WEBVTT - The Treasury Payment System Elon Musk Now Has Access To 0:00:02.480 --> 0:00:19.320 Bloomberg Audio Studios, Podcasts, radio News. Hello and welcome to 0:00:19.440 --> 0:00:22.160 another episode of the Odd Lots Podcast. 0:00:22.280 --> 0:00:24.720 I'm Joe Wisenthal and I'm Tracy Alloway. 0:00:24.960 --> 0:00:28.040 Tracy, the theme of the last two weeks has been, 0:00:28.080 --> 0:00:31.880 I don't know, emergency episodes of the podcast. Look in 0:00:32.000 --> 0:00:36.440 some respects, it's not surprising, new administration, new unexpected things. 0:00:36.520 --> 0:00:39.120 There's always going to be a flurry of activity when 0:00:39.159 --> 0:00:44.400 a new administration comes unexpected stuff. But uh, there's a lot. 0:00:44.600 --> 0:00:47.760 Yes, we're basically a daily show now, at least for 0:00:47.800 --> 0:00:48.480 the past two weeks. 0:00:48.479 --> 0:00:50.239 Well, it's like how we were a daily show. I 0:00:50.240 --> 0:00:51.920 mean we used to just do one episode a week 0:00:51.960 --> 0:00:54.400 prior to COVID. That was like really the mark of 0:00:54.440 --> 0:00:55.160 the world changing. 0:00:55.200 --> 0:00:58.639 It was like that, right, when you get more aud 0:00:58.680 --> 0:01:00.760 blots episodes, that's bad sign. 0:01:01.240 --> 0:01:04.160 It's a sign, right, So some people would say it's 0:01:04.200 --> 0:01:05.960 a good sign that there's a lot of stuff going 0:01:05.959 --> 0:01:08.479 on that people want, but it's certainly a sign. And 0:01:08.560 --> 0:01:11.959 of course there's been stuff going on on trade. I 0:01:11.959 --> 0:01:15.319 guess one of our emergency episodes was about the Deep 0:01:15.360 --> 0:01:17.600 Seek sell off. There's just a lot going on right now. 0:01:17.680 --> 0:01:20.080 Yes, indeed, and we're going to talk about one of 0:01:20.120 --> 0:01:22.000 the other things that's been going. 0:01:21.800 --> 0:01:24.880 On, right, and so obviously we've known for a while 0:01:24.920 --> 0:01:27.760 since part of the administration that Elon Musk and his 0:01:27.880 --> 0:01:31.440 Department of Government Efficiency would be coming in. To my mind, 0:01:31.440 --> 0:01:35.240 there's like multiple questions here. I mean, there's just so 0:01:35.280 --> 0:01:38.280 many questions about what that is. You know, some people 0:01:38.319 --> 0:01:40.039 are like, oh, is it going to be about just 0:01:40.120 --> 0:01:44.080 making the government run more efficiently? So the capital e 0:01:44.280 --> 0:01:47.560 which probably a lot of people wouldn't object to in theory. 0:01:47.600 --> 0:01:50.000 And then there's of course the question about how much 0:01:50.080 --> 0:01:53.880 can an organization or an entity like this do unilaterally 0:01:54.200 --> 0:01:57.040 because a lot of the big spending decisions they come 0:01:57.080 --> 0:02:00.400 out of Congress. One of the things that's happened, though, 0:02:00.440 --> 0:02:03.480 there's been a lot of reporting on this from multiple outlets, 0:02:03.920 --> 0:02:06.760 is that Elon Musk and his team have apparently gotten 0:02:06.960 --> 0:02:11.080 access to a key payment system within the Department of Treasure. 0:02:11.320 --> 0:02:13.640 Yeah, so this has been all over the news in 0:02:13.840 --> 0:02:16.800 recent days, and I guess I guess the downside is 0:02:16.919 --> 0:02:20.800 we have a group of unelected people who I think 0:02:20.880 --> 0:02:26.200 technically aren't government employees, controlling the system through which the 0:02:26.280 --> 0:02:31.079 US sends basically all its payments, like everything social security 0:02:31.400 --> 0:02:35.640 to treasuries, all of that. But the upside is we 0:02:35.760 --> 0:02:39.000 get to talk about payments technology. Right, there's a small 0:02:39.400 --> 0:02:40.560 silver lining. 0:02:40.440 --> 0:02:43.040 Right, and you know, look, this is actually you know, 0:02:43.200 --> 0:02:46.240 we talk a lot about macro stuff on the podcast, 0:02:46.240 --> 0:02:49.040 showed the amount of government spending that goes to this 0:02:49.240 --> 0:02:52.720 or that or deficits are dead or whatever. But it's 0:02:52.760 --> 0:02:55.519 actually we both like it when we get to talk 0:02:55.560 --> 0:02:58.680 about like how does money go from point A to 0:02:58.760 --> 0:03:01.920 point b? And this is is an infinitely fascinating topic. 