Powell Probe Stirs GOP Concern; Trump Vows 25% Tariff on Iran's Trading Partners

0:00Hello, I'm Stephen Carroll. I'm in Brussels where many of Europe's biggest decisions get made. And I'm Caroline Hepker in London with the hosts of the Bloomberg Daybreak Europe podcast. We're up early every weekday keeping an eye on what's happening across Europe and around the world. We do it early so the news is fresh, not recycled and so you know what actually matters as the day gets going. From Brussels, I'm following the politics, policy and the people shaping the European Union right now. And from London, I'm looking at what all that means for markets, money and the wider economy. We've got reporters across Europe and around the globe feeding in as stories break.

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. Good morning. I'm Nathan Hager. And I'm Karen Moscow. Here are the stories we're following today. Karen, we begin with the ongoing controversy around the probe into Jay Powell and the Fed. Bloomberg's John Tucker joins us with the very latest. John, good morning. And good morning, Nathan. Bloomberg has learned that Washington, D.C., U.S. attorney and former Fox host Janine Pirro subpoenaed the Federal Reserve without ever seeking permission from her bosses at the Justice Department. And she doesn't plan to back down. The blowback from lawmakers and government officials continues to grow.

1:41Federal Reserve Bank of New York President John Williams, among those leaping to the defense of Fed chair Jerome Powell. He's proven himself to be a man of impeccable integrity and a man who has been calmly leading the Federal Reserve. Former Philadelphia Fed President Patrick Harker says members of Congress can't let this happen. When you talk to members of Congress on both sides of the aisle, they understand this. They may have different rhetoric out in public, but you talk to them one-on-one, they understand how critical the Federal Reserve is, and they are going to push back. Senator Tom Tillis, a key GOP member in the Banking Committee, vowed to oppose any Trump nominees to the Fed until this is resolved.

2:24Senate Majority Leader John Thune said the threat of a legal battle with the Fed could make confirming future nominees, quote, challenging. Axios reported that Treasury Secretary Scott Besson warned President Trump the investigation had created a mess that could be bad for financial markets. And judging by market reaction, investors doubt the probe of the Fed is going to lead anywhere. In New York, I'm John Tucker, Bloomberg Radio. All right, John, thank you. The Trump administration is facing new legal action over the immigration crackdown in Minnesota. The state is suing the Department of Homeland Security and Secretary Kristi Noem over the, quote, unprecedented surge of ICE officers in Minneapolis and St.

3:03Paul. Here's Minnesota Attorney General Keith Ellison. The deployment of thousands of armed mass DHS agents to Minnesota has done our state serious harm. This is, in essence, a federal invasion of the Twin Cities and Minnesota, and it must stop. Minnesota Attorney General Keith Ellison's lawsuit comes nearly a week after an ICE officer shot and killed 37-year-old Renee Good in Minneapolis. Her death during a tense confrontation in her car has sparked protests across the country. Turning to U.S. foreign policy now, Karen, a bipartisan congressional delegation is headed to Copenhagen later this week to show unity with Denmark, mid-tensions over Greenland.

3:44Delaware Senator Chris Coons is leading the trip. It includes at least nine members of Congress. They plan to meet with Danish and Greenlandic officials on Friday and Saturday. Let's get to the latest from the Middle East, Nathan. President Trump plans to meet with advisers today to weigh options on responding to deadly protests in Iran. On social media, the president announced a 25 percent tariff on countries that do business with the Islamic Republic. That could upset his one-year trade truce with China. Ali Vaiz is Iran Project Director at International Crisis Group. We have to see if that threat is really implementable because Iran's biggest trading partner is China.

4:21And of course, the U.S. has a complicated relationship when it gets to imposition of tariffs on China. Second most important trading partner is the UAE. Again, a close ally of the United States. And it's hard to imagine that these countries would be willing to really cut off all their ties with Iran overnight. overnight. Levi is with International Crisis Group notes China is the world's biggest buyer of Iranian oil. It's unclear if President Trump would stack the new tariffs on top of existing duties or announce carve outs for China. In Japan, Karen, Prime Minister Sanae Takeuchi is reportedly planning to call a snap election.

4:59Success at the polls for Takeuchi, who has been in the premiership since October, would provide a mandate for her to continue hawkish diplomacy and pro-stimulus policies. Stocks rallied and the yen weakened to its lowest level since July 2024 on the news. Well, in the U.S. here, Nathan, stocks and bonds rebounded on Wall Street to eke out gains. After initially dropping on news, the Trump administration escalated its attack on the Fed. Steve Chivarone is deputy chief investment officer of equities at Federated Hermes. It doesn't matter how you get to where we were. It's not good, right? If you have a Fed share that's engaging in illegal activity, that's not good.

