[Music]
Live from Washington DC, this is Balance
of Power with Joe Matthew.
Lisa Cook's hearing ends with no ruling.
Welcome to the Friday edition as a judge
in Washington gives legal teams on both
sides more time to make their case over
President Trump's efforts to fire the
Federal Reserve governor. We'll bring
you to the courthouse here in Washington
for a live report from Bloomberg's Tyler
Kendall where things just wrapped up
with insights this hour from Bloomberg's
Michael McKe and from Natasha Sarin from
the Yale Budget Lab. Our panel's in
place. Bloomberg politics contributors
Jeannie Shenzeno and Rick Davis. They're
with us for the hour and we start as
always on Wall Street. Charlie Pellet
has the latest on the Friday trade from
world headquarters in New York. Hey
Charlie.
>> Hi. Thank you very much. Not just a
Friday trade, but a PCE Friday trade.
But the Dow, the S&P, Nasdaq, they're
all in the red right now. Tech being hit
especially hard. Right to the numbers.
S&P down 41 right now. 6460, retreating
from yesterday's record and falling back
below 6,500. S&P down by 610 of 1%. The
Dow down 130 now down 3/10. We've got
NASDAQ down 238 points, down 1.1%.
Nvidia, which reported this week, down
another 3.3%.
10-year at 4.22% with a 2-year currently
yielding 3.62%.
Spot gold up $32 the ounce 3449
up by almost 1%. West Texas Intermediate
Crude 64 even a barrel, down 9/10en of
1%. And Bitcoin down 2.9%
108,668
right now on Bitcoin. Tech names after
earnings, we've got Dell plunging by
8.3%. Marvel Technologies after earnings
down by 17%. Again, recapping S&P down
7/10 of 1%. Balance of power continues
right now. The Friday edition we go to
Washington once again, your host. Here
he is, Joe Matthew. All right, Charlie.
Many thanks. Charlie Pellet will have
more on Wall Street about 20 minutes
from right now as we keep tabs on the
trading on this Friday. Welcome to the
threshold of the weekend and the Friday
edition, the balance of power here on
Bloomberg TV and radio. I'm Joe Matthew
in Washington where all eyes have been
on the courthouse just a couple of
blocks from where I'm sitting, right
where Constitution meets Pennsylvania
Avenue. Bloomberg's Tyler Kendall has
been there since before the sun came up.
This is of course the emergency hearing
for Federal Reserve Governor Lisa Cook
and the president's efforts to have her
fired. There was a big argument about
cause and whether in fact the president
has the authority here, whether due
process will be invoked. Both sides left
wanting. It's unclear exactly when they
will be back as the legal teams on each
side have been given more time to
provide more filings. Tyler brings us up
to date and picks up the story from
there at the courthouse. What else
should we know, Tyler?
>> Yeah. Hey, Joe. Well, this hearing
lasted just under two hours and we saw
really both sides get some tough
questioning from the judge uh during
this hearing because as you're outlining
here, there's a few different issues at
play. One is that today's case was
really about uh Cook seeking this
temporary restraining order which would
reinstate her into the role as the court
process around the larger legal
questions surrounding her firing
ultimately play out. But that concluded
with no ruling. We're not expecting
anything earlier than Tuesday as both
sides now have time to uh file some
additional arguments related to the
case. And while today's ruling didn't
really have to do with the broader case,
we got a whole lot of insight into how
both sides are going to approach that
legal battle. And as you mentioned,
really uh hitting the nail on the head
there, the crux of this has to do with
defining the idea of cause. And we heard
from Lisa Cook's lawyers today that
these allegations of mortgage fraud do
not rise to that level of cause,
pointing out a few different reasons why
they feel that way, including that these
allegations happened in 2021 and Lisa
Cook wasn't appointed as a governor
until 2022. So, they are outside of her
realm uh as a Federal Reserve official.
In the court filing yesterday, it's
worth mentioning we did get a little bit
more of an insight into what they're
thinking here when it comes to a defense
suggesting that if there were any
discrepancies on these mortgage
applications, perhaps it's a clerical
error and that Lisa Cook did not have
any intent to deceive anyone. Joe, I'll
mention on the administration side, they
have said that it is up to the courts to
allow the president to define the
stature of what qualifies as sufficient
cause. They also pushed back on this
notion that Lisa Cook was not given due
process, pointing to President Trump's
own social media post, saying that that
should qualify as uh the necessary time
that she could have had to respond.
>> Right, Tyler? We've got a lot to cover
here. It's unclear exactly when they're
going to come back, though. Correct.
Could it be as soon as Tuesday after
this long weekend?