0:03:02.200 --> 0:03:03.440 But maybe sometimes. 0:03:03.040 --> 0:03:05.799 People don't care, but this is now they care. 0:03:05.680 --> 0:03:08.280 But now this is a time for people care, Like 0:03:08.320 --> 0:03:11.960 how does a payment actually get made to anything, whether 0:03:12.040 --> 0:03:14.960 it's a Social Security or recipient, whether it's to an 0:03:14.960 --> 0:03:18.359 independent contractor whether it's to an employee, or whether it's 0:03:18.400 --> 0:03:23.480 to the holder of a government bond awaiting their coupon. Yeah. Absolutely, Well, 0:03:23.480 --> 0:03:28.119 we're gonna be speaking to someone who really knows payments 0:03:28.600 --> 0:03:31.840 and the intricacies he seems to get. Really, I don't 0:03:31.880 --> 0:03:35.000 know many people who like are interested is going deep 0:03:35.000 --> 0:03:37.600 into how all these sort of like payments and accounting 0:03:37.640 --> 0:03:40.840 systems actually work, going deeper than just the macro The 0:03:40.880 --> 0:03:43.320 perfect guest, we haven't had him on in a long time, 0:03:43.440 --> 0:03:45.640 and we're gonna originally talk about something else. We'll get 0:03:45.640 --> 0:03:48.960 to that one day. We're gonna be speaking with Nathan Tanks. 0:03:48.960 --> 0:03:52.200 He is the author, editor creator of the Notes on 0:03:52.280 --> 0:03:55.120 the Crises Substack. So, Nathan, thank you so much for 0:03:55.120 --> 0:03:56.240 coming back on Oddlas. 0:03:56.400 --> 0:03:58.720 Well, I we'll say not substack anymore, but yes, thank 0:03:58.720 --> 0:03:59.160 you very much. 0:03:59.200 --> 0:04:01.440 You just let it write. What is the Bureau of 0:04:01.440 --> 0:04:02.240 Fiscal Service. 0:04:02.920 --> 0:04:08.080 The Bureau of the Fiscal Service is a sleepy, obscure 0:04:08.440 --> 0:04:13.880 part of the United States Treasury that make sure that 0:04:14.160 --> 0:04:18.240 all of the sort of operational things that the Treasury 0:04:18.279 --> 0:04:21.760 Department is doing operates, so you know, you can have 0:04:21.839 --> 0:04:28.680 big conversations about foreign currency, about issuing treasury securities, about 0:04:29.200 --> 0:04:33.600 social security and Medicare, and government spending, and tax collection. 0:04:34.320 --> 0:04:37.920 Of course, you know, the tax collection is an IRS prerogative. 0:04:38.080 --> 0:04:40.720 But the other side of that, the sort of flip 0:04:40.800 --> 0:04:46.280 side of the IRS with tax collection is the payment side, 0:04:46.360 --> 0:04:50.200 and of course those tax collections in turn run through 0:04:50.240 --> 0:04:52.839 the payment system. The Bureau of the Fiscal Service is 0:04:52.839 --> 0:04:55.200 what sends out tax refunds. So tax refunds are not 0:04:55.360 --> 0:05:00.200 actually technically an IRS prerogative in terms of making those 0:05:00.240 --> 0:05:04.200 payments going out, and the Bureau of the Fiscal Service 0:05:04.240 --> 0:05:08.159 is what does that. Eighty eight percent of government payments 0:05:08.600 --> 0:05:15.240 flow through this system every year, and it is what 0:05:15.360 --> 0:05:21.240 I've described as the beating, pulsating heart of the federal 0:05:21.279 --> 0:05:24.839 government's payments. Before you get to the banking system, before 0:05:24.839 --> 0:05:28.000 you get to the Federal Reserve. This is the heart. 0:05:28.120 --> 0:05:31.680 This is the artery that is making it all function. 0:05:32.080 --> 0:05:37.719 It is the most important aspect of the federal government, 0:05:38.240 --> 0:05:39.960 even though no one's ever heard of it. 0:05:40.880 --> 0:05:43.880 How complex is it to actually send out these payments? 