Speaker 1: Bloomberg Audio Studios, podcasts, radio news. President Donald Trump achieved
Speaker 1: reality TV fame by telling contestants on The Apprentice two.
Speaker 2: Infamous words, you fired.
Speaker 1: And on Wednesday, those words were at the center of
Speaker 1: a Supreme Court case that could have big implications for
Speaker 1: the global economy and the independence of the US Central Bank.
Speaker 3: Just a meeting across a conference table finished with your fired.
Speaker 1: I mean, that was Supreme Court Justice Neil Gorsch, speaking
Speaker 1: as the court heard arguments over one of Trump's latest
Speaker 1: attempted firings.
Speaker 4: President Trump says he's removing FED Governor Lisa Cook effective immediately.
Speaker 2: He cites allegations that she committed mortgage fraud, which she denies.
Speaker 4: No president has fired a sitting governor in the one
Speaker 4: hundred and twelve year history of the FED.
Speaker 1: Bloomberg reporter Amara Amoqua, who covers the Federal Reserve, was
Speaker 1: in the room.
Speaker 5: This was my first time at his Spreme Court hearing.
Speaker 5: I mean, it's not every day that a FED related
Speaker 5: matter comes before the Supreme Court, And you know, when
Speaker 5: all the reporters walked into the room, we were all
Speaker 5: kind of just kind of stretching our next to see
Speaker 5: who was in sort of the public part of the room.
Speaker 1: Former FED Chair Ben Bernanke was there, so was current
Speaker 1: Chair Jerome Powell.
Speaker 4: It is pretty noteworthy that Jay Powell came to this argument.
Speaker 1: Greg Storre is a Supreme Court reporter for Bloomberg who's
Speaker 1: been following Cook's case.
Speaker 4: Up until very recently. J Powell has tried to remain
Speaker 4: studiously neutral in this case. The FED itself has not
Speaker 4: been taking a position in this case.
Speaker 1: Wednesday's hearing came just over a week after federal prosecutors
Speaker 1: served grand jury subpoenas to the Central Bank over renovations
Speaker 1: at its headquarters and congressional testimony Powell gave about that project.
Speaker 4: The fact that he showed up, I think did send
Speaker 4: the message about how important he sees it as being,
Speaker 4: especially after that rather extra ordinary statement that he gave
Speaker 4: the other night about the criminal investigation involving him.
Speaker 6: No one, certainly not the Chair of the Federal Reserve
Speaker 6: is above the law. But this unprecedented action should be
Speaker 6: seen in the broader context of the administration's threats and
Speaker 6: ongoing pressure.
Speaker 5: That is a remarkable departure from the posture that Chair
Speaker 5: Powell and the FED have taken towards all of the
Speaker 5: attacks that President Trump has directed at them since he
Speaker 5: returned to office last year. And so I think it
Speaker 5: raises the stakes in the Lisa Cook case right because
Speaker 5: if the justices signaled that it is in a way
Speaker 5: easier to remove a FED governor than has been thought
Speaker 5: of in the past, then it could be open season
Speaker 5: on any FED governor.
Speaker 1: I'm Sarah Holder, and this is the big take from
Speaker 1: Bloomberg News Today. On the show, Bloomberg reporters Amara Amoquay
Speaker 1: and Greg Store take us inside the Supreme Court for
Speaker 1: Trump the Cook.
Speaker 2: We take a look at the arguments from.
Speaker 1: Both sides and unpack what a ruling could mean for
Speaker 1: FED independence, for the economy, and for Trump. President Trump
Speaker 1: tried to fire Lisa Cook eight months ago. In a
Speaker 1: letter posted on truth Social Almost immediately, she sued the president,
Speaker 1: saying his effort to fire her could cause irreparable harm
Speaker 1: to the US economy. A district court sided with Cook,
Speaker 1: saying she could remain on the job while she continues
Speaker 1: to challenge Trump's attempt.
Speaker 5: That decision then went to the appellate level, and the
Speaker 5: appeals court said the same thing essentially cited with Lisa
Speaker 5: Cook that she could stay on the job while she
Speaker 5: fights to stay on the job permanently. And so then
Speaker 5: the administration went to the Supreme Court and that is
Speaker 5: how we landed there today.