>> That seems to be uh our understanding.
the judge had indicated that it's going
to take her perhaps a little bit
additional time here to weed through uh
exactly what's happening particularly
when it does come to this TTRO. We did
hear from Lisa Cook's lawyer Abby Lel
earlier today saying that they're not
expecting uh the Federal Reserve to act
today. He said he said that they're
expecting the Fed to act once this is
resolved in the courts which then also
raises questions about whether or not
there needs to be uh this TTRO in place
if this could move directly to a uh an
injunction uh for perhaps the longer
duration of this legal battle. So still
a lot of questions that we have have to
parse through but as of today the update
is that there is no ruling but we did
get more insight into how both of these
sides are approaching the broader legal
case of her firing.
>> Yeah Tyler, many thanks as always. It's
been a long one for Tyler Kendall at the
courthouse here in Washington.
Bloomberg's Michael McKe has been
watching this from his perch at world
headquarters. Bloomberg international
economics and policy correspondent, the
man who brings you the news from the
Federal Reserve meetings from the
lockups when the minutes are released.
And he's with us right now again.
Michael, do we know if Lisa Cook will be
going to work in the meantime? What does
this mean for her status?
>> Well, as Tyler just mentioned, the Fed
basically said that they are not taking
any action until the case is resolved.
Now, what resolved means, we don't know
whether that means the judge issuing
>> some sort of restraining order or
injunction
uh to keep her in the job or whether it
means they're going to wait until we see
what the legal case uh how that's
resolved. So, we don't know, but it
appears that she's been working from
home and she can still continue to work
from home as far as the Fed is concerned
for the time being. Now, uh before they
left, the judge asked the lawyers to
discuss the idea of skipping from the
TTRO to the injunction as Tyler was
talking about. And uh Abby Lel, Cook's
lawyer, said the one thing he would not
do would be to agree to anything that
disrupted the status quo. In other
words, anything that pushed her out of
the job in the meantime and allowed the
president to put someone else in.
>> Got it. Interesting. Well, I don't know
if we really learned uh very much today.
We're we're we're still chewing on
exactly how to define cause once this is
resolved on a legal level, and I realize
that could need some time because this
will likely go all the way to the
Supreme Court. Does Jay Powell weigh in
as the chair? When do we hear from him?
>> We probably won't. uh except for the
fact that he's got to face the press
after the September 17th meeting. Um the
Fed is in the uncomfortable position of
not being able to defend Lisa Cook
because this is a private uh issue of
hers. It doesn't it's not part of the uh
the Fed's job. So they can't get
involved in that. They have obviously a
rooting interest in the president not
being able to replace people on the Fed
at will, but they can't say that either.
So, they're kind of sidelined for the
time being. They will probably continue
to make the case though that an
independent central bank produces better
economic outlooks outcomes for the
countries that have them.
Well, whether we get a ruling here on
Tuesday or not, we do know that we have
an important date on Thursday when
Steven Meyer sits for his confirmation
hearing before uh the Senate Finance
Committee. What are you expecting at
this point, Michael? Because I'm
thinking we could have a lot more
fireworks than we would have before.
>> Yeah, it'll be fairly easy for Myron to
parry any questions on Lisa Cook because
he could say, "I'm the chairman of the
Council of Economic Advisors. I don't
have anything to do with whether she's
employed or not and I don't know what
cause means either. But the Democrats
certainly will uh push him hard on some
of the things he's written about. Of
course, he is the one who came up with
the Mara Lago accord idea. Uh and he
also wrote a paper last year calling for
significant reforms to the Federal
Reserve Act, including allowing state
governors to appoint the boards of
directors of regional Fed banks, which
would then probably enable them to
control who's appointed as a regional
Fed president. And obviously that would
make the Fed even more political. So you
can imagine some of the questions
they're going to have. They'll also, I'm
sure, say, "Are you just going in to be
a toad for the president and vote for
huge rate cuts because he told you to?"
>> How will he answer that?
>> I'm sure he will say, "No, no, no. I
have lots of valid economic reasons for
wanting huge rate cuts."
>> Understood. Michael McKe, it's always
great to see you on the Friday before a
long weekend. Uh, this is a story that
we saw coming here a couple of days ago.
And to think that we're going into a
long weekend with so little certainty on
how this is going to end is really
something. Natasha Serin has been
watching this as president and
co-founder of the Yale Budget Lab,
having spent time as deputy assistant
secretary for economic policy and former
counselor to Treasury Secretary Janet
Yellen in the United States Treasury
Department. Natasha, it's great to have
you back on Bloomberg TV and radio. How
should we be looking at this today? this
is going to be precedent setting one way
or the other. You know, it's such a
bigger issue than anything about Lisa
Cook or anything about mortgages in that
you're in a situation where one of the
fundamental institutions and sort of
causes of American economic strength is
the fact that we have an independent
central bank that makes monetary policy
decisions absent from political
influence based only on how it thinks
about inflation and how it thinks about
the labor market. And what you're seeing
here play out is really a sort of
potentially quite damaging conversation
around whether that type of institution
should actually be free from political
influence. And the reason why I know
it's pretty damaging is because we've
actually done it before in the United
States. We've had a politicized Federal
Reserve in the Nixon administration that
made rate decisions sort of according to
how they would best be suited to help
President Nixon win a presidential
campaign. The result of that was that we
saw the worst stagflation in this
country in recent history and inflation
rise from 3 to 13%. So, we're running
some pretty real risks here and they're
quite substantial and they're much
bigger than any one particular
individual or any one particular case.