0:05:43.920 --> 0:05:46.799 Because on the one hand, I can kind of imagine 0:05:46.800 --> 0:05:48.960 a scenario where people are just you know, pressing a 0:05:49.000 --> 0:05:51.360 button that says, like pay this person, pay that person, 0:05:51.560 --> 0:05:54.839 pay whoever. But on the other hand, I also imagine 0:05:54.839 --> 0:05:59.400 we're talking about, you know, millions of individual payments. People 0:05:59.520 --> 0:06:03.400 might have to be like onboarded into the system. I 0:06:03.400 --> 0:06:08.080 imagine getting into the technology that we're talking about, seriously 0:06:08.160 --> 0:06:13.240 old mainframe type computers like dinosaur systems. How hard is 0:06:13.279 --> 0:06:14.760 it to do this job? 0:06:15.320 --> 0:06:19.240 It's an incredibly complex task. I mean, we're talking about 0:06:19.279 --> 0:06:24.240 a mind boggling scale of payment processes that you have 0:06:24.279 --> 0:06:27.640 to do, and there's a physical architecture to the system. 0:06:27.680 --> 0:06:31.159 There's what you know encoding is called the business logic, 0:06:31.240 --> 0:06:34.240 So not just the logic of like the abstractly the 0:06:34.320 --> 0:06:38.440 language of the program, but the business logic that is involved. 0:06:38.640 --> 0:06:44.320 The Treasury has you know, belatedly gone into various payment 0:06:44.360 --> 0:06:48.840 modernization projects over the last twenty years, if you know, 0:06:48.880 --> 0:06:51.400 as we'll get to there's a sinking feeling in my 0:06:51.400 --> 0:06:54.840 stomach of that maybe it shouldn't have. But it is 0:06:55.000 --> 0:06:59.400 quite a complex system that requires a quite a specialized 0:06:59.440 --> 0:07:06.160 group of essentially aging programmers to manage this system and 0:07:06.839 --> 0:07:10.760 make sure that it is functioning properly and that you know, 0:07:11.320 --> 0:07:15.680 all payments go out from the Treasury on time, and 0:07:15.720 --> 0:07:18.680 that they never miss a payment and it's never delayed. 0:07:19.240 --> 0:07:22.800 We like talking about aging systems that are taken care 0:07:22.840 --> 0:07:24.120 of by a handful of gray beary. 0:07:24.360 --> 0:07:27.640 We need we need a Cobyl clasic cobylic. 0:07:27.720 --> 0:07:29.840 By the way, I went on IBM's website and I 0:07:29.840 --> 0:07:33.240 found some files where they had some Cobyl examples. I 0:07:33.320 --> 0:07:36.080 dropped them into Chad GPT. I said, rewrite these Python. 0:07:36.200 --> 0:07:38.120 It looked like it came out. Can't they just do that? 0:07:38.480 --> 0:07:40.240 Copy and paste the whole thing, drop it into a 0:07:40.400 --> 0:07:42.440 I'd say, rewrite this on Python or something. 0:07:42.640 --> 0:07:44.840 Well, I mean that is kind of what I was 0:07:44.880 --> 0:07:46.000 getting at with. 0:07:46.880 --> 0:07:49.720 You're a deep seat guy. Can't they just go, yeah, I've. 0:07:49.640 --> 0:07:51.800 Been Actually it's funny. I started playing with deep seek 0:07:51.840 --> 0:07:53.840 before this, CRISTI is really good. I was having fun. 0:07:53.960 --> 0:07:56.240 You put it in, and you know, I I you know, 0:07:56.280 --> 0:07:59.080 I loved, you know, getting some R code and building 0:07:59.080 --> 0:08:03.320 an economic model, proving my mathemat skills and understanding the 0:08:03.360 --> 0:08:06.360 mathematical properties of monels. It was great for that it 0:08:06.440 --> 0:08:09.920 has a ton of data that it is based on 0:08:10.240 --> 0:08:14.160 that it can do that. And each system, I mean 0:08:14.160 --> 0:08:18.680 this is true about generally any sort of business system 0:08:18.680 --> 0:08:20.640 that has developed for over a long time, but it's 0:08:20.760 --> 0:08:24.600 especially true for COBAL system, especially true for older systems, 0:08:24.600 --> 0:08:27.680 and no system is older than the Treasury, even with 0:08:27.840 --> 0:08:34.560 the modernizations, you know, the modernizing these systems mean changing 0:08:34.600 --> 0:08:38.520 the physical architecture that they run on, and maybe updating 0:08:38.559 --> 0:08:41.520 the language so that it can also be used on 0:08:41.600 --> 0:08:45.320 say a computer and not just a mainframe. And there's 0:08:45.400 --> 0:08:48.280 some unification of business logic that at all, But it's 0:08:48.320 --> 0:08:50.599 not