Weekend Law: Powell Probe Dropped, SCOTUS & Religion in Schools

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1:31This is Bloomberg Law with June Grosso from Bloomberg Radio. About a month ago, the U.S. attorney for D.C., Janine Pirro, professed that she didn't care that Senator Tom Tillis was opposing her controversial criminal investigation into Federal Reserve Chair Jerome Powell. She was moving forward. You know, honestly, I don't know and I don't care. And I'll tell you why. I am in a legal lane. All of the rest is white noise. I don't care what they say. I have a job. I have the ability to go into a grand jury. There are questions that the American public and people in D.C. are entitled to know where a billion dollars has gone.

2:20And on Wednesday, Pierrot doubled down and again vowed to continue the investigation into building renovation cost overruns by the Fed and to appeal a judge's order quashing her two grand jury subpoenas. This investigation continues. I am in the legal lane. There are others who are in the political lane. I don't intersect those two lanes. I am going forward. We are appealing the decision of Judge Boesberg. But then on Friday, in a stunning reversal, Pirro said in a social media post that her office was closing the investigation on Powell, but that, quote, this morning, the inspector general for the Federal Reserve has been asked to scrutinize the building costs overruns.

3:08In fact, the IG's investigation began last year. Does the end of Pirro's investigation clear the way for the confirmation of Kevin Warsh as Fed chair, even though Pirro added in her post, quote, note well, however, that I will not hesitate to restart a criminal investigation should the facts warrant doing so. Joining me is Elliot Stein, Bloomberg Intelligence Senior Litigation Analyst. Elliot, what do you make of Pirro's abrupt reversal? Is it due to the lack of evidence or pressure to clear the way for Walsh's confirmation? Probably a combination. I mean, you know, the whole point of Judge Boasberg's opinion questioning the subpoenas was that, you know, there's very little evidence of a crime versus a lot of evidence that this is all a pretext to go after Powell for not lowering interest rates.

4:01But then you also have this whole Senator Tillis dynamic, and he has been very forceful in saying that he's not going to allow Warsh to be confirmed until the investigation is wrapped up. And, you know, they're coming up on a May 15th deadline, which is when Chair Powell's term ends as Federal Reserve Chair. And so I think they want to move things along. They want to get Warsh in there. And this is sort of the quickest path to doing that. Although, you know, Janine Pirro did leave an opening for opening the investigation down the road. So it's unclear right now if this is going to be enough for Senator Tillis.

4:43I suspect it probably is. But if I'm Jerome Powell, I would want a little more assurance in the form of perhaps an immunity agreement of some sort. Pirro appeared to be trying to gloss over the implications of dropping the investigation by saying that the inspector general was now going to be the one scrutinizing the cost overruns. And quote, I expect a comprehensive report in short order and am confident the outcome will assist in resolving once and for all the questions that led this office to issue subpoenas. But in fact, the IG has already reviewed the project twice and started another review last year because Powell had requested it.

5:26So does this seem like sort of a dead end? Right. Yeah. I mean, we're sort of where we were before the investigation started, right? That it's still with the Inspector General and that's what they do. And, you know, it sounds like Janine Pirro is sort of trying to appease two camps here, right? On the one, she obviously reports to President Trump, who has been adamant about going after Jerome Powell for several years now, and he wants him out of the board completely. On the other hand, she needs to satisfy Senator Tillis, who has said, you know, he's going to block the confirmation of Kevin Warsh until the investigation is wrapped up.

6:05So, you know, her tweet sort of seems to try to navigate right through both those sides in that narrow passageway. And we'll see if it's enough. I don't think we've heard anything from Senator Tillis yet, but I suspect maybe we will soon. Let's back up for a moment, Elliot. What is she investigating? The cost overruns and possible perjury by Powell? Right. Those are the two things. I think the testimony to me sort of seemed to be more of the impetus for her investigation because the inspector general is already investigating the cost overruns, for one. And, you know, they tried to accuse Powell of essentially lying in his testimony to the Senate last summer.

6:46But, you know, it seemed very nitpicky and sort of a matter of semantics, nothing approaching a federal crime. And proving perjury is not easy. You have to prove that someone knowingly and willfully made a false statement under oath about a material matter. Yeah, it's very hard to prove intent in one of these types of cases. And we know that as late as a month ago, Pirro's office essentially had no evidence that Powell had committed a crime because during a closed door hearing with Judge Boesberg, the judge who quashed their subpoenas, they acknowledged they had no evidence but said they wanted to go ahead with the investigation anyway.

