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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Judge Janeen Piero, the

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Speaker 1: US attorney for the District of Columbia. She had issued

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Speaker 1: subpoenas back in January of this year related to testimony

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Speaker 1: that FED Chair Jerome Powell had given in June of

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Speaker 1: last year. This related to purported cost overruns for renovations

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Speaker 1: going on at the Federal Reserve headquarters in Washington, DC,

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Speaker 1: cost over runs that by some measures, have reached over

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Speaker 1: the one billion dollar mark. A judge today decided that

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Speaker 1: that was subpoenas were not necessarily rooted in any real

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Speaker 1: evidence of criminality, and that they had no basis for

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Speaker 1: that to continue towards a grand jury. Janeine Pero calling

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Speaker 1: that judge, in her words, an activist judge and saying

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Speaker 1: that he has taken away a grand jury tool away

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Speaker 1: from her. She then went on to say that she

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Speaker 1: will appeal the decision and will move forward with this investigation.

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Speaker 1: Joining us right now to talk a little bit more

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Speaker 1: about this is Paul Krugman. He's a Nobel laureate in

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Speaker 1: economics and research professor over at the City University of

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Speaker 1: New York. And Paul, you've written a lot over the

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Speaker 1: last few months about FED independence not necessarily related to

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Speaker 1: this case, but the Lisa Cook case and some other things.

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Speaker 1: I don't know how much you had to hear of

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Speaker 1: what Jannine Piro had to say right now, But when

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Speaker 1: you think about those subpoenas and you think about her

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Speaker 1: response to the judge's decision today, are we still now

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Speaker 1: in a world where FED independence is a question mark?

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Speaker 2: Well, you know, the judge, I've read a little bit

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Speaker 2: of the ruling, which is is quite brutal. He said,

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Speaker 2: a mountain of evidence suggests that the dominant purpose of

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Speaker 2: the subpoenas is to harass Powell, to pressure him to

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Speaker 2: lower rates, which is undoubtedly true. Piro was fulminating a

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Speaker 2: lot there, but it's it's very clear that this, you know,

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Speaker 2: it's overwhelmingly obvious that this is all about harassing power costs.

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Speaker 2: The President keeps on, you know, he's been harassing the

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Speaker 2: FED on truth social saying time to lower rates, you

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Speaker 2: got to cut rates. And now so far clearly power

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Speaker 2: is fought back and the FED is defying, and this

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Speaker 2: is actually looking like a big flop for the administration.

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Speaker 2: But you know, in previous administrations you would never have

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Speaker 2: gotten to any of this. You wouldn't have even had

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Speaker 2: previous administrations were hesitant to even criticize the Fed's decisions,

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Speaker 2: let alone brings subpoenis on an unrelated subject against the

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Speaker 2: Chair of the FED. So yeah, FED independence is still

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Speaker 2: very much on the line.

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Speaker 1: I I'm curious though, I mean the judge without getting

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Speaker 1: too much into the legal stuff here, because neither one

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Speaker 1: of us are lawyers, but I mean he specifically says

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Speaker 1: that the government produced I'm using his words, essentially zero

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Speaker 1: evidence to suspect Chair of Powell of a crime. Indeed,

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Speaker 1: its justifications are so thin and unsubstantiated that the court

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Speaker 1: can only conclude that they are quote pretextable. So I

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Speaker 1: asked you this question primarily because we know Jay Powell

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Speaker 1: is going to be gone in a couple of months

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Speaker 1: one way or the other. Kevin Warsh potentially is most

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Speaker 1: likely going to assume that Chair. Does this investigation continue

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Speaker 1: after that?

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Speaker 2: It's you know, they might because but not because there's

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Speaker 2: a good legal basis. I mean, again, I'm not a lawyer,

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Speaker 2: you're not a lawyer, But since you know, I essentially

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Speaker 2: I think there's essentially zero people who believe this was

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Speaker 2: this was actually about suspicion of criminal wrongdoing, that there

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Speaker 2: was any suspicion of anything that you know, that this

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Speaker 2: was anything but pretextual. Now, they might continue the investigation regardless,

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Speaker 2: because if we know one thing about this administration, it

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Speaker 2: is that they are they do not like being crossed,

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Speaker 2: and they are kind of vindictive about things, and they

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Speaker 2: will they will probably continue to go after Powell even

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Speaker 2: even if he's no longer Chare And by the way,

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Speaker 2: he will stay on the board, so it will still

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Speaker 2: be there and anyway that this will continue. But it's yeah,

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Speaker 2: I mean, this is not a good look. I mean

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Speaker 2: the fact that people have that Powell has been able

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Speaker 2: to beat this stuff back. You know, a lot of

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Speaker 2: it is money out of his own pocket. You know,

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Speaker 2: it happens that Powell has the resources personally to fend

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Speaker 2: off these attacks.

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Speaker 3: Other FED officials might not.

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Speaker 2: I know that Lisa Cook, you know, really had to

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Speaker 2: scramble to find the resources to fight the attacks on her.

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Speaker 3: So this is not this is not a comfortable place.

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Speaker 4: Well, Paul, I want to talk a little bit about

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Speaker 4: what might happen in May with you know, the caveat

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Speaker 4: that we're talking about a lot of hypotheticals here. But

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Speaker 4: again we heard from Senator Tom Tillis reiterating that he's

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Speaker 4: going to block any nomination to FED chair until this

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Speaker 4: is resolved. That you know, appealing the ruling will only

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Speaker 4: delay that confirmation. We heard from Jennin and Piro that

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Speaker 4: the DOJ Yes, indeed, they're going to appeal this judge's decision.

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Speaker 4: So what happens if we get to May this isn't

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Speaker 4: resolved and we don't see Kevin Worsh confirm to lead

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Speaker 4: the FED.

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Speaker 2: I could be wrong, but I think in fact how

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Speaker 2: stays on until the slot is filled.

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Speaker 3: But you know, a lot of us have been.

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Speaker 2: Sitting and markets have been very calm about all of

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Speaker 2: this because it really won't matter for at least for

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Speaker 2: the New York term who is the FED chair.

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Speaker 3: The FED chair is just one vote on the FOBC.

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Speaker 2: And in normal circumstances, the FED chair carries a lot

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Speaker 2: of weight. But if Kevin Worsh were to come in,

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Speaker 2: which I don't think he'll do, but if he were

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Speaker 2: to come in and demand Trump endorsed interest rate cuts

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Speaker 2: in the face of stubborn inflation, the board would just

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Speaker 2: vote against him. He will not have that kind of weight,

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Speaker 2: So this is probably not going to have any impact

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Speaker 2: on policy in twenty twenty six anyway.

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Speaker 4: All right, Paul, we really appreciate you sticking with us.

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Speaker 4: That is Nobel Laureate and Economics Paul Krugman also a

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Speaker 4: professor of economics over the City of University of New York,