getting rid of COBAL and actually getting rid of 0:08:50.679 --> 0:08:53.120 COBAL would be about there's an updated version of gobal 0:08:53.280 --> 0:08:56.959 arm goball that they use. These servers are now or 0:08:57.000 --> 0:08:58.800 at least I think for the most part, running on 0:08:58.880 --> 0:09:02.120 Linux servers. That they've got modern operating systems, but they're 0:09:02.160 --> 0:09:05.520 still very, very complex, and it's still Cobal and it's 0:09:05.520 --> 0:09:11.320 still decades and decades of business logic making the system run, 0:09:11.440 --> 0:09:14.080 you know, and all of these systems are a highly 0:09:14.080 --> 0:09:17.480 confidential system in every bank in the world, in every 0:09:17.640 --> 0:09:20.840 you know, major insurance company, every government. So there just 0:09:21.040 --> 0:09:24.600 is not like a set an example of confidential data 0:09:24.679 --> 0:09:26.800 set of these things that can run on. And you know, 0:09:26.880 --> 0:09:29.880 I should say, and this is part of why I'm 0:09:30.120 --> 0:09:34.360 so you know adept for this moment. That my father 0:09:34.559 --> 0:09:40.080 was a COBYL programmer at Morgan Stanley and he for 0:09:40.120 --> 0:09:43.040 almost twenty years he was the person in charge of 0:09:43.080 --> 0:09:48.240 making sure every financial advisor got their compensation. I've been 0:09:48.360 --> 0:09:50.400 telling him for the last three days, please let me, 0:09:51.000 --> 0:09:53.920 you know, be in me in the odd lots interview, 0:09:54.000 --> 0:09:57.560 please please, and uh, it's gonna take me a couple 0:09:57.600 --> 0:10:00.000 of weeks to uh, you can do it. I believe 0:10:00.200 --> 0:10:04.400 I'm working at this. This is the hardest informant task 0:10:04.480 --> 0:10:06.800 that I that I've had in the last five days. 0:10:23.160 --> 0:10:27.160 Okay, so musk slash doge now have access to this 0:10:27.280 --> 0:10:30.800 incredibly complicated system, as you just laid out, Do we 0:10:30.920 --> 0:10:34.040 know exactly what kind of access they have, because there's 0:10:34.080 --> 0:10:37.520 been a lot of discussion over whether it's read only 0:10:37.800 --> 0:10:40.880 or maybe they have administrative rights. What do we know? 0:10:41.200 --> 0:10:44.320 So, you know, there was a lot of very terrifying reporting. 0:10:44.520 --> 0:10:46.840 You know, you want to make a point of saying 0:10:47.400 --> 0:10:50.720 that when I first read the Washington Post reporting, which 0:10:50.760 --> 0:10:54.320 is the source that broke this in three PM, I 0:10:54.480 --> 0:11:00.160 was absolutely terrified. I had an absolute panic attack. And 0:11:00.360 --> 0:11:03.160 you know, as this story got started developing in Saturday, 0:11:03.520 --> 0:11:07.560 anonymous sources started leading, say The New York Times other 0:11:07.640 --> 0:11:10.800 sources to update their articles saying, well, they only have 0:11:10.880 --> 0:11:14.040 read only access. But this was there was never any 0:11:14.040 --> 0:11:17.199 public confirmation the idea. These were anonymous sources that were 0:11:17.240 --> 0:11:20.680 trying to placate the utter panic that was coming out 0:11:20.960 --> 0:11:26.120 and Wired at one am today reported recording this February fourth, 0:11:26.440 --> 0:11:28.959 recording this February fourth, at twelve nineteen. 0:11:29.320 --> 0:11:31.520 But that's how fast the news cycle is. Now, we 0:11:31.640 --> 0:11:33.520 got to give the exact minutes. 0:11:33.679 --> 0:11:37.640 Yeah, and so at a at one am they exclusively 0:11:37.679 --> 0:11:40.000 reported for the first time that that is not true. 0:11:40.160 --> 0:11:44.360 They have read and write access, and I've reported as 0:11:44.400 --> 0:11:48.240 of seven thirty this morning confirmed their reporting from my 0:11:48.360 --> 0:11:52.440 sources independently. Unfortunately couldn't be to it first. I crashed 0:11:52.480 --> 0:11:55.080 out and fell asleep at seven PM, got up at 0:11:55.080 --> 0:11:56.360 three am and got going. 