>> So, what's the Fed going to look like 6
months from now?
>> I hope that the answer to that is not
that different than it looks like today.
And part of what gives me a little bit
of hope is that you're watching this all
play out in legal proceedings throughout
the judiciary that ultimately will get
to the Supreme Court. And the Supreme
Court went out of its way in a removal
case that had nothing to do with the
Federal Reserve to signal the importance
of the Federal Reserve as an institution
and its unique quasi private it called
it role in this economy such that in
that particular case there were real
limits on the president's ability to
remove um at will uh members of the
Federal Reserve Board of Governors uh
and particularly the chair of the
Federal ederal reserve. And so I think
in some sense they're laying I hope
maybe I'm sort of hoping that they're
laying the groundwork for being very
explicit here that this is not a case in
which you're going to allow the
executive to have unfettered capacity to
remove and install political operatives
in these roles, but instead this is a
case where the unique exigencies of the
Federal Reserve demand that we remain an
independent monetary policy institution.
Well, I don't know if Natasha you think
that Steven Myron is going to make the
next meeting. There are questions about
that. He's got his confirmation hearing
next week. Looks like that in fact could
happen. But Christopher Waller today is
again calling for lower rates. He sees a
quarter point in September and then more
additional cuts over the next 3 to 6
months. The pace driven of course by
incoming data. You can weigh in uh on
the the rate cut if you want, but there
are worries that if President Trump goes
through with this and Lisa Cook is in
fact fired for cause that you're going
to see a big drop in short-term interest
rates because of a Trump friendly Fed,
but that longerterm rates are going to
keep rising for fear of a greater
inflationary trend.
>> How do you see it?
>> You know, you know, it's really
interesting. I actually think there is
substantial like room for debate and
you're seeing it among the members of
the Federal Reserve Board right now with
respect to how to navigate this
particular economic moment because on
the one hand you have the most
inflationary policies that we've seen in
our lifetimes with respect to tariffs
that are at a 18 plus% effective rate in
the economy. And on the other hand, you
have a labor market that's starting to
cool. And so what you've seen Governor
Waller say is he's in the direction of
being concerned about the labor market.
I will note that even the sort of
dissent on the Federal Reserve Board at
the moment is about whether you hold
rates steady or you cut rates by 25
basis points. That's nowhere near the
rate cuts that the president and the
administration have called for. And so I
think there is room for debate about
whether the Fed waits or whether the Fed
continues or starts to lower rates. But
I actually don't think you're anywhere
close or should be anywhere close to
some of what the administration has been
pushing. But the thing that's really
important that you said there, Joe, is
sort of the flip side of this, which is
like what happens? Let's assume that
you're in a world in which the Federal
Reserve Board decides tomorrow that
we're going to lower interest rates to
the 1% the Fed funds rate to the 1% that
President Trump has called for. Well,
that's actually not going to do. It's
like pretty counterproductive. It's not
going to do to mortgage rates what the
president might like to see precisely
because you might be changing the
short-term rate at which banks borrow
from one another, which is the Fed funds
rate that the Fed controls, but you're
not actually able to effectuate what
mortgage rates or other rates we care
about, small business loan rates are in
this economy because that matters a lot
with respect to what the market
perceives as longer term trends in
interest rates and what the market's
going to perceive is that yeah, we did
this politicized thing, but the result
of that is we're going to be like we
were in the Nixon administration facing
a very substantial inflationary outlook
and forced to raise rates in the future
and long-term rates are going to be high
as a result of that understanding. So,
in some sense, this is all incredibly
damaging to the Fed as an institution
and incredibly counterproductive to the
goal of lowering interest rates in the
economy. And if the administration would
like to see that happen, I have a very
easy solution for them, something over
which they have direct control, which is
roll back these excessively high
tariffs.
>> We spent a lot of time talking about
what could go wrong here, and I realize
that there's now apparently a third
mortgage application that may not help
uh Lisa Cook's case, at least according
to what we're hearing uh from the
administration. But when we think about
things that could go right as well, if
this is going to be a precedent setting
ruling one way or the other and Lisa
Cook keeps her job based on say a
Supreme Court ruling, what would that
mean for Fed independence going forward?