5:36If you have political pressure on a Fed chair being exerted through the courts, that's not good. To have the video released is certainly not helpful for markets. So nobody benefits from this. And Federated Hermes, Steve Chivarone. Right now, futures again are lower. S &P futures down a tenth of a percent this morning. And attention will now turn, Karen, to real economic data. This morning, we get the latest inflation report for December. Bloomberg's Michael McKee has a CPI preview. We get a full month's data in the December CPI, but the numbers will remain somewhat unreliable. Because there was no October data, the Bureau of Labor Statistics imputed them.

6:14The imputation was zero, no change, which to anyone who went shopping during the month knows is wrong. That decision biased the November CPI lower. For December, we should see some payback, an upward bias. That bias may or may not push the annual inflation rate higher. Analysts are divided, so confidence in what the numbers are telling us may be low. Markets, however, don't see the Fed moving anyway this month, and we'll have January and February CPI data in hand before the next Fed meeting. Michael McKee, Bloomberg Radio. All right, Michael, thank you. In addition to the CPI report, investors will get earnings from the first of the big banks.

6:52JPMorgan Chase reports before the opening bell. We get a preview with Bloomberg's Tom Busby. J.P. Morgan Chase's trading and investment banking businesses will be in focus with revenue from trading stocks and bonds expected to rise 13 % from a year ago, helping shares of the bank up 35 % in the past 12 months, easily topping the 16 % gain in the S &P 500 financials index. Bloomberg consensus calls for adjusted revenue of$46.35 billion for the fourth quarter on adjusted earnings per share of$4.92. Tom Busby, Bloomberg Radio. Okay, Tom, thank you. Looking at company news now, Citigroup is among three major companies cutting jobs.

7:31The bank is set to slash about 1 ,000 positions this week as part of CEO Jane Fraser's march to keep a lid on costs. And BlackRock's cutting hundreds of jobs across its company as well. Those cuts total about 1 % of BlackRock's global headcount and include members of its investment and sales teams. and MetaPlatforms plans to cut about 10 % of its employees in the reality labs division. That's part of a broader strategy to shift money away from some virtual reality products and into other AI wearables. Nathan, President Trump says big tech must bear the costs of reining in electricity costs. In a post on Truth Social, the president said his administration had been in talks with Microsoft to ensure that consumers, quote, don't pick up the tab for enormous data centers.

8:15The rapid construction of data centers is widely seen as one reason why electricity has become more expensive in the U.S., though it is not the only one. Later today, Karen, President Trump will visit a key battleground state to promote his tariff and manufacturing policies and flesh out a more populist economic message. He'll visit a factory that makes Ford F-150 trucks and promote his policies at an event sponsored by the Economic Club of Detroit. This is the president's third trip to a bellwether state since early December.

8:46Time now for a look at some of the other stories making news in New York and around the world. And for that, we're joined by Bloomberg's Michael Barr. Michael, good morning. Good morning, Karen. About 15 ,000 nurses in New York City are on the streets into the second day of their strike. Nurses say they'll stay there until their demands are met. We want a fair contract, so we want to save our health care, save our pension, and provide safe staffing for our patients. Nurses are also calling for higher wages and better staffing. Hospital officials say union leaders are making reckless demands, including nearly 40 percent wage increases.

9:23A New York City Council employee was detained by federal immigration officials when he appeared for a routine immigration appointment. That's according to City Council Speaker Julie Menon, who says the employee works as a data analyst and has the legal authorization to remain in the country until October. DHS confirmed that this employee had gone in for a routine court appointment and was nevertheless detained. They provided no other basis for his detainment. According to the DHS, the employee is a criminal alien from Venezuela who has an assault arrest and no work authorization. New York Mayor Zoram Namdani calls the detention an assault on democracy and demands the employee's immediate release.

10:10New York Governor Kathy Hochul will reveal how she plans to tackle making housing more affordable for people. Hochul would use today's State of the State address to detail how she plans to cut red tape for developers to boost the state's housing supply amid a widespread shortage of affordable units. It would be through her Let Them Build program. The proposal has drawn criticism from green groups who argue that changes to the law could open up loopholes that could be exploited by business interests. Global News, 24 hours a day, and whenever you want it, with Bloomberg News Now, I'm Michael Barr.

10:47This is Bloomberg. Karen. Thanks, Michael. Time now for our Bloomberg Sports Update, and for that, we bring in John Stashauer. Thanks, Karen. the end of the NFL wildcard playoff round of the Houston Texans had a one-point lead in the fourth quarter in Pittsburgh and then scored 23 points in a span of 10 and a half minutes. They had two defensive touchdowns. Houston won 30 to 6 to advance to play New England on Sunday. Was this the last game for Aaron Rodgers? Will he retire? There was talk the Packers might fire coach Matt LeFleur instead. They're talking about a contract extension with him. John Harbaugh's first coaching interview with Atlanta.