0:11:56.640 --> 0:11:59.400 So what can you do with read only access? With 0:11:59.559 --> 0:12:02.520 read like, if someone has quote read only access to. 0:12:02.480 --> 0:12:05.680 It, that means you can My understanding is that means 0:12:05.679 --> 0:12:08.160 you can look at people's social security numbers, you can 0:12:08.200 --> 0:12:12.200 look at other confidential medical information, you know, all sorts 0:12:12.240 --> 0:12:15.200 of confidential information. You can look at the source code 0:12:15.400 --> 0:12:19.480 and so come up with ways of restructuring the code 0:12:19.760 --> 0:12:23.199 and then propose those restructurings and then it, you know, 0:12:23.480 --> 0:12:26.120 goes through a testing process and then try to get 0:12:26.120 --> 0:12:30.240 one of these aging programmers to implement what you want. 0:12:30.480 --> 0:12:33.840 And do we have any sense of what Elon wants 0:12:34.040 --> 0:12:36.560 out of this access? I mean, this is the big question, 0:12:36.679 --> 0:12:39.440 right And if you look at his account on Twitter 0:12:39.559 --> 0:12:43.160 slash x, he's talking a lot about, oh, I'm rooting 0:12:43.160 --> 0:12:48.360 out fraudulent payments or improper payments and my impression of 0:12:48.400 --> 0:12:52.120 this bureau is that, you know, the validity of payments 0:12:52.960 --> 0:12:57.240 isn't really their jurisdiction, right, Like their jurisdiction or their 0:12:57.360 --> 0:13:00.840 task is to send out the payments that have been 0:13:00.880 --> 0:13:05.840 mandated by Congress or other sources. They're not there to 0:13:05.960 --> 0:13:09.160 necessarily say, well, this payment is legit and that payment 0:13:09.280 --> 0:13:09.959 is not legit. 0:13:10.679 --> 0:13:12.840 Yeah. So, I mean, I think, you know, for an 0:13:12.880 --> 0:13:15.480 odd looted audience who talks about the banking system a 0:13:15.480 --> 0:13:19.200 lot more and talks about the Federal Reserve, I think 0:13:19.400 --> 0:13:23.280 that is where to start to talking about this. Talking 0:13:23.320 --> 0:13:28.960 about having individual verification of payments and trying to determine 0:13:29.520 --> 0:13:35.800 improper payments at the technical, operation operational level of processing 0:13:35.840 --> 0:13:42.000 payments is like saying that, like the operations departments at 0:13:42.000 --> 0:13:46.160 the Federal Reserve, banks should not just simply rely on 0:13:47.640 --> 0:13:51.199 know your customer laws, anti money laundering and all sorts 0:13:51.240 --> 0:13:55.240 of other sort of safeguards for an authorized you know, 0:13:55.840 --> 0:14:01.600 you know, authorized payer to make payments that you know, 0:14:01.920 --> 0:14:06.240 the fundamental premise of the payment system, of any payment 0:14:06.280 --> 0:14:11.320 system that you're supposed to rely on, is that whether 0:14:11.480 --> 0:14:16.480 or not a legitimate payment is going is determined by 0:14:16.520 --> 0:14:19.760 the process of letting people into the system, and that 0:14:19.840 --> 0:14:23.160 if a regularly show up with what is going on 0:14:23.440 --> 0:14:27.800 with one of these authorized users, then that gets investigated, 0:14:28.000 --> 0:14:30.760 maybe they get shut out of the system. But trying 0:14:30.840 --> 0:14:34.760 to examine the individual payments, I mean, you know, it's 0:14:34.880 --> 0:14:37.760 like saying that that the operations department of the Federal 0:14:37.800 --> 0:14:41.480 Reserve Banks have been improperly sending improper payments. 0:14:41.760 --> 0:14:45.360 Explain this further because obviously, just in the abstract, the 0:14:45.440 --> 0:14:50.560 idea of being vigilant about improper payments, it's a good idea. 0:14:50.720 --> 0:14:53.200 I don't know how often they are, et cetera. But 0:14:53.360 --> 0:14:56.960 just sort of explain this idea further, where you know, 0:14:57.000 --> 0:15:01.040 in the vast system of the Treasury is the place 0:15:01.600 --> 0:15:05.480 or the seat of these sort of judgments And why 0:15:05.760 --> 0:15:07.640 is the in your view of the Bureau of Fiscal 0:15:07.680 --> 0:15:10.800 Service not the sort of place to identify these. 