I hope what it means is that we entrench
in this country the sort of legal
respect for the incredible importance
institutionally of the Federal Reserve
and the incredible importance to our
country's not just economic security but
sort of place in the global world order
with respect to the independence of this
institution and why it's like so
critical is that it's taken you know
generations decades ades to be able to
be the type of country that enjoys um
the safe harbor premium that is allowed
to borrow at lower rates precisely
because we're like a stable ship in kind
of turbulent waters at times. And what
happens if you are no longer that and in
some sense that sort of credibility that
took decades and generations to build,
it can evaporate very very quickly. And
when you are no longer that, that
translates into real economic costs. It
translates into an environment that's
not friendly for business investment. It
translates to higher mortgage rates for
households and for borrowers in this
country. So I am hopeful that what we're
going to see is we're going to see
entrenched a respect for something that
is so pivotal to our economic strength.
>> With all of this said, Natasha, and I'm
out of time, I only have a couple
seconds. Did the Fed do the right thing
by not weighing in today in court?
>> I think that the Federal Reserve is
doing exactly what it needs to and
should do in this case. And as you know,
they're named as a suit uh as a party in
this suit. So, it's a complicated sort
of judicial dance for it to be doing,
but they're doing exactly what they
should be and they have great lawyers
there as does uh the legal case mandate.
>> Thank you, Natasha, for joining as
always. Natasha Stern, president,
former deputy assistant secretary for
economic policy, and former counselor to
Treasury Secretary Janet Yellen. I'm Joe
Matthew in Washington. We'll assemble
our panel next. Rick Davis and Judy
Shenzeno on Lisa Cook on Bloomberg.
Make sure to subscribe to the Balance of
Power podcast. Go to Spotify, Apple, or
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subscribe. Listen anytime at our
website, bloomberg.com.
Coming up on Balance of Power, Lisa
Cook's emergency hearing finishes
without a ruling on the Fed governor
status. We'll play it to the panel next.
Rick Davis and Jeannie Shanzeno on the
way only on Bloom.
It's 121 on Wall Street. We do check
markets all day long here at Bloomberg.
Developing story, Craft Hind nearing a
breakup announcement as soon as next
week. This according to the Wall Street
Journal, Craftine shares, they're up now
by 1.7%.
Stocks lower across the board. S&P 500
index very close to session lows down
49, dropped there of 8/10 of 1%, 6452.
We've got the Dow down 141, down 3/10.
NASDAQ right now lower by 1.3%.
Stocks are declining. We've got the
10-year at 4.21%.
Uh right now, we've got the two-year
yielding 3.61%. 61% spot gold at $34.449
the ounce. Spot gold up 1% right now
higher by $32. West Texas Intermediate
crude down 9/10 of 1%. WTI 6402 a
barrel. And Bitcoin now down 3.1%
108,458
on Bitcoin. Petco Health and Wellness
shares are surging after raising its
earnings targets for the year. Does the
company's turnaround start showing signs
of progress? Petco, which uses the
ticker Woof, WF, up now by 20.4%.
Other earnings news, GAP up 2 1/2% after
earnings as investors weigh tariffs and
sales trends heading in the other
direction after earnings. Ulta Beauty
down now by 6.2%.
Recapping S&P down 8/10en of 1%. Balance
of power continues right now. Back we go
to Washington. And once again, your
host, Joe Matthew.
>> Many thanks, Charlie. We'll get back to
Charlie Pellet in about 15 20 minutes
for more on the Friday trade. Watching
Wall Street from his perch at world
headquarters in New York. We couldn't do
the program without him as we bring you
news every day here live from
Washington. In many cases, market moving
news. It's a little bit more abstract in
the case of Lisa Cook, but Wall Street
is watching. The bond market certainly
is. The judge did not indicate which way
she was leaning in this emergency
hearing today that started at 10:00 a.m.
It concluded with no ruling as the judge
peppered lawyers for both sides, Lisa
Cook and the administration about two
hours today without ruling on the Fed
governor's request for a temporary order
blocking her ouster. We're going to talk
about this with the panel along with the
greater view on what the administration
is trying to accomplish here beyond Lisa
Cook herself. the firings that we've
seen at the head of the CDC, BLS, and
other agencies that the president is
clearly shaping in his own vision.
Something we talked about with Donald,
the former deputy solicitor general,
former deputy attorney general, joined
us in studio today to express his
concerns about the changes that he fears
in some cases could be irreversible.
Listen to what he said.
What's far more important than any one
of these situations is the pattern
that's clearly emerged since the
inauguration, which is a pattern of
Donald Trump in one instance after
another working to essentially overthrow
the norms, procedures, checks of our
process. And that's the real concern
that we should all have.
We play it to the panel on our Friday
edition. Bloomberg politics contributors
Rick Davis and Jeannie Shanzeno are with
us. Rick is Republican strategist and
partner at Stone Court Capital. Genie,
of course, democracy visiting fellow at
Harvard Kennedy School. Ash Center, our
Democratic analyst. Always wonderful to
have both of you with us here. Rick, do
you see it as Donald does a test of the
system? We certainly see Donald Trump
trying to exercise the limits of his
power as an executive, but is it a cause
for concern?