7:29Right. I mean, you know, in most cases, that's sort of the purpose for the subpoena, right, when you don't have all these other things going on that suggest it's a pretext, right? If you have, you know, reasonable suspicion, or probable cause that that a crime was committed, then you issue subpoenas to develop the evidence further. But yeah, to your point, the judge found, you know, not only is there no evidence yet and not only did the Justice Department concede that, you have to balance that with the other side of the equation that the subpoenas were issued for the purpose of harassing Jerome Powell because he's not lowering interest rates fast enough.

8:09And the evidence of that was overwhelming, according to the judge. Yeah, Judge Boesberg said there was no evidence whatsoever that Powell had committed any crime, but there was a mountain of evidence that the investigation was intended to pressure Powell to lower rates or resign. And this isn't the first time that Pirro's office has had trouble moving forward on an indictment. Several times D.C. grand juries have refused to indict, disproving the old adage that a prosecutor can get a grand jury to indict a ham sandwich. They couldn't get a grand jury to indict the guy who threw the salami sandwich at an officer.

8:49And there are other instances, including a federal grand jury unanimously rejecting charges against six members of Congress for making that video reminding the military that they don't have to follow illegal orders. Right. And it's not just her in D.C. I think it was also in the Eastern District of Virginia. You had subpoenas issued and investigations opened against Tisha James, James Comey. Those were also essentially quashed or the grand juries refused to indict. And, you know, this case, too, against Jerome Powell, if it had proceeded, it looked like it was on a path to also not lead to an indictment.

9:31So it does seem that, you know, they are bringing weak cases. They're obviously going after President Trump's perceived political enemies. And, you know, if that's a justification, it's an explanation for why there's not evidence of a crime. What also strikes me about this is that Pirro dropped the investigation by social media post, but she held a press conference to announce that Judge Boesberg had quashed the subpoenas, a loss many people would not want to broadcast. I remember watching that press conference and at the time it really felt very performative. It felt like she was defensive. And, you know, I'm sure some of it was knowing that President Trump was watching and that she wanted him to know that she was continuing to pursue this case aggressively against Jerome Powell, who the president, you know, is not happy with, hasn't been happy with for a while.

10:30But what's interesting is they filed a motion to reconsider that opinion. They lost that on April 3rd. They haven't appealed those decisions to the D.C. Circuit at all. And you would think that if they really wanted to move the case along and continue to prosecute it, they would have done that. We haven't seen that. The deadline is two months from that April 3rd date where the motion to reconsider was denied. I mean, they do have until June 3rd. Obviously, we don't expect that to happen now that they're dropping the probe. But it may be a date that gives Jerome Powell some comfort if it comes and goes and it results in no appeal being filed.

11:10It may give him some comfort that the investigation really is being dropped because they're not going to be able to really revive those subpoenas. I suppose in theory they could issue new subpoenas that cover different subject matter and different terrain. But it's hard to envision what that looks like. But I mean, the real question, you know, the two people that you really need to get inside the heads of at this point right now are Senator Tillis and Jerome Powell and whether Jeanine Pirro's tweets are enough to give them assurance that the investigation is not going to be relaunched at some point down the road after Kevin Walsh gets confirmed in the coming weeks.

11:47And in other Fed news, we are still waiting for the Supreme Court's decision on President Trump's attempts to fire Fed Reserve Governor Lisa Cook over unproven mortgage fraud allegations. Those oral arguments were in January. And every time there is an announcement of decisions by the Supreme Court, we keep expecting that the Cook decision will be among them. Yeah, exactly. I was on the soccer field down in North Carolina this last Friday at 10 a.m. when it was a Supreme Court opinion date. And I have one eye on my daughter playing. I have one eye on my phone. And I was just so relieved when it was not that decision.

12:26I think one of the reasons it may be taking longer than people anticipated is that it's sort of wrapped up with the Slaughter case. Rebecca Slaughter, if you recall, is the FTC commissioner who also challenged her termination. And the cases are all sort of wrapped up together because the Supreme Court has indicated that even though the president likely has the authority to remove most agency commissioners out. This message is brought to you by Apple Card. Apple Card members can earn unlimited daily cash back on everyday purchases wherever they shop. This means you could be earning daily cash on just about anything, like a slice of pizza from your local pizza place or a latte from the corner coffee shop.

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15:04All investing involves risk of loss. See complete disclosures at public.com slash disclosures. Will and that for cause removal restrictions as to them is unconstitutional. The Federal Reserve is situated differently because it's sort of quasi-private. It's not really a part of the executive branch. And as a result, the for-cause removal restriction in the Federal Reserve Act is likely constitutional. The only question is, what does it actually entail? Maybe next Supreme Court Opinion Day, the Cook decision will come out. Thanks so much for joining me today, Elliot. That's Bloomberg Intelligence Senior Litigation Analyst Elliot Stein.