0:15:10.880 --> 0:15:13.400 Yeah, So, I mean, you know, the big pictures that 0:15:13.440 --> 0:15:17.680 think about this is that the Treasury, the Bureau of 0:15:17.680 --> 0:15:20.960 the Fiscal Service is essentially and thus the Treasure as 0:15:21.000 --> 0:15:25.840 a whole is essentially a fiscal agent for every administrative 0:15:25.840 --> 0:15:28.960 agency in the federal government and a various maybe some 0:15:29.080 --> 0:15:33.000 other entities as well, And so You know, traditionally, when 0:15:33.000 --> 0:15:36.040 we talk about this, we talk about treasury payments. People 0:15:36.160 --> 0:15:40.680 consolidate the entire federal government and just say the treasury. Yeah, 0:15:40.880 --> 0:15:43.680 And you know, it's a shorthand that's useful for ninety 0:15:43.760 --> 0:15:47.440 nine percent purposes, just like other forms of consolidation would be. 0:15:47.840 --> 0:15:51.880 But for payment operational level issues, and you ask that 0:15:52.000 --> 0:15:55.280 question or when you ask questions about it, you have 0:15:55.400 --> 0:15:59.360 to disaggregate the federal government and examine those payments up there. 0:15:59.840 --> 0:16:03.480 For example, the Department of Agriculture, they would have their 0:16:03.520 --> 0:16:07.320 own focus on who is getting a payment that's legitimate 0:16:07.480 --> 0:16:11.000 or not. The Department of Education would have a division 0:16:11.040 --> 0:16:13.520 that focuses on these things, et cetera. Yeah, but then 0:16:13.600 --> 0:16:17.000 ultimately they make some decision. The Department of Agriculture says, Okay, 0:16:17.200 --> 0:16:22.240 there's some subsidy to corn growers somewhere, but ultimately that 0:16:22.320 --> 0:16:24.040 just gets routed through the Treasury. Yeah. 0:16:24.040 --> 0:16:27.240 And the Bureau of the of the Fiscal Service wants 0:16:27.600 --> 0:16:32.920 those administrative agencies to have better internal controls. They have 0:16:33.000 --> 0:16:36.520 their own Payments Integrity Unit, which is not supposed to 0:16:36.600 --> 0:16:41.440 investigate the payments themselves, but to help improve the controls. 0:16:41.600 --> 0:16:45.000 There is one of these sprawling systems is a do 0:16:45.080 --> 0:16:47.120 not pay system where there is a list of do 0:16:47.240 --> 0:16:51.240 not pay that these files get pushed through before the 0:16:51.280 --> 0:16:54.760 payments actually get put out. And you know, the buer 0:16:54.760 --> 0:16:57.600 of the Fiscal Service also has legislative proposals. Their last 0:16:57.840 --> 0:17:00.600 you know, Fiscal year twenty twenty four report has seven 0:17:00.800 --> 0:17:05.440 legislative proposals. Five of them are about reducing improper payments, 0:17:05.480 --> 0:17:11.240 including giving them greater authority to require better internal controls 0:17:11.280 --> 0:17:15.520 from other administrative agencies. So these are known problems. The 0:17:15.560 --> 0:17:18.840 main barrier has been Congress has not budgeted enough and 0:17:18.960 --> 0:17:22.439 authorized enough to do this, and notably, a lot of 0:17:22.480 --> 0:17:27.040 this needs legislation to do, both on you know, internal 0:17:27.200 --> 0:17:31.000 legal things within the federal government and also in terms 0:17:31.040 --> 0:17:35.320 of privacy protections for people of doing responsible changes that 0:17:35.640 --> 0:17:37.720 and make sure they're still privacy respecting. 0:17:38.560 --> 0:17:43.040 So the other word that's been flying around lately is impoundment. 