Speaker 1: But this isn't a typical Supreme Court case. It's on
Speaker 1: the court's emergency docket. It came about after the Trump
Speaker 1: administration filed an emergency application asking the court to let
Speaker 1: them remove Cook immediately even as a legal fight continues.
Speaker 1: And what's the fundamental question that the judges are being
Speaker 1: asked to consider here? What is this case really about?
Speaker 4: So you've basically got two things that Lisa Cook is arguing. One,
Speaker 4: she says, I can't be fired without some sort of
Speaker 4: process more than just a social media post, which is
Speaker 4: how she was notified that Trump was trying to remove her.
Speaker 4: And so there's a question of is she entitled to
Speaker 4: a chance to make her case before she's removed. And
Speaker 4: then the bigger question is, even if these allegations are true,
Speaker 4: and the allegations are that she engaged in mortgage frauds,
Speaker 4: she denies that vehemently, and her lawyer said at most
Speaker 4: it was inadvertent. Even if those are true, is that
Speaker 4: enough grounds for the president to fire her, So that's
Speaker 4: sort of the issues in the backdrop. And then because
Speaker 4: it is coming to the court in the context of
Speaker 4: an emergency application, not looking for a final ruling, the
Speaker 4: court is also thinking about what would be the consequences
Speaker 4: in the short term of say, letting Trump fire her
Speaker 4: for the time being, And they're thinking about things like
Speaker 4: what would the impact on the markets be, what would
Speaker 4: the impact on FED independence be? So there are kind of,
Speaker 4: you know, non legal factors that are at least in
Speaker 4: the air in this argument.
Speaker 1: Mara, how central were those broader questions going into these
Speaker 1: oral arguments about not just the question of whether or
Speaker 1: not Trump has the power to fire or remove Lisa Cook,
Speaker 1: but the questions around presidential authority and the future of
Speaker 1: the FED.
Speaker 5: As someone who covers the FED, I mainly talk to
Speaker 5: FED watchers and economists. I don't think that they're necessarily
Speaker 5: focused on sort of the nitty gritty legal details. Everyone
Speaker 5: is kind of thinking about the broader context, which is
Speaker 5: that the attempt to fire Lisa Cook comes amid the
Speaker 5: Trump administrations and the president's really effort to try to
Speaker 5: have more influence over the FED and try to have
Speaker 5: more influence over monetary policy. The President has made clear
Speaker 5: that he wants to nominate a FED chair to replace
Speaker 5: Jerome pal when his term is up, a FED chair
Speaker 5: who will cut interest rates drastically. He has pressured the
Speaker 5: FED from several different sides, and so I think FED
Speaker 5: watchers are looking at this and saying, if the President
Speaker 5: is able to remove Lisa Cook over an unproven mortgage
Speaker 5: fraud allegation, that would essentially erode this job protection that
Speaker 5: FED governors enjoy in a way that would really then
Speaker 5: erode FED independence and the ability of the FED to
Speaker 5: set interest rates free of political pressure.
Speaker 1: With that backdrop, I want to walk through the actual
Speaker 1: arguments that the court hurt this week. So let's start
Speaker 1: with Cook, the plaintiff in this case. Greg What was
Speaker 1: it the center of her lawyer's argument to the court.
Speaker 4: We will hear an argument this morning in case twenty
Speaker 4: five A three twelve Trump versus Cook. Whether essentially are
Speaker 4: two prongs that she was not given any process, not
Speaker 4: given a chance to make her case that any problems
Speaker 4: with the mortgage applications were inadvertent, And secondly, that this
Speaker 4: allegation is not enough for the President to fire her.
Speaker 4: Coupled with that, the lawyer for Lisa Cook, Paul Clement,
Speaker 4: was also talking about the impact on FED independence.
Speaker 7: It's less important that the president have full faith in
Speaker 7: every single governor, and it's more important that the markets
Speaker 7: and the public have faith in the independence of the
Speaker 7: FED from the President and from Congress.
Speaker 4: You know, this is something the Supreme Court has suggested earlier.
