or disbursement of all Federal financial assistance." The freeze covered grants, loans, and other assistance programs potentially implicated by the president's executive orders on foreign aid, DEI, and climate — a scope encompassing trillions of dollars in congressionally appropriated funds.
Immediate Chaos
The memo's breadth created immediate confusion across state and local governments, universities, hospitals, and nonprofit organizations that depend on federal funding. Programs ranging from Medicaid to disaster relief to scientific research grants were caught in the freeze. States reported being unable to access funds for programs already authorized and appropriated by Congress.
Court Challenges and the Rescission Shell Game
Two federal judges blocked the freeze within days. Judge John McConnell of the U.S. District Court for the District of Rhode Island granted a temporary restraining order on behalf of a coalition of 22 state attorneys general and the District of Columbia, finding the freeze likely exceeded presidential authority over congressionally appropriated funds.
On January 29, OMB issued a second memo formally "rescinding" M-25-13. However, White House press secretary Karoline Leavitt immediately tweeted: "This is NOT a rescission of the federal funding freeze. It is simply a rescission of the OMB memo." The judge noted this contradiction, and the administration continued to withhold funds despite the supposed rescission.
Appellate Victory for States
The First Circuit Court of Appeals, in an opinion by Chief Judge David J. Barron, affirmed the lower court's ruling, holding that the freeze of over $3 trillion in congressionally appropriated funds was likely improper. The appellate court agreed that the executive branch cannot unilaterally impound funds that Congress has directed to be spent.
Capture Significance
The OMB funding freeze was the administration's most direct early assault on the separation of powers. By attempting to unilaterally halt the disbursement of funds appropriated by Congress, the administration asserted a power of impoundment that Congress had explicitly prohibited in the Impoundment Control Act of 1974 — itself passed in response to Nixon's similar attempts. The freeze demonstrated the administration's strategy of acting first and litigating later, forcing opponents to seek emergency judicial relief while the damage from funding disruptions accumulated.