0:17:43.920 --> 0:17:47.080 And I guess my question is, you know, if DOGE 0:17:47.280 --> 0:17:52.000 starts cutting off certain payments for whatever reason, is there 0:17:52.040 --> 0:17:58.359 a backup contingency payment processor. Is there like another agency 0:17:58.800 --> 0:18:01.200 that could maybe step in and do some of this. 0:18:02.080 --> 0:18:06.160 No, there's no rule book or game plan if this 0:18:06.280 --> 0:18:10.359 system goes down, then the payments don't go out that day. 0:18:10.640 --> 0:18:14.399 And if they break this system in a way that 0:18:14.520 --> 0:18:18.040 takes months to fix that we have no rule book 0:18:18.440 --> 0:18:21.760 for this. Now. Ironically, the memos that I've gotten through 0:18:21.760 --> 0:18:25.400 FOYA about what the federal reserves game plan in case 0:18:25.440 --> 0:18:28.480 of treasury default the debt ceiling kind of makes this 0:18:28.600 --> 0:18:31.840 situation a little bit less stuff on the panic because 0:18:31.880 --> 0:18:34.919 you could, like, you know, who's caring about legalities at 0:18:34.920 --> 0:18:38.119 this point anyway? With this, you know, basically decided to 0:18:38.119 --> 0:18:40.840 do anything. So you maybe like create an SPV for 0:18:40.920 --> 0:18:45.320 each administrative agency, lend to it with you know, thirteen 0:18:45.359 --> 0:18:48.439 point three authority, and then try to work out payments. 0:18:48.440 --> 0:18:50.000 But you still have to figure out who to pay 0:18:50.000 --> 0:18:50.440 and where. 0:18:50.840 --> 0:18:53.800 But there's two separate questions here when we're talking about empundment. 0:18:53.880 --> 0:18:55.719 One is the theory of just something break. But then 0:18:55.760 --> 0:18:59.040 the other question is there is a legal theory, you know, 0:18:59.359 --> 0:19:02.480 the classic like sort of constitution one to one Congress 0:19:02.520 --> 0:19:05.919 controls the power of the purse, and the Congress decides 0:19:06.000 --> 0:19:08.400 so gets money, et cetera, and then it goes out there. 0:19:08.680 --> 0:19:10.879 And then there is the other theory that some in 0:19:10.920 --> 0:19:16.480 the trumpe administration support that actually the executive branch does 0:19:16.520 --> 0:19:20.919 have discretion about payments, so Congress could authorize something, but 0:19:21.320 --> 0:19:24.439 tell listeners about the legal debate about what impoundment is. 0:19:24.960 --> 0:19:28.200 Yes, so, and this is what I was called covering 0:19:28.400 --> 0:19:30.920 Friday morning with my first I mean, that's how Also, 0:19:30.960 --> 0:19:33.200 how you know things are really bad is when there 0:19:33.240 --> 0:19:36.639 had been three notes of the crisis pieces in three days, 0:19:36.680 --> 0:19:42.199 in three business days. But the core issue is, as 0:19:42.480 --> 0:19:47.440 you said, the foundational constitutional principle is that Congress has 0:19:47.480 --> 0:19:51.680 control of the power of the purse, and that is 0:19:51.680 --> 0:19:57.600 is not supposed to be abrogated. There is some you know, 0:19:57.640 --> 0:20:01.080 the historical precedent here is the Nix administra. The Impowerment 0:20:01.160 --> 0:20:03.960 Act of nineteen seventy four was meant to stop Nixon 0:20:04.119 --> 0:20:07.639 for impounding because he claimed that he could impound because 0:20:07.720 --> 0:20:10.199 you know, Congress is spending too much and they're you know, 0:20:10.280 --> 0:20:11.440 maybe just. 0:20:11.359 --> 0:20:18.320 To be is the executive branch unilaterally decision sorry uh uh, Yes. 0:20:18.520 --> 0:20:23.640 Impowerment is the concept of the president deciding not to 0:20:23.720 --> 0:20:30.000 spend money that Congress has appropriated, and Congress appropriating the 0:20:30.040 --> 0:20:33.400 money is a directive to spend, and especially when Congress 0:20:33.400 --> 0:20:38.359 directs uh for an exact amount of money to be 0:20:38.400 --> 0:20:41.080 spent or an exact formula of money to be spent. 0:20:41.880 --> 0:20:46.879 The president does not have the authority to just stop 0:20:47.119 --> 0:21:01.200 those payments. 0:21:04.200 --> 0:21:07.640 I mean, you mentioned the Impoundment Control Act of nineteen 0:21:07.680 --> 0:21:11.119 seventy four. So there's obviously been some dispute about the 0:21:11.160 --> 0:21:16.040 basic premise that only Congress has this prerogative. Does this 0:21:16.160 --> 0:21:17.080 end up in a court fight? 