Well, I think that anybody who um is
used to uh the sort of standard checks
and balances that have existed, you
know, throughout the modern presidency
would be concerned about the emergence
of Donald Trump and sort of his unitary
executive theory that is clearly being
implemented in virtually every one of
these instances. And certainly, you
know, his test to see if he can fire
Lisa Cook, you know, is a exercise of
the concept that the article 2 in the
constitution says the president has sole
power uh to govern the executive branch
and he is testing every aspect of that
uh in the first nine months of office.
And so in the extreme, a unitary theory
like this could uh uh diminish the roles
of the checks and balances in both the
legal, you know, and the congressional
side. So yeah, it's something to keep an
eye on because it's definitely a
different approach to governance than
we've seen uh really in our lifetimes.
He had four years to think about this,
Genie, and a lot of people around him uh
to help him succeed in these goals of of
pushing the lines of authority from the
Oval Office. If you're a Trump
supporter, this is all up. You're making
America a great again. But you've you've
thrown down a number of flags and issued
a number of warnings about the checks
and balances that Rick Davis refers to.
If they go away, can you ever get them
back?
>> Well, you know, we would hope so, but I
think, you know, challenging um legally
challenging in court is not the problem.
It's a lot. It's a lot for you to cover
every day. It's a lot for all of us to
watch. What is most concerning to me
though is the fact that not just the
president challenging his power if he
does so and he listens to the rulings by
judges the fact that he is trying to
upend any sense of agreement on what is
truth. You know, there's an old saying
which says that when you don't adhere to
or listen to facts, you abandon your
freedom because there's no way to fight
back if we don't have an agreed upon
fact, language, evidence-basedbased
understanding. And that to me is the
most troubling aspect of what we've
seen, whether it's the Bureau of Labor
Statistics, whether it is, you know, the
issue involving the Fed. Um, it's
startling to me that JD Vance went out
yesterday in an exclusive interview with
another outlet and said that it doesn't
really matter if what Lisa Cook did is
illegal or not. What matters is she is
not serving the president. And of
course, that's not what matters here.
You've got to follow due process and we
have to have an agreed upon
understanding of facts in order to make
policy in this in this country going
forward. So that to me is the most
troubling component and the president
has been pushing those boundaries in a
way we've never seen before in the US,
but we have certainly seen elsewhere.
>> You wonder if the checks and balances uh
will be restored in Congress. Rick, so
far it really just has been. The courts
pushing back on this administration, but
Bill Cassidy has been doing some hard
thinking here when it comes to the CDC
and the changes that have taken place
there just in the last 24 hours. The CDC
director was fired. Four leaders in the
agency resigned in protest. And
yesterday, we saw the rank and file walk
out and hold a protest on the streets in
front of the agency here. Senator Bill
Cassidy got a promise from RFK Jr. that
this type of thing would not happen and
that vaccine policy would not be
impacted by his personal beliefs. Now,
Cassidy says it's time to cancel the
vaccine uh advisory meeting. that's set
for September and that the help
committee must provide oversight when it
comes uh to these positions either being
fired or vacated through resignation. Is
the Senate about to stand up here, Rick?
You know, it's hard to tell. They have
not to date. uh speaking of exercising
their powers of the constitution,
advising consent on these presidential
uh appointments is one of the most
powerful aspects of their uh legislative
authority. And you know, in almost every
instance of the most controversial
members of the Trump cabinet, they were
able to uh become appointed uh by a
tiebreaking vote by the vice president.
Uh, and so there there were not enough
senators to stand up and say to Tulsi
Gabber, to JFK Jr., this is a no. And
and so they they've kind of abdicated
that most important role uh to hold the
executive branch's feet to the fire, you
know, when appointing individuals to uh
to high office. So, um, uh, it it makes
sense that Cassidy is going to want to
understand what direction this
administration's going on vaccine policy
before they implement it. Uh, that is
the proper role of oversight. I I I
would not be surprised if they stiff him
and say, "We're going forward with this
committee and we're going to implement
the the rules to make America healthy
again."
>> Wow. Well, RFK Jr. In a memo uh to
staff, Jeie writes, "Reform does not
diminish your work. It strengthens it."
Is he right?
You There's nothing wrong with reform.
Um the problem is is that he apparently
if we are to believe the reports that
are coming out is not mis listening to
taking the advice of even meeting with
those experts in the CDC who have the
knowledge to advise him properly. So I
am really curious to see what this
report comes out on autism and the
connection between autism and
vaccinations which has been widely um
you know discredited obviously and we
heard just the other day in the cabinet
meeting the secretary promising
President Trump who has also expressed
belief in that connection unfounded as
it is that that report was coming and a
lot of speculation that the director of
the CDC was removed because she was
pushing back on that and again we don't
know but you know the secretary is
talking about reform we welcome reform
the CDC needs reform but you simply
cannot lose all the knowledge in an
institution and then reform it properly
properly bringing in people who have no
expertise in this case in science or
medicine
>> we heard from Dmitri Dascalakis he's
been doing some interviews Rick this is
the director of national center for
immunization and respiratory diseases
who quit. He resigned yesterday in his
resignation letter meant made the
rounds. We were talking about that he
did an interview with the Atlantic and
said no one from his center had ever
been allowed to brief the secretary RFK
Jr. Quote, "I'm not sure where he's
getting his information other than
Substacks that are erroneous." Unquote.