15:38Coming up next, revelations from behind the curtain at the Supreme Court. I'm June Grosso, and this is Bloomberg. Chief Justice John Roberts has long cultivated an image of the Supreme Court as an institution above politics. Nine justices who reach their decisions based on the law alone. I think the important thing to understand is that there are three branches of government, and two of them are political. And if you don't like what the Congress is doing, your congressman, you can throw him out of office. If you don't like what the president is doing, you can throw him out of office. If you don't like what I'm doing, it's just too bad.

16:20And now most people would say, how can that be? You do, you know, the cases are pretty important and you need to understand, well, it's because the framers didn't want the courts to be making political decisions. And Roberts famously compared justices to umpires at his confirmation hearings more than 20 years ago. Judges are like umpires. Umpires don't make the rules, they apply them. The role of an umpire and a judge is critical. They make sure everybody plays by the rules, but it is a limited role. Nobody ever went to a ball game to see the umpire. But the New York Times has published leaked confidential memos between the justices, and they reveal a very different side of Roberts, certainly not an umpire calling balls and strikes, but rather the driving force to block President Obama's signature environmental policy, pushing the decision through in just five days, without oral arguments, without briefings, and without input from lower court decisions.

17:27Why? Because Obama's power plan, in Roberts' words, was, quote, the most expensive regulation ever imposed on the power sector. And so on February 9th of 2016, in a five to four vote along partisan lines, the justices issued a one paragraph ruling halting Obama's clean power plan. It was just the beginning of the court's emergency or shadow docket that has been repeatedly used to move President Trump's agenda forward. My guest is an expert in constitutional law, Harold Krent, a professor at the Chicago-Kent College of Law. House of the New York Times has published these until now secret memos about the five days before the Supreme Court issued an order blocking President Obama's clean power plant.

18:21Tell us what happened. So the court never blocked the power plant on the merits, but rather used its power to stop the action before they could even hear the case. And so they deployed their power to basically protect individuals in the United States from what they saw as overreaching by the Obama administration. So this is an overtly political move because they didn't like the power plan and the memos evince the fact that they thought that there shouldn't be this much of a drain on the economy in order to protect the environment. And so the way it reads is that the Supreme Court was overtly political in deciding to resolve this case, not on the merits, but rather simply on the basis of its emergency docket, thereby stopping the plan before it could be effectuated.

19:15So this was pushed through in five days, and some of the justices were in Europe. So it was all done by exchanging memos. And from your reading of those memos, did it seem like the chief justice was the one really pushing it through? And what astonishes me is that we know that for years the chief justice stood and said, integrity of the court is my mission. This is the most important thing to me. So we have stature. Yet it was the chief who decided to use the power of the Supreme Court to try to attain his political ends. So this to me is what is so amazing is that while the chief seemed to have this public persona of respect and integrity of the court, he was the one that instigated the unorthodox use of the court in order to accomplish a political result.

20:08Did it seem as if some of the justices didn't recognize the importance of what was happening here? In retrospect, I think we can all tell this is the start of the aggressive use by the robbers court of the shadow docket. But the justices at the time didn't know that. They thought maybe this was a one-off. The court was not in session. They were in various places around the world. And so they could have said this is a one-off, a unique response that wouldn't create any kind of precedent. That's what it seemed to me from reading the memos. Obviously, now with the lens of history, we look back and say we can see a linear progression.

20:45The use of the power of the Supreme Court for various political ends has become much more common. But at that time, it was rare. And I don't think that justices realized what a precedent this could create. So the chief justice said that this was the most expensive regulation ever imposed on the power sector. Too big, costly and consequential for the court not to act immediately. Yet no justice, not a liberal, not a conservative, ever mentioned the dangers on the opposite side of climate change. There's no discussion of climate change. There was no discussion of letting the challenges to the regulation play out in court.

21:24This wasn't a discussion of the usual legality of an administrative action. This was a political reaction to the Obama administration saying this is too extensive, too much, and no consideration of the equities on the other side. It's astonishing. The irony. So Justice Kennedy figures that, you know, well, when we take this on the merits docket, it's going to end up being struck down anyway. But then Justice Scalia passed away. And so the vote on the power plan would most likely have been 4-4. And so Obama's power plan would have gone into effect. Likely. Obviously, we don't know because we're deprived of that knowledge because of how history played out.

