OMB general counsel faces backlash following federal funding freeze order: Sources

(WASHINGTON) — When the Office of Management and Budget issued a sweeping order this week freezing trillions of dollars in federal grants and loans, senior White House officials had not reviewed it beforehand, according to sources familiar with the matter.

The order was rescinded following legal challenges and intense backlash amid widespread confusion and disruptions to critical services like Medicaid.

And now, amid the fallout, finger pointing has begun inside the administration, sources said, with the attention turning to Mark Paoletta, OMB’s general counsel, who played a key role in drafting the order.

Top White House policy adviser Stephen Miller and staff secretary Will Scharf were among those who had been left out of the review process, sources said.

The fallout has already led to discussions about reassigning Paoletta away from his position as OMB’s general counsel, though no final decision has been made, according to multiple sources.

Sources said senior advisers were caught off guard and frustrated that they had not reviewed the memo before its release, seeing its rollout as a stain on what had otherwise been smooth messaging around President Donald Trump’s rapid rollout of executive orders.

Meanwhile, some rank-and-file officials at OMB were themselves left confused both when the memo was issued and after it was rescinded, sources said.

OMB officials did not respond to a request for comment from ABC News.

On Wednesday, a federal judge signaled he would issue a temporary restraining order barring the Trump administration from freezing federal loans and grants. That’s now raised concerns that the White House will try to enact the same policy described in the now-rescinded memo.

District Judge John McConnell Jr. had harsh words for the Trump administration following a social media post by White House press secretary Karoline Leavitt, in which Leavitt said it was the memo that was being rescinded, not the freeze itself.

“This is NOT a rescission of the federal funding freeze,” Leavitt posted on X, defending the policy after the memo was rescinded. “It is simply a rescission of the OMB memo. 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.”

Despite the Office of Management rescinding their directive, Judge McConnell said he believed there was “sufficient evidence” that the government still plans to carry out the policy based on Leavitt’s social media post.

“That’s my read of the tweet. I can’t believe I’m saying that, but that’s my read of the tweet,” Judge McConnell said.