What's going on inside of the HHS?
Well, this was the motivation behind
Senator Cassidy and his questions of uh
uh Secretary Kennedy before he was
willing to give him a vote uh on his
nomination is um you know put a reign on
this issue of attacking the vaccine
policy the administ you know that exists
today uh uh and and he got a commitment
uh and that commitment didn't last 9
months. So, uh, I think that, um,
there's a lot of recognition,
realization in the Republican caucus of
the United States Senate that that they
are a party to, uh, this kind of
dismantling of government. Uh, Jeanie's
right, you can reform an agency without
losing its expertise. Uh, it virtually
every administration puts its stamp on
it like that. But then to drive very
talented people out and replace them
with folks who have no basic experience
in the uh subject matter of the agency
uh is not going to build confidence with
the American public. And again, we
started this segment, you know, earlier
this hour talking about whether or not
Donald Trump has the potential of
overreach and losing the confidence of
the American people. And I would say
issues like this uh tend to drive you in
that direction.
This is quite a moment we're in. Next
Thursday, by the way, will be the
hearing, Senate Finance Committee
hearing uh for RFK Jr.'s testimony, and
there going to be some tough questions,
I'm sure. Many thanks to our great panel
on the Friday edition. Rick Davis and
Jeannie Shenzeno, Bloomberg politics
contributors. I hope you both have a
long weekend, and we'll see you back
here on the Tuesday edition, not to
mention the late edition later on this
evening. I'm Joe Matthew in Washington.
Stay with us. We have more to cover here
on the fastest show in politics. This is
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Wherever you get your podcast back, we
go to Washington once again. Here he is,
Joe Matthew.
>> Thank you so much, Charlie. You should
come down. We've got a big weekend down
here in Washington. A long weekend.
Labor Day. The markets are closed on
Monday. We'll do the Smithsonian or
something. You know, they're keeping it
safe. This has been the big story here
most recently. And there are questions
about whether other cities will follow.
Uh, you know, I'm talking about the
federalization or I don't know if I can
use that term, the introduction of
federal law enforcement working
alongside DC police here in Washington.
They added, of course, armed National
Guard troops. We've been talking about
this for a couple of weeks. questions
now about what happens when lawmakers
come back to town and whether they'd
like to see more of this for longer
because it would take an act of Congress
to maintain this beyond 30 days, not to
mention other cities. The president
floated Chicago, New York, and others.
Speaker of the House was on Fox this
morning talking about it. Listen to what
Mike Johnson had to say.
>> I'm all for it. I told the president
yesterday morning. We talked about this
and I said, "We will give you the
resources and the authority necessary to
complete this job because it is wildly
popular. You seen the Democrat mayor of
DC came out and said, "Thank you for the
reinforcements. We have to bring law and
order back. We're the party. He's the
president to do it and we're going to
show that to the people." The statistics
are overwhelming and it's it's
ridiculous for him to deny that he needs
assistance with that. So, I hope I hope
the National Guard does go to Chicago.
>> Well, we'll see if that happens. But we
thought first we'd spend some time with
the resident of Washington DC you may
have heard of. His name is Patrick
Mckenry Bloomberg politics contributor
former Republican congressman of course
former chair of the house financial
services committee and yes former house
speaker prom. It's great to see you sir.
Welcome back. Um you live on Capitol
Hill which has been known to see a
little bit of crime. uh lawmakers come
from all different parts of the country,
including a lot of rural areas who may
not be used to the game here in DC where
we've seen carjackings and a lot of
other stuff, even if, albeit crime rates
are at what they say is a 30-year low.
So, what's the mindset going to be among
the Republican conference when they come
back and Donald Trump asks them for more
time?
>> Well, first, lawmakers, both parties
traverse a very narrow range of
Washington DC. They're not here for
tourist attractions. They're on Capitol
Hill and a few blocks from Capitol Hill
for meetings and dinners and and
breakfast and that's about it. Yeah.
Okay. Um and so uh for their vantage
point uh they have Capitol police, you
have Metro Police, DC Metro Police. They
are well covered for basic security
measures. Having said that, you've had
some high-profile
uh um
cases uh of Democratic lawmakers,
Republican lawmakers experiencing
carjackings, uh physical assaults at
just a couple blocks from the capital.
