Instant Reaction: Supreme Court Blocks Trump from Firing Fed's Lisa Cook

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1:45Bloomberg Audio Studios. Podcasts. Radio. News. This is a breaking news update from Bloomberg. Instant reaction and analysis from our 3 ,000 journalists and analysts around the world. Paul, we have some breaking news. The Supreme Court, of course, publishing its opinions today. It has expanded the president's power to fire top officials. It refuses to let the president immediately oust Lisa Cook, however. And Lisa Cook is now currently allowed to stay in the job for now. All right, let's bring in June Grasso. Bloomberg's legal analyst here. She joins us here in studio. Let's start with the Lisa Cook decision here, June.

2:29Can you summarize what's going on here? So Lisa Cook, as you know, Federal Reserve Governor, and Donald Trump tried to fire her on the basis of allegations of mortgage fraud. So there was no any kind of procedure at all before he said that. So during the oral arguments, it was pretty clear that the Supreme Court justices were going to vote with Lisa Cook and not allow Trump to do that because of the status of the Federal Reserve. And during the oral arguments, there are a lot of questions by the conservatives as well about, you know, why was there no process here? She had absolutely no process.

3:09What would it take for you to have some kind of hearing, at least before this happened? So there was concern on their part. And Justice Brett Kavanaugh had said prior to that, that the Fed is different. So that was expected. Now, as far as the slaughter case where she's on the FTC, they say that that's different and because it's not the Fed. But what this does is this really expands presidential power. It means that the president has the authority to fire people at the top of what, like 20 agencies or so. And what they've done here is they've done away with Humphrey's executor, which was a decision which is standing for about 70, 80 years, I think, about the ability of presidents to fire people, which was that there was no ability for them to fire people at the head of agencies.

4:01And they've been cutting back on that bit by bit by bit. And now they appear to have gotten rid of it since they, I haven't read the opinion yet, obviously, since they're allowing the slaughter to be fired. And one more thing, too, if you notice this week, what's happening, and last week, what's been happening is that they're releasing opinions at the same time that have to do with the similar issue. And what I think is happening, too, is it used to be that all the big decisions were loaded to the very end, the last day. But now we're seeing big decisions this week and last week. And I think the chief is trying to mix it up so we don't have a day on the last day of the opinion.

4:41And there were five, six to three decisions, and they were all in these big cases. So I think that that's what's happening here. So let me just make sure I understand. The Supreme Court ruled that Lisa Cook, a Federal Reserve governor, can stay in her job for now. What's for now mean? That's a good question, but it's while litigation continues, right? Right, right. So, yeah, because they've had no litigation at all. He just said, you know, hello. So she's getting her due process, in other words. Well, I assume that we have to see what the president does now. Are they going to go forward with this?

5:16Are they going to bother to go forward with this and have it litigated? Probably. And she's got one of the best Supreme Court litigators around, the former Solicitor General Paul Clement, who is just really his record at the Supreme Court is phenomenal. And I think he is the one who has argued the most cases at the court. And you can see the deference the justices pay to him when he's arguing. So, I mean, that will go on. Her litigation will go on to, you know, to stop this. But, you know, by the time, who knows, by the time it gets done, Trump could be out of office. I mean, the way these things drag on.

5:50So the president's efforts to push her out of the central bank's board, that is not going forward. That failed. But and you were saying that his ability to oust other government agency leaders. Yeah. This has been expanded. Right. This is all part of the theory called the unitary executive theory. I don't know if you've heard about it, but it's like that this people who believe that the power of the executive branch should be in the president. So all these agencies are executive branch agencies. So the president should have the ability to fire the people who are in charge of the executive branch agencies.

6:26But I mean, you know, that is different. The Fed is different. But I mean, so with a with a with a the normal president or the prior presidents, you wouldn't worry about what was going to happen because there wouldn't be a wholesale. You're fired. But, you know, this opens the door and people have been worried about them doing away with that Humphreys executor opinion. And so the risk there is that these agencies perhaps lose some of their independence. Yes. Yeah. Yeah. Because, you know, if if the president doesn't like what you're doing, you're fired, you know. But I mean, in reality, he he is controlling.

7:01He has put most people in those agency heads. Right. Talking about the FCC and things like that. So I don't know that they'll see anything happening right away. But it's a huge win. And this court, as you know, has been expanding presidential power over and over again. I mean, you had those decisions where, you know, nothing the president does in office in his duties can he be prosecuted for. So, I mean, this court just believes in presidential power. And one has to wonder when the next president comes in, if they're not Republican, what whether they'll start cutting back on presidential power.