Speaker 4: It cares about, and so trying to make the case
Speaker 4: that whatever you think about those legal questions, at the
Speaker 4: end of the day, just be really careful about doing
Speaker 4: something in this case that would shatter that FED in dependence.
Speaker 1: And Greg, what about the lawyers arguing in favor of
Speaker 1: President Trump, how did they counter that argument in front
Speaker 1: of the justices.
Speaker 4: So, US Solicitor General John Sower, who's the top Supreme
Speaker 4: Court lawyer for the Trump administration, had multiple levels to
Speaker 4: his argument. One level was, Hey, the Supreme Court has
Speaker 4: no business here. This is something the president has total
Speaker 4: authority over, total discretion. That didn't get him very far too,
Speaker 4: he said. On that issue of process, he said, first,
Speaker 4: Lisa Cook doesn't have any property right in this job.
Speaker 4: She's not doing any process because she's not entitled to
Speaker 4: this job. He also said that even if she is
Speaker 4: entitled to some process. She got plenty, She was told
Speaker 4: publicly that she was being fired, and she has not responded,
Speaker 4: in his view, in any adequate way to those allegations.
Speaker 4: And that also met some resistance, Justice Barrett asking, you know,
Speaker 4: why would it be so hard to to give her
Speaker 4: a hearing. One step you could take to reduce your
Speaker 4: irreparable harm to show that there really was cause is
Speaker 4: just to have a hearing. Why not?
Speaker 6: I don't think it's a question of resource allocation. It's
Speaker 6: our position that adequate process was already provided.
Speaker 4: And then finally he made the argument that if these
Speaker 4: allegations are true, this is not somebody we want setting
Speaker 4: interest rates. It means that it's somebody untrustworthy.
Speaker 7: The American people should not have their interest rates determined
Speaker 7: by someone who was at best grossly negligent and obtaining
Speaker 7: favorable interest rates for herself.
Speaker 4: And that was sort of where the justices had the
Speaker 4: harder time, because that's a kind of a judgment call
Speaker 4: that they seemed reluctant to get too deep into to
Speaker 4: try to figure out whether these allegations were the kind
Speaker 4: of things that were serious enough that the president ought
Speaker 4: to be allowed to fire her. For cause, and.
Speaker 1: Whether they were material to how she does her job,
Speaker 1: whether she fulfills her responsibilities in the right way.
Speaker 4: Exactly. These are allegations about things that happened before she
Speaker 4: became a FED governor, and there was a question of
Speaker 4: given that it's not something that was happening while she's
Speaker 4: doing the job, is it something that is of lesser importance?
Speaker 1: And amara, how did the justices respond to these arguments?
Speaker 1: What were you seeing in the room about what they
Speaker 1: were paying attention to and asking about?
Speaker 5: Well, I thought one of the most notable moments was
Speaker 5: when Justice Kavanaugh questioned sour about FED independence and he
Speaker 5: basically started that line of questioning asking him why is
Speaker 5: FED independence important? And then he went on to basically
Speaker 5: talk about how you know, a decision to remove Lisako
Speaker 5: could essentially create a slippery slope where you have a
Speaker 5: cycle where presidents continuously kind of remove governors at will.
Speaker 3: Because if this were set as a precedent, it seems
Speaker 3: to me, just thinking big picture, what goes around comes around.
Speaker 3: All the current president's appointees would likely be removed for
Speaker 3: clause on January twenty, twenty twenty nine.
Speaker 2: If there's a.
Speaker 5: Democratic that was a point in the hearing where you
Speaker 5: saw people kind of perk up because it kind of
Speaker 5: got to the heart of the matter, the thing that
Speaker 5: we've all been thinking about, which is the question of
Speaker 5: FED independence.
Speaker 1: I mean to tie this all together, Greg, after hearing
Speaker 1: these arguments and the justices responses, what's your sense of
Speaker 1: where the justices are leaning on this case as a
Speaker 1: body or individually.