22:10The other thing that's amazing about this is why the leak now? You know, is this a leak from clerks who have reported this material for 10 years? Is this a leak from the Supreme Court justice that's more and more frustrated with how the court is acting? We don't know, but it certainly suggests that tensions are aflame within the Supreme Court building. Well, we've seen that with the various justices. I mean, we saw Sotomayor criticizing Kavanaugh and then coming out with an apology. We saw Jackson and Kavanaugh quibbling about the shadow docket in a public appearance and Jackson giving an hour long speech at Yale Law School, basically taking the shadow docket apart and criticizing it.

22:58So it seems like the tensions are pretty much out in the open. Yeah, and this idea of the friendship between RBG and Justice Scalia is a thing of the distant past. And obviously, these justices don't like each other. They're sniping at each other. And now they're arguably possibly making leaks. So we don't have a very unified or collegial court. I've asked you often in the past, how much are the justices influenced by public discussions of the issues, public discourse? And here they're relying on outside sources like a blog post and television interviews to push their points. We try to teach our students, you know, the Supreme Court justices consider, they deliberate, they're influenced by their predecessors.

23:44They try to understand the integrity of the legal process. And then we're confronted by these memos, the disparate memos that seem to suggest, oh, it's all about politics and our knee-jerk reaction to what we think is dangerous for politics. So they're acting as politicians. So what then differentiates the court from the other institutions is getting a little muddier here. And I think that's the real downside of what they've done is to sap the Supreme Court of the respect that it should otherwise deserve in our system. Yeah. And how many times have we heard the chief justice talk about the Supreme Court is not a political institution?

24:27We're different from the political branches. And here it's all about politics. It is. And again, I can understand why people are disillusioned, because if the court is thinking about politics, you know, what gives them the advantage as opposed to those in Congress? Was this in any sense President Obama versus Chief Justice Roberts? Because, I mean, Obama was one of just 22 senators who voted against Roberts' confirmation. And here it seems like the Chief Justice is eager to assert the authority of the Supreme Court against Obama. I don't know how much of this is reaction to the friction between Chief Justice Roberts and President Obama.

25:13I think it's more about President Obama's policies that he just thought that the Democrat was wrongheaded in trying to sort of quickly change the ground in terms of climate change and limiting pollution and saw his responsibility as a court to do something about the rapid change that was at play. within the Environmental Protection Agency. Do you think that there'll be any fallout from this publication of these notes? Well, we saw that the first Dobbs decision, if you remember, was released by someone, and we knew what the Dobbs decision was going to say, overruling their right to an abortion.

25:55And tighter security was imposed, but nothing really happened. Again, we don't know if the leak is from now or from 10 years ago. There may be some more security, but I think now in this age, There won't be too many more steps that can be undertaken by the court to prevent this kind of leaking. But the leaking isn't good for the court. Clearly, this is a court that has lost its civility, but also its ability to be collegial. And also, I'm wondering if since now we have this huge leak, you mentioned the leak before, whether the justices will be more reluctant to put things into writing that can be leaked.

26:35Oh, absolutely. I think that if you know that your rough draft and your comments, Snyder or otherwise, may end up in the New York Times, you're going to think twice before you write that down. And that's also not good for the court, right? Sometimes it's really important to have a sharply worded memo, some kind of comments about the wisdom of a particular argument that another justice may write, and the justices will be more restrained in showing candor for fear of disclosure. And Hal, I want to get your reaction to this speech by Justice Thomas, ostensibly to commemorate the 250th anniversary of the Declaration of Independence, but it devolved into an attack on progressivism.

27:17Progressivism seeks to replace the basic premises of the Declaration of Independence, and hence our form of government. Thomas said that Stalin, Hitler, Mussolini and Mao were all intertwined with the rise of progressivism, as was racial segregation, eugenics, and other evils. I do think there's a tie here, both with the Roberts decision and with Thomas. There is such a deep-seated hatred for the administrative state, and Justice Thomas calls it progressivism. What he's talking about is this idea of these experts in government and both Chief Justice Roberts and Justice Thomas sort of evince a real distrust for anybody who believes in bureaucratic government, anybody who relies on the government to actually respond to our nation's woes and to try to help the country.

28:13Well, the Roberts Court's attacks on the administrative state have been pretty clear. Thanks, Hal. That's Professor Harold Krent of the Chicago-Kent College of Law. Coming up next, an appellate court rules it's okay to force schools to post the Ten Commandments in classrooms. I'm June Grosso, and you're listening to Bloomberg. You need to make a huge presentation in an hour. Adobe Acrobat uses AI to take all your documents and generate a presentation with a single click. Build slides quickly and streamline the process. Need a last-minute pitch deck? Do that with Acrobat. Need to level up your presentation design?

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