Uh so that's speaking to something
that's very real, very real in urban
America today. Coming off of COVID, the
stats were incredible uh for how bad uh
DC and a and a lot of places like
Chicago have been. And so there is a
perception across America for the rest
of America that there is a an urban
crime problem. And that's why you see
the president speaking to this. Um and
so is there something to it in urban
America? Yes. Uh is it uh as dramatic as
I think it's made out to be by the White
House? Not really. Um but but these
aren't great stats. and the the the
mayor the Democratic mayor of Washington
DC is saying look these things do have a
positive impact on reducing crime rates
the attention to the matter but if we
take the attention off then the crime
will reappear unless we change
>> okay so what happens when you start
adding other cities it's one thing the
federal city gives the president a lot
more leeway if you're going to roll into
a Chicago uh like this particularly with
national guard troops the way we saw in
LA it it's a different construct And the
push back from Democratic governors has
has been very loud, of course. Is there
a line uh for for Republicans, for
lawmakers on this when it comes to other
cities or when it comes to the
difference between federal police and
the National Guard?
>> Well, frankly, it's it's for the voters
of those jurisdictions to vote in people
that are going to keep them safe. We saw
this in San Francisco, a dramatic
reversal in San Francisco from a very
soft on crime regime in an alldemocratic
city to a now tough on crime regime with
encampments and assaults, vehicles
disappearing, uh CVS is being raided,
every store like every retail store
possible being raided and they voted in
a new government. Chicago's got to do
the same thing. If they want something
better, they've got to vote for
something better and to get different
results. But you're also saying that
it's not up to Donald Trump.
>> It is not up to the president to to keep
uh mismanaged, badly run cities uh and
save their politicians or give their
politicians a foil to keep inept
government in. That's my view. Yeah. Uh
there's enough for us to preside over
with national security measures, uh
international challenges, uh tariffs
issue, e economic issues. We've got big
things uh that we should be focused on,
the political class in Washington should
be focused on and especially the
president
>> like funding the government say.
>> Yeah. Some of that basic stuff.
>> Everyone turned away from all this
shutdown talk and the recisions and how
much Democrats and Republicans uh can't
trust each other because we got into the
whole Epstein thing and we got into the
this the throws of summer news. We're
not done with that. So I
>> what's top of mind as lawmakers come
back and and are we going to be hearing
about Epstein
next week? Sure. Will we have a
shutdown?
>> Sure. The FBI director and the uh uh
uh testifying before uh the Hill uh in
the month of September in the next in 3
weeks from now. Uh there'll be
discussions of that, discussions about
keeping the government open, discussions
about um the the president's nominee for
the Fed seat that was previously open.
>> Um and so there is so much going on
>> hearing next week, an RFK Junior
hearing. When it comes to appropriations
though, is is the conventional wisdom
correct here? We're shutting down. It's
just a question for how long?
>> Well, it's really open to the Democratic
minority in the Senate. uh in the House,
Speaker Johnson showed that they can
pass a continuing resolution like they
did in March, which was its own
political miracle because House
Republicans have not previously been
able to do that. So, kudos to Speaker
Johnson. Chuck
>> Schumer's got some tough decisions to
make.
>> This time around, just like in March,
it's Schumer's decision. Uh you have
enough Republican votes uh to to pass
something, but not to get to the 60 vote
closure uh vote that they need to have
for for funding the government. So, it
is in Schumer's hands. And so the focus
should be on him
>> on uh on what he wants, his expectations
because he's going to be the deciding uh
the decider on whether or not we have a
government shutdown.
>> Boy. Okay. Um if we do, every Democrat
we've asked has said, "Yeah, but we
can't do it unless there's a plan to
reopen it." Because if Donald Trump gets
this thing closed, he has no interest in
reopening it. Right. Let me just tell
you, uh, Russ vote, the the budget
director for President Trump has, uh, so
desperately wants Chuck Schumer and the
Senate Democrats to shut the government.
>> This is really important because what
will happen?
>> Uh, we will find out. But he has a plan.
He has an intricate, detailed plan. And
the goal is to win the shutdown.
Republicans have previous not won
shutdowns in the 90s all the way through
uh just a few years ago. Um so not
winning shutdown, he intends to change
that and he's thought deeply about it
for a very long time and Schumer may
give him that opportunity either October
1st or sometime late in the fall or into
January.
>> If it happens, it's a record, right?
>> It would be a record. It will be bad.
And it will be bad particularly for
Democratic politicians who did not fund
the government
>> and a government that they help fund and
build and that they are in defense of as
a party. It would be a very bad thing
for Democratic politicians. So what I
would what I would tell my Democratic
friends is get out of the way of your
own folly here um and fund the
government. Get out of the way and move
on to some other more serious fight for
the ballot box of the midterms. And if
they don't do that, then it's going to
be a tasty great fight for the White
House against congressional Democrats.
>> October is going to be a riot.
>> It's going to be wild.
>> Yeah.