Speaker 4: It sure seemed like and not just a you know,
Speaker 4: a five justice majority, but a larger majority was really
Speaker 4: concerned about the prospect of what it would mean if
Speaker 4: the court sided with Donald Trump and let him fire her,
Speaker 4: at least right away. It seems like the big question
Speaker 4: now is a court going to issue a narrow ruling
Speaker 4: that just kicks the can down the road a little
Speaker 4: bit and maybe it comes back to them a ruling
Speaker 4: maybe that says, hey, she's got to have some sort
Speaker 4: of opportunity to be heard before you fire her. Or
Speaker 4: do they do something broader that says allegations of these
Speaker 4: sort are not the kind of things that let a
Speaker 4: president remove a FED governor. That would give much deeper
Speaker 4: protection for FED governors going forward. That would be a
Speaker 4: very big deal. Whether the Court is ready to go
Speaker 4: there yet that's not clear.
Speaker 1: Up next what prior rulings by the Court could tell
Speaker 1: us about where the justices might land this time, and
Speaker 1: just how big the stakes are for Trump, for the FED,
Speaker 1: and for the US economy. This isn't the first time
Speaker 1: the Supreme Court has been asked to weigh in on
Speaker 1: President Trump's power to fire top officials at independent federal agencies.
Speaker 1: Last year, the Court ruled in his favor, allowing him
Speaker 1: to oust officials at the National Labor Relations Board and
Speaker 1: the Merit System's Protection Board, but notably, it exempted the
Speaker 1: Federal Reserve from that decision. It was an indication that
Speaker 1: the Court was prioritizing FED independence, an argument that Lisa
Speaker 1: Cook's lawyer Paul Clement invoked on Wednesday.
Speaker 7: There's a reason that monetary policy has been treated differently
Speaker 7: for lo these many years, and there's a reason that
Speaker 7: the markets watch the FED a little more closely than
Speaker 7: they watch really any other agency of government.
Speaker 1: So I asked Bloomberg Fed reporter amea Amokway to walk
Speaker 1: me through what it would mean if the Court decided
Speaker 1: to rule in Trump's favor this time and allow the
Speaker 1: President to fire a FED governor in this way.
Speaker 5: If you talk to any mainstream economist, when a central
Speaker 5: bank is independent, it provides for better economic outcomes. It
Speaker 5: reassures investors, it reassures the public that a central bank
Speaker 5: like the FED is willing to take decisions that may
Speaker 5: be unpopular to produce the best economic outcomes, particularly when
Speaker 5: it comes to inflation. So a good example is, in
Speaker 5: the wake of the pandemic, we had an inflationary surge
Speaker 5: in the United States and the FED raised interest rates
Speaker 5: aggressively to combat that. Painful for Americans, but necessary to
Speaker 5: push back against inflation, right. And the FED was able
Speaker 5: to do that because it is an independent institution and
Speaker 5: it doesn't have to worry about the political ramifications of
Speaker 5: taking unpopular steps. And so the idea is that if
Speaker 5: you have a less independent FED, if you have a
Speaker 5: board of governors where people can be fired basically at
Speaker 5: will by the President, then perhaps they aren't going to
Speaker 5: be willing to take those unpopular steps when necessary. And
Speaker 5: then maybe you have an economy that is less strong,
Speaker 5: You have an economy where inflation is not well controlled,
Speaker 5: and that in turn erodes confidence that investors both here
Speaker 5: and abroad have in the US economy and our assets.
Speaker 5: So it would have implications for the US dollar, would
Speaker 5: have implications for US stocks, it would have implications for
Speaker 5: US treasuries, and so economists worn of basically a downward
Speaker 5: spiral if we see FED independence eroded.
Speaker 1: And Greg let's play out the other possible scenario here.
Speaker 1: If the court rules against Trump, as perhaps seems more
Speaker 1: likely after these oral arguments, where does that put the president?
Speaker 1: More broadly, how big of a loss is that?