0:21:18.359 --> 0:21:22.000 Yes, I mean that is the traditional check and balance 0:21:22.080 --> 0:21:25.800 in our system is that the judiciary is supposed to 0:21:25.840 --> 0:21:33.600 step in and speak to a constitutional question and impose 0:21:33.880 --> 0:21:36.600 or say that a certain act that the president is 0:21:36.600 --> 0:21:42.359 engaging in is unconstitutional and should be stopped. In this situation, 0:21:43.080 --> 0:21:46.720 the obvious thing to say about that is that Trump 0:21:46.760 --> 0:21:50.840 appointed three of the nine Supreme Court justices that are 0:21:50.880 --> 0:21:54.320 on the Supreme Court. So it seems very unlikely, although 0:21:54.359 --> 0:22:01.000 not impossible, that the Supreme Court would actually step in 0:22:01.119 --> 0:22:05.919 and declare what Trump's is doing unconstitutional and even more importantly, 0:22:06.359 --> 0:22:12.760 impose some sort of consequences or block to what Trump 0:22:12.840 --> 0:22:13.400 is doing. 0:22:14.040 --> 0:22:17.800 But even if the Court were to rule it unconstitutional, 0:22:17.800 --> 0:22:20.720 you would still need someone to actually enforce that decision, 0:22:20.880 --> 0:22:24.040 which seems like it's pretty up in the air One 0:22:24.080 --> 0:22:27.720 more question from me. So, one of the interesting things 0:22:27.760 --> 0:22:31.479 about all of this is the doge people who have 0:22:31.600 --> 0:22:34.560 access to the payment system. I think it's like a 0:22:34.600 --> 0:22:39.600 group of young, twenty something year old programmers, according to 0:22:39.680 --> 0:22:42.840 various reporting. I find it kind of funny because I 0:22:42.880 --> 0:22:47.479 always thought Cobaal was like, you know, this thing that 0:22:47.520 --> 0:22:50.639 not a lot of people understood or there wasn't a 0:22:50.640 --> 0:22:53.000 lot of expertise in it. But apparently, you know, twenty 0:22:53.080 --> 0:22:57.000 year olds seemed to be able to understand it. What's 0:22:57.080 --> 0:23:01.840 the potential here that they actually mess something up pretty bad? 0:23:03.680 --> 0:23:08.480 The potential is absolutely enormous. The reporting that I've done 0:23:08.640 --> 0:23:13.000 that confirms the WIREDS reporting is that there is a 0:23:13.720 --> 0:23:18.560 twenty five year old SpaceX former SpaceX employee, Marco Ales, 0:23:19.080 --> 0:23:23.640 who has read and write access to the payment Automation 0:23:23.840 --> 0:23:27.040 manager and the secure payment system of the Bureau of 0:23:27.080 --> 0:23:33.679 Fiscal Service. It is an absolutely enormously terrifying situation. I 0:23:33.920 --> 0:23:38.600 had a source describe it as apocalyptic. There's no way 0:23:39.320 --> 0:23:45.920 to exaggerate how enormously dangerous this is. Every financial market 0:23:46.400 --> 0:23:49.560 in the world, in the country in the world should 0:23:49.560 --> 0:23:58.720 be pricing in the operational failure uncertainties of this system. 0:23:59.080 --> 0:24:02.000 Every single finance market should be pricing it, and none 0:24:02.040 --> 0:24:04.119 of them are. None of them are even close. 0:24:04.760 --> 0:24:06.639 And just to be clear, my last thing, so like 0:24:07.640 --> 0:24:09.280 bond payments run through this system. 0:24:09.520 --> 0:24:12.679 Bond payments run through the system. There's another Coball system 0:24:12.800 --> 0:24:16.119 at the New York Federal Reserve which I know less about. 0:24:16.560 --> 0:24:18.840 That was also part of that. But I think it 0:24:19.000 --> 0:24:23.560 still foundationally relies on the Coball systems that it communicates 0:24:23.600 --> 0:24:24.880 with at the Treasury. 0:24:25.640 --> 0:24:27.760 Nathan Tankers, thank you so much for coming on up. 0:24:28.040 --> 0:24:43.720 That was great. Yeah, Tracy. On the plus side, I 0:24:43.800 --> 0:24:44.960 like talking payments stuff. 0:24:45.359 --> 0:24:45.960 No, I really do. 0:24:46.080 --> 0:24:49.320 I mean, I think there are two main takeaways from 0:24:49.359 --> 0:24:53.320 me so far. It's like, one is the idea that 0:24:53.840 --> 0:24:56.720 this team now just has such access to, like such 0:24:56.760 --> 0:25:00.399 sensitive data is extraordinary to me. And two, I have 0:25:00.600 --> 0:25:05.919 zero doubt that it would be very easy to screw 0:25:06.040 --> 0:25:10.000 up something that is truly at the lifeblood of just 0:25:10.040 --> 0:25:12.560