7:40I mean, I think it's worth noting here that stocks fell to session lows or maybe not fall. they paired their gains and were at session lows right around the time that this opinion was published. They've since come back a little bit and we're looking at modest gains in the S &P Dow and Nasdaq. The Russell 2000 is lower by 1.1 percent. So among the headlines that we got is the Supreme Court letting Lisa Cook, a Federal Reserve governor, stay in her job. This is a case that really tested the central bank's independence from the White House. So this is a defeat for the president's efforts to oust her over these mortgage fraud allegations.

8:15At the same time, we also heard that the Supreme Court has basically said that the mail-in ballots can arrive after election day. That's another defeat for the president. And certainly this is relevant given that we're at a midterm election year. On the other hand, and June, this is where it gets a little complicated. The other government agencies are not seen as independent, really, because the president can let go of whoever he wants to. Yeah. And I, you know, I'm trying to pull up the opinion just to see what they're, you know, how they how they parsed out these two, these two cases. But I'm not getting it.

8:55I'm not getting it. I guess I have to refresh, refresh, refresh. How about this ballot case? Just give us your thoughts on that. That was a surprise, actually, the ballot case, because that's about, Mississippi has a law, as do more than 20 other states, that as long as the ballot is postmarked by Election Day, it can come in five days, up to five days after, and it'll still be counted. So the Republicans were against this. Obviously, President Trump is against this and any kind of mail-in ballots. And during the oral arguments, a lot of the conservatives seem to be in favor of it, although the chief justice and Justice Barrett were wondering, well, would this affect what about states that have all mail-in ballots?

9:41If we say that, so the argument is in the Constitution says election day is this day. So you shouldn't be extending it any further. Well, if you can't extend it further, then can you go, you know, can you also say, well, they can come in ahead of time. So I think that was part of the reasoning. And Justice Barrett wrote the opinion. But so that's a huge surprise. And it was five to four. And so the most conservative in the in the no column. And so that's big because that could have affected the elections, the midterms coming up in so many states, more than 20. So that's actually a big decision and it is a surprise.

10:20OK, very good. June, thank you so much. Appreciate it. June Grasso is a legal analyst for Bloomberg News. We'll let her go back and do that lawyer thing, like actually read the case. We put her in an unfair position because she was working without the tax. I just want the A.I. like Cliff Notes. Thanks a lot. I'll be leaving. One pager. Drew, thanks so much. We appreciate that, as always. Let's go to Elliot Stein, litigation analyst for Bloomberg Intelligence. Elliot, I want to go to the Lisa Cook case. For me, for now, what does for now mean? That she can stay in her job for now? Yeah, exactly.

10:57Well, this whole appeal was based on a preliminary ruling by the trial court earlier in the case, saying that she could stay in her position while the rest of the case would continue. And so that's really the issue that the Supreme Court was looking at. And they said, yes, she can stay in her position. But the real important part of the ruling is that they said the for-cause removal restriction requires that she have some sort of notice and opportunity to be heard, which the president and the administration did not offer her. So that that's sort of the crux of the ruling. OK, so her litigation can continue or the White House's litigation can continue as well.

11:42Who hears who hears out this case? So this will go back to the lower courts. And I should preface this by saying I haven't read the full decision. I read the brief summary you referenced. You know, you want to. But the Supreme Court sort of gives you a brief summary at the beginning of the opinion, which I skimmed. But I think the way it's going to proceed is that it will be sent back down to the trial court for them to issue a final ruling. But the administration, presumably, if they want, will have to offer her some sort of notice and opportunity to be heard if they want to be able to continue to try to fire her.

12:20Otherwise, the trial court is going to rule in her favor. So to the extent the administration wanted to extend litigation, what it should have been known to do in the past, what's a timeline for a case like this? Because I'm wondering if does she have to worry about, you know, is this something that could take drag on for years, in which case the Trump administration will end? Or how does that play? Yeah, I mean, it's a little unclear exactly how it's going to proceed. Presumably, if the Trump administration continues to want to remove her from the Fed based on these accusations of mortgage fraud, they'll have to have some sort of proceeding, not a full trial, but some sort of like administrative proceeding where she can present her defenses.

13:01If the administration doesn't want to do that, the case is essentially over. The trial court will rule in her favor and say there was no notice and opportunity to be heard pursuant to what the Supreme Court said this morning. OK, so is the Supreme Court's role in Lisa Cook done? For now, for now, it could always come back later because I don't know if we have real resolution on substantively what cause requires. Right. We sort of know now procedurally what it requires. I'm not sure the Supreme Court, I haven't read the full opinion again, I'm not sure they got into the actual definition of what for cause requires substantively.