Speaker 4: It's significant, But keep in mind this is a Supreme
Speaker 4: Court that, over the last year in particular, has that
Speaker 4: a lot of things to expand presidential authority, and so
Speaker 4: in the non FED context, the Court is still giving
Speaker 4: him very broad power to fire other people in the
Speaker 4: federal government when he wants to. But in terms of
Speaker 4: the FED, it means that the FED continues as we've
Speaker 4: known it for the most part. It means that even
Speaker 4: though they'll still be subject to political pressure, the bully
Speaker 4: pulput the president will be, you know, no doubt still
Speaker 4: talking about you should lower interest rates. He's going to
Speaker 4: have the ability to appoint a new chair and other
Speaker 4: members going forward. But in terms of where the FED
Speaker 4: stands legally, it will be basically where it has always stood,
Speaker 4: which is once members are appointed and confirmed by the Senate,
Speaker 4: unless they do something are really really wrong, they are
Speaker 4: there throughout their term.
Speaker 1: And against this backdrop, Amera, the decision that we're waiting
Speaker 1: for seems quite high stakes. But I'm wondering, you know,
Speaker 1: you've described the Supreme Court as the Fed's last line
Speaker 1: of defense in the past. Are there other lines well?
Speaker 5: Prior to us learning about the DOJ investigation, it really
Speaker 5: had been the Supreme Court with their initial sort of
Speaker 5: decision to allow Lisa Cook to remain on the job.
Speaker 5: That was kind of the first time we saw any
Speaker 5: of Washington's kind of institutions come to the fed's defense
Speaker 5: because really Republicans in Congress, since they can troll built
Speaker 5: chambers of Congress, have been very reticent to sort of
Speaker 5: push back on all the attacks from the Trump administration
Speaker 5: on the FED. We haven't really seen much market reaction
Speaker 5: to some of these attacks. You know, last year, over
Speaker 5: the spring and early summer, Trump was sort of talking
Speaker 5: about firing chair Pow. We didn't see much of a
Speaker 5: market reaction after he said he was firing re Lisa Cook.
Speaker 5: We didn't see much of a market reaction, and so
Speaker 5: the idea that the markets act as a check on
Speaker 5: President Trump wasn't really applicable in the case of the Fed.
Speaker 5: We didn't really see much market reaction, But now with
Speaker 5: this dj investigation, we did see a few Republicans come
Speaker 5: out and say, you know, this is going a little
Speaker 5: too far. We kind of need to pull this back.
Speaker 5: And so I think this investigation is being seen as
Speaker 5: sort of a more serious threat, in part because it
Speaker 5: is a criminal investigation than some of the other sort
Speaker 5: of attacks that we've seen from the Trump administration.
Speaker 1: And Greg, I also want to understand what comes next.
Speaker 1: This is on the court's emergency docket, So what does
Speaker 1: that actually mean for when and weather we'll get a
Speaker 1: conclusive ruling on whether or not Lisa Cook can be
Speaker 1: removed from her post as FED governor.
Speaker 4: The only thing I can say with a lot of
Speaker 4: confidence is that it will come out sometime before the
Speaker 4: term ends, which is typically end of June, very early July.
Speaker 1: And amara what's next for the Fed as they await
Speaker 1: this decision.
Speaker 5: There's a lot going on. So we have a FED
Speaker 5: meeting next week where Fed officials are widely expected to
Speaker 5: hold interest rates steady after cutting three consecutive times at
Speaker 5: the end of last year, and so FED officials are
Speaker 5: actually dealing with a pretty complicated economic picture on top
Speaker 5: of everything else, because they are trying to figure out
Speaker 5: what's happening in the labor market and what's happening with inflation,
Speaker 5: which are kind of pulling their policy choices in kind
Speaker 5: of opposite direction. So there's a complicated economic backdrop that
Speaker 5: they're dealing with. The other big thing that's happening is
Speaker 5: that President Trump is weighing who he wants to pick
Speaker 5: for FED chair chaired. Jerome Pal's term is up in May,
Speaker 5: and President Try is considering mainly four candidates, and that
Speaker 5: his whole selection process has been complicated by this DOJ
Speaker 5: investigation because you now have some Republicans who are pushing
Speaker 5: back against that and saying that they will not advance
Speaker 5: any of President Trump's phennominees until that situation is resolved.
Speaker 5: So there's a question of who Trump will pick to
Speaker 5: be FED chair and how easily that person will be
Speaker 5: able to be confirmed.
Speaker 2: This is the Big Take from Bloomberg News. I'm Sarah Holder.
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Speaker 2: Thanks for listening. We'll be back tomorrow.