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13:29Coast to coast on Bloomberg Radio, nationwide on Sirius XM, and around the world on Bloomberg.com and the Bloomberg Business app. This is Bloomberg Daybreak. Good morning. I'm Nathan Hager. The Justice Department's move to launch a grand jury probe against Fed Chair Jay Powell is drawing rare pushback from many Republicans on Capitol Hill. Louisiana Senator John Kennedy is among them. He says a perjury allegation against Congress is a serious allegation. It's serious as four heart attacks and a stroke. And if you make an allegation like that, by God, you better be prepared to put it, to back it up.

14:05That was Republican Senator John Kennedy of Louisiana on Capitol Hill. This morning, we're joined by Bloomberg News senior editor Alistair Bull. And Alistair, we're just getting word from central banks around the world issuing a joint statement of solidarity for Chairman Powell as well. It does seem as though the pushback against this Justice Department probe is pretty remarkable. Good morning. Morning, morning. Thanks for having me on. It is remarkable, But I think the most remarkable thing is the strident tone taken by key Republican senators who are in a position to do something about it. Investors may well heed comments by other central bankers and BIS.

14:44It could affect their long-term view on U.S. assets. That's obviously important. The bond market vigilantes do have a role to play here. But Senate Republicans can stop Trump from putting his nominees on the Fed board. And that really sort of like blocks the Trump campaign to get more control over the central bank. So that's very serious pushback. What are we hearing in terms of how these subpoenas came about? It sounds like there might have been some kind of disconnect between the attorney general or the U.S. attorney in D.C. and the Justice Department writ large. Well, you know, that's very interesting because the reporting yesterday made it clear that there were a lot of people around the White House who didn't know this coming and were not happy it happened, including Treasury Secretary Scott Besson, who, according to Axios, was very quickly on the phone to Trump on Sunday night to tell him this was going to be a mess and it was going to put a stick in the spokes of his effort to nominate a new Fed chair.

15:47We don't entirely know what happens next. The ball really is in the court of a DOJ because the Republican Senator Tom Tillis has said, this needs to be cleared up soon. And that clip you played from Senator Kennedy said, if you're going to make these allegations, you better back them up. So I think people are going to want to see movement, but they've really not said very much to clarify what happens now. What kind of role could Congress play to get that kind of transparency from the Justice Department. Could we see a clash there? Yeah, I expect so. I mean, I think Tillis also sits on the Justice Committee.

16:25So, I mean, he has power here. But the important thing is that the Senate has oversight. Congress has oversight of the Federal Reserve, which was very carefully constructed to insulate it away from political pressure. Now, President Trump is testing those layers of defense, but he hasn't breached them yet. And there's another important thing that's going to happen this month, which is the Supreme Court's going to start to hear the argument around Governor Lisa Cook, who Trump fired for cause, and she's fighting that. The Supreme Court's indicated it wants to give some sort of carve-out to the Fed as a special quasi-private public agency.

17:02If a Supreme Court comes down on Lisa Cook's side, that's going to give the Fed even more protection and insulate Powell further from sort of an assault that he has identified as a threat to Fed independence. And importantly, Republican senators say they agree with him. They say it is a threat to Fed independence. And of course, this is coming as we're still waiting for an announcement from President Trump on who his successor choice for Chairman Powell will be, with Senator Tillis saying he'd block any further Fed nominees. That has to complicate even that announcement, doesn't it? Yeah, absolutely.

17:38I mean, that's the big story. The big news we are expecting on the Fed this week, or maybe after Trump goes to Davos for the World Economic Forum, was his pick for Fed share. But that's been completely overshadowed by this. And if Tillis sticks to his word, if he votes to block any nominee, he basically has a veto on Senate banking. It's split at 13-11. If he crosses the floor to join the Democrats, that's 12-12. That blocks it there to move out of committee over an objection. You need 60 senators under the current rules. You've already got Lisa Murkowski. You've got Kramer. you've got Kennedy sounding dubious, you've got John Thune, who's, you know, majority leader, saying this needs to be fixed soon.

18:23So they, you know, Trump may not have the votes in the Senate. So it basically freezes the whole plan, which is why when you read that Treasury Secretary Besson was very angry and frustrated by this, you're not surprised. This is Bloomberg Daybreak, your morning podcast on the stories making news from Wall Street to Washington and beyond. Look for us on your podcast feed by 6 a.m. Eastern each morning on Apple, Spotify, or anywhere else you listen. You can also listen live each morning starting at 5 a.m. Wall Street time on Bloomberg 1130 in New York, Bloomberg 99.1 in Washington, Bloomberg 92.9 in Boston, and nationwide on Sirius XM Channel 121.

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