13:39Okay. What does this say about how the Supreme Court views the Federal Reserve versus other government agencies? Yeah, this is a very good point because the other opinion, one of the other opinions that they issued, but simultaneously with the Cook decision, was the Rebecca Slaughter opinion. She was an FTC commissioner. As you recall, President Trump fired multiple commissioners from independent agencies who were appointed by Democrats for the most part. She challenged that, as did many other commissioners. And the Supreme Court early on sort of hinted that the president would be able to fire these other commissioners of independent agencies.

14:19But the Federal Reserve is different. And we saw that very clearly today because the Supreme Court said that the president could indeed fire Rebecca Slaughter and other independent commissioners. I haven't read that opinion either, but presumably they overruled the Humphreys executive decision from 90 years ago, which established that the for cause removal restriction was constitutional for independent agencies. I suspect now they're going to say it's unconstitutional. I feel like today was a win. I think that that slaughter case is huge. The slaughter case is a big deal. It's absolutely a big deal.

14:56It's going to reshape. Yeah, but that's not just a win for Trump. That's a win for the executive branch because the next president who comes in can fire any commissioner of an independent agency appointed by a Republican that they don't like. So a better way to phrase that, it's a win for the executive. Yeah, and he's going to be very upset about the Lisa Cook decision. And also he in an earlier order, it sounded like he lost his cert petition on the mail and ballots and on the mail and ballots. And the Gene Carroll. Right. Exactly. A lot going on. So net net. He's probably going to be angry this afternoon.

15:27For the executive branch, though, I'm not sure. I mean, so now the question for a lot of just scholars, constitutional scholars is. Isn't it aren't these agencies, their ability to be independent, isn't that a good thing? And I guess that's the debate round. So you have to balance that on the one hand versus this theory called the unitary executive theory that the president should be able to hire and fire anyone he wants in the executive branch and that he oversees the entire executive branch. And if you have these independent commissioners that the president can't fire, you almost have this fourth branch of government.

16:04That's the counter argument. OK, we have some comments from Senator Elizabeth Warren of Massachusetts. She is commenting on the Lisa Cook Supreme Court decision, says we'll keep fighting back against attacks on the Fed. She also talks about Bill Pulte and how he can't be trusted, should be removed. But that's separate from, again, her comments on Lisa Cook and how, according to Senator Warren, she or her party will keep fighting back against these attacks on the Federal Reserve. What are the White House's options now? How does it move forward with Lisa Cook specifically? Well, I think if they want to continue to go after her for these accusations of mortgage fraud, they can, but they'll have to have some sort of proceeding where she's allowed to present her defenses.

16:46I think that's basically it. It's unclear exactly what that looks like. The Supreme Court, in the brief summary that I was able to read before coming on, said it doesn't have to be a full blown trial, but they have to give her some opportunity to be heard and present her defenses. And just to put some context on Senator Warren's comments about Bill Pulte, Bill Pulte was the one who brought up the fact that Lisa Cook perhaps had these misrepresented her mortgage application. Right. Because he's the head of the FHFA and he brought it to the president's attention. And that kind of got everything started, Paul, with this allegation of mortgage fraud.

17:23So if I'm an agency head appointed by anybody other than Donald Trump, am I nervous about my job today? Probably. But I think he's already fired most of the ones he wants to fire. I mean, I'm serious. Look at the CFTC. You have one chairman. And that's it. No other commissioners. And so, you know, the effect of that is you don't have you're probably not going to change the votes because you're always going to. It was always tradition that the chair would resign and let the incoming president appoint someone from his own party. But you're not going to have dissenting voices now to push back on the majority in these agencies.

17:58And I think that's really the big effect. How much of this is a surprise? What surprises you about this string of decisions? Nothing. This was exactly as we anticipated, that Humphrey's executor would be overruled, the president would be able to fire commissioners of independent agencies under the unitary executive theory. But the Supreme Court gave us hints as far back as last year that the Federal Reserve is different, just based on it said it has a unique structure, a unique history. It's not it's sort of this quasi private entity because it has a mix of being a government entity and also private sector members who are at least private sector members who vote in some of the regional bank presidents.

18:45So it didn't come as a surprise. We thought the Fed would be treated differently. Mail-in ballot. Was that a surprise? That's a little bit of a surprise. I don't follow that case. It doesn't have a huge doesn't have a business impact. Fair. But yes, I would say it's a little bit of a surprise. And I think June probably touched on that earlier. All right. Good. Elliot Stein. Great stuff. As always, Elliot Stein, Bloomberg Intelligence litigation analyst. See, that law school paid off. Totally. He started strong at Stanford and then he took a long turn going to law school. I mean, I don't know. He did that all without the benefit of reading the full text.