>> But for us to sit behind the
microphones,
>> much more interesting, right?
>> A shortage of things to talk about.
Democrats would say though, hey, you
guys did that recision package, so we
can't trust you in a budget deal anyway.
That's why we're not willing to to vote
for this. And Republicans say, "Yeah,
and we're going to do another one." Yep.
>> Is that coming?
>> Yeah, absolutely.
>> What will it look like? Uh well, they've
got to determine that and determine that
the type of fight they want to have
about that recisions package. But but
the point is right now we're we we have
currently the largest federal government
we've had outside of wartime
>> in the history of the United States. We
have the largest federal government
outside of wartime. Uh that is too big
as a percentage of our economy and raw
dollar numbers. We have a government
that's too big that we cannot afford as
a great society. Uh we we have a
government if you match state, local,
and federal that that tells Europeans
that they're not running a socialist
state. We are. So we've got to get our
financial house in order. And uh and to
prioritize that fight, I think the
president is doing a very good job of
bringing that uh bringing that to the
four.
>> We haven't even mentioned the word
tariffs since we've been talking this
time, which is usually something that we
get around to. Is is Congress kind of
hands off the reigns on this? Will there
be a congressional answer to tariffs now
that they appear to all be in place?
India just got sacked with 50% this
week. We're waiting for news on China,
but everyone else has a number right
now, Congressman.
>> Well, uh I will tell you that uh
President Trump has complete mastery of
the Republican party. Uh there are folks
on the Hill that hate tariffs. Uh they
will remain quiet and the president is
there to go get a big deal uh on trading
arrangements. Now all of this is noise,
right? Landing uh where do we end up
with India? where do we end up uh with
Mexico? Some very key decisions are
still out. Um
>> but it all brings to focus the the main
thing here. The main thing is our
trading relationship with China and the
globe's trading relationship with China
that cannot be missed in all of this.
There's a lot of stuff in Washington, a
lot of noise, but that is the signal you
got to go follow. And the White House is
very focused on and Treasury and
Commerce are very focused on landing a
deal with with China that is durable for
the long term.
>> How well do you know Lisa Cook?
>> A little bit. Um I interacted
significantly with the Fed.
>> Sure you did. That's why I asked.
>> This is someone who's been vetted
already uh who's being questioned now on
apparently three mortgage applications.
>> There was a big emergency hearing down
the street arguing about cause. They
left without a ruling. How concerned are
you about the Federal Reserve being
impacted, its credibility being impacted
by this?
>> Well, it is concerning. It is
concerning. Um the the reputational
damage to the Fed, number one. Number
two, the question of one person getting
bounced from the Fed, which is what
we're talking about, one one appointee
getting removed for cause.
>> Um the courts have to decide on this.
It's a 110 year old statute, untested.
No previous governor has been removed um
by the president. Although the act says
this uh it's not been tested in the
courts. It'll be tested in the courts.
>> We will find out.
>> Um and that will be a determinative
that's determinative on the act. That
does not mean the Federal Reserve is no
longer independent.
>> It is that it it's what comes next that
could unravel Fed independence. If if
you and so those are the things
>> who is named
>> well in terms of what other
precipitating acts
>> uh can can impair the Fed's independence
>> like reaching into the 12 regional banks
>> correct okay
>> and so you have that is an open question
you have these independent boards the
nature of the Federal Reserve is built
on the nature of our constitutional
checks and balances and that means
separations of powers uh separation of
powers and representative banks. So we
have a diverse group of banks across the
country that are supposed to be the
voices for that region and know what's
happening in the economy. Bring those
lessons to Washington and be that
region's voice.
>> It is a very complicated structure. The
Federal Reserve is different distinct
than other pieces of congressional uh
creation.
>> The Supreme Court has ruled that and has
opined on that. uh that is special and
distinct in the nature of central
banking back to the first and second
bank of the United States and the
founding fathers that put were still
alive and writing those statutes uh
around the central bank at the time. So
those things are tested. The Supreme
Court is has already opined on this. Now
it's a question of lower courts making a
determination on whether or not they
follow the statute and uh in the clear
letter of the law.
>> Steven Myron going to have a hard
session next? Oh my gosh. It's going to
be the craziest fireworks.
>> It's going to be the craziest fireworks
on any Fed uh governor nominee.
>> Wow. All right. This is going to be wild
to watch something else. Senate Finance
Committee. We'll be of course
interpreting this with the help of the
great Patrick Mckenry. It's always a
pleasure to have you. Bloomberg politics
contributor, former congressman. I'm Joe
Matthew in Washington. We'll meet you
back here for the late edition 5:00 PM
Balance of Power on Bloom.
In the meantime, make sure to subscribe
to the Balance of Power podcast. Go to
Apple, Spotify, wherever you get your
podcast to hear our full conversation
with Patrick Mckenry and listen anytime
at our website. It's bloomberg.com.