19:18So thank you, Elliot, for doing that. Exactly. When your options are limited, so are your opportunities. At SIBO, the global exchange that pioneered options trading, we offer more ways to move with the market. From VIX and SPX options to global market data solutions, SIBO helps investors diversify, manage risk, and stay ahead of whatever the market does next. SIBO. Life is better with options. Your investments could be too. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers. The thing about AI for business, it may not automatically fit the way your business works.

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21:16Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., Member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. Tyler Kendall joins us here. She is outside of the Supreme Court. She's a Bloomberg News Washington correspondent. Tyler, what's the feeling, do you think, what do you think the takeaway will be from this president, from this administration about this busy, busy day of Supreme Court rulings? Well, by and large, Paul, the administration got a win when it comes to the Trump v.

21:51Slaughter case, essentially expanding the president's authority to remove independent heads of independent agencies. Rebecca Slaughter was the last Democratic commissioner on the Federal Trade Commission. So that is considered to be a win for the Trump administration. Not necessarily a surprising decision. The justices had been a little bit wary of the idea that the president wouldn't be able to remove officials that are accountable to the executive branch. But the Lisa Cook decision means that she can stay in her job at least for now, which means that that legal fight does continue. The justices did not weigh in on whether or not they believed that the Trump administration's accusations rise to the level that Lisa Cook should be fired, which means this is still a stay tuned situation.

22:42But by and large, that part of the decisions today does mark at least partially a setback for this White House. So when it comes to Lisa Cook, I guess a lot of people are wondering what that means for Jay Powell, because the former Fed chair had said that he would stay on the Federal Reserve Board until legal issues are resolved. And maybe Lisa Cook was one of them. But I guess the Fed renovation and the DOJ's action against the Fed and J-PAL specifically, it's still out there, isn't it? Yeah, and it could come back up. There were a few different threads that we were watching in this case, Scarlett.

23:21One is the idea of equities, basically that the justices were looking into what the broad range impacts would be when it comes to the Federal Reserve and what would happen to the U.S. economy if a governor was removed. And I bring that up because we heard this be one of the main arguments from one of the conservative justices, Brett Kavanaugh. His line of questioning back when this case was heard in January very much focused on this. I'm trying to find the quote. At the time, he said that if Lisa Cook was removed, it would, quote, weaken, if not shatter, the independence of the Fed. And today, the decision was 5-4, and that included Brett Kavanaugh siding with the liberal justices on this court in favor of Lisa Cook being able to keep her job for now.

24:06So that's probably a thread that would make its way through if a case against Powell ultimately came up. And the second is the idea that Lisa Cook wasn't given essentially due process in responding to the allegations against her before she was fired. You remember when all of this was happening and essentially she was fired via a tweet from President Trump without much chance to respond to the allegations that were posted on social media. So there are a lot of different factors in this case, but by and large, it is taken to mean that the Supreme Court bolstered the independence of the central bank.

24:41Tyler, we also had a ruling Supreme Court earlier today left intact. A jury's finding that Donald Trump sexually abused and defamed the writer E. Jean Carroll, putting her in line to collect a$5 million award from the president. What has the president commented on this particular case? so we haven't heard from him yet today and the justices didn't really provide much of an explanation for this uh decision but uh this probably isn't going to be something that president trump uh is too happy with this does deal essentially a final blow to president trump's efforts to thwart thwart thwart and one of the most significant legal cases uh against him it was another one that we were tracking closely but it wasn't uh heard in the standard term of this Supreme Court.

25:28So it came out earlier this morning instead of with this ruling. Instead, we just got this Supreme Court decision, which means that President Trump is going to have to pay that$5 million judgment. All in all, Tyler, what do you expect in terms of the president's giving some kind of response? How does he usually respond to these kinds of decisions? Will it be on Truth Social? Do you think, do we expect him to hold a news conference, for instance? what will you be looking for? I would expect that we'll probably we'll probably get a post out on true social today. President Trump actually doesn't have any public events on his schedule.

26:05That doesn't mean that some of the closed door events couldn't open up. He does have a few different policy meetings that we're tracking closely today. But this case was one where President Trump was heavily involved in. We're also waiting likely later this week to get a decision on the other really console consequential case that we're watching for, which is birthright citizenship. And I was actually here at the court back in April when President Trump came here too. He very clearly wanted to make his opinion known when it comes to the justices trying to figure out the legality of his executive order that deals with ending automatic birthright citizenship.