BOMBSHELL Lawsuit Targets The Fed and Jerome Powell!

0:00What's going on guys? Today we've got a special surprise for you. I've got James Fishback. He's the founder and CEO of Azoria. He just filed a bombshell lawsuit against the Federal Reserve, and we talk all about it. We're live today from the desk of Anthony Pompliano.

0:23What's going on, guys? Today, I've got a big surprise for you. My friend, James Fishback, he is the founder and CEO of Azoria. He just filed a bombshell lawsuit against the Federal Reserve. He's claiming that the Federal Reserve is not actually complying with federal law to conduct their official business out in the public so that everyone in the world can actually understand what's happening. That lawsuit just won an emergency hearing with a federal judge to understand whether Tuesday's meeting with the Fed is actually going to happen on the live stream or can it happen behind closed doors. Rather than sit and speculate as to what James is trying to accomplish here and what's going to happen, we've got James who's joining us on this show.

1:00Here's my conversation with James Fishback. All right, James, I thought a great place to start the conversations with the big story. You are suing the Federal Reserve because they've been holding closed door meetings and you think that there is a precedent that the government should be required to actually hold these meetings in public so that anyone can hear the conversation, understand what the Federal Reserve's doing with monetary policy. Explain what your case here is. Good morning, Pom. The case is pretty straightforward. It's called Azoria versus Powell. It was filed yesterday morning in the D.C.

1:31District Court. That's a federal court where I am right now in Washington, D.C. And the case makes clear that the Federal Reserve, under the leadership of Jerome Powell, is violating the Government in the Sunshine Act of 1976. That act stipulates that any federal agency with a multi-member collegial body, the FTC, the FCC, or even the FOMC, the Federal Open Market Committee that sets rates eight times a year, must conduct its official business within public view. Why? Because the public deserves to know what's going on with these deceptions, how the deliberations go down and what might be coming next.

2:08And so very simply, we filed a lawsuit against them specifically with what's called a TRO, a temporary restraining order. We asked the federal judge to block next week's FOMC Fed meeting from happening behind closed doors. And usually these TROs, I got to tell you the truth, they get they just get written off right away. They get denied what's called on the papers without even having a hearing. We just heard back late last night that the federal judge in this case has called for an emergency hearing on Monday right before the two day FOMC Fed meeting begins on Tuesday and Wednesday. And so we will be in court on Monday with Jerome Powell's lawyers at 2 p.m.

2:47That judge will decide whether next week's FOMC meeting with the Fed can proceed as planned behind closed doors. We argue that's illegal. I think there's a really good chance we prevail on this case overall, but specifically in blocking next week's meeting from happening in secret. All right. So let's talk about kind of what you're trying to accomplish here. And then we'll talk about the procedural components to it in terms of the goal. If the Federal Reserve came out in FOMC and they just said, hey, we're going to have the meeting. We're going to let reporters in the room. We're going to live stream it.

3:17Does that satisfy kind of what your goal here is or like what is the outcome that you're looking for? Our outcome is that the Federal Reserve follows the law. And so that would absolutely count as one of the as as the outcome we want. We don't expect that there's going to be hundreds of folks in the room with the Fed. The law sets a pretty clear standard that even a live stream can count. So you can live stream into the meeting and see and hear. Well, what did what did Fed Governor Waller say? How did Fed Governor Bowman respond? Most importantly, though, Pomp, we share the president's concerns at Azoria that monetary policy may be influenced by political considerations.

3:54And if that's not true, I hope it isn't. But if it's not true, Fed Chair Jerome Powell should welcome transparency because sunlight is, of course, the best disinfectant. We want the Fed to follow the law. The law says that any official business happens in public view, and that's a public live stream. I look forward to you and I tuning into that live stream on Tuesday and Wednesday, watching exactly what goes into their decisions, because I got to tell you the truth. It's not making a lot of sense. 20-year high in interest rates, 25-year high in mortgage rates, which are, of course, influenced by how the Fed sets the Fed funds rate and how it trickles out to the curve.

4:29And then, of course, we have the fact that we've had five consecutive better than expected, lower than expected readings in core CPI. I was a rates derivatives trader at two different hedge funds for 10 years. I watched every single Fed meeting and traded every single Fed meeting. They are not making any sense. The president is right to be concerned. Millions of Americans are right to be frustrated. They want a mortgage. They want a loan. They want to pay down their credit card debt. And they're paying the highest credit card rates in a quarter century. And so Jerome Powell has a historic opportunity here to bring his Federal Reserve into compliance with federal law.

5:02And I look forward to all of us seeing next week's meeting on a public live stream. All right. So there's a bunch of people who are going to hear you say all this. They're going to say, got it. James is somebody from the MAGA movement. He is loyal to the president of the United States. This is all political. It's big theater. It's nonsense. I think what is most interesting out of what I've been able to gather online and talking to different people is that the judge who is actually requiring this emergency hearing was an Obama appointed judge. So this is it seems to be at least for somebody who's not an expert when it comes to the kind of judicial branch and the politics involved in all this.

5:39It seems to be somewhat bipartisan across the aisle where you have Republicans and Democrats now say, wait a second here. This actually may be a real issue and maybe they should be doing this in public. Is that a fair way to evaluate this? That's a fair way to evaluate it 100%. You know, we are not asking the federal court in Washington, D.C. to force Jerome Powell to make any sort of policy decision. We're simply asking this court to go and have the Federal Reserve follow federal law. Transparency is a good thing. This is not an 80-20 issue. It's a 98-2 issue. One of my closest friends is a progressive Democrat, and I told them that we were filing this case yesterday morning.

6:14And she told me, it makes sense. It just makes sense. The Federal Reserve needs to conduct its business in public. And so when the Fed is doing stuff in our name behind closed doors and we don't understand it, one, that's wrong. But two, as Azoria v. Powell makes clear, it's illegal. And so to your point, Judge Beryl Howard, who was appointed by President Obama, who sits here on the bench in the D.C. federal court, she I think will look at this case very fairly. And she already has. I mean, it's already been a win to have an emergency hearing. You're not supposed to have an emergency hearing in most cases on these TRO requests.

6:49She wants to hear both sides, including the Federal Reserve's lawyers, before making a decision. Next week's Fed meeting, I got to tell you, volatility is mispriced next week if next week's Fed meeting is allowed to happen in public. And it should be allowed to happen in public because that's the law. I look forward to everyone tuning in and the prospect of seeing what actually goes into the Fed's decision-making process because most Americans just don't get it. This would be the first Fed meeting pump in half a century that would happen in public view. What an historic week and consequential week it would be for transparency just as America approaches its 250th birthday.

7:28All right. Before we get to the volatility conversation, which I think is probably the most interesting aspect of this entire thing from a ramification standpoint, let's talk about why is the FOMC not do it public? Do they have an argument or is there some reasoning? Did they make some decision at some point to say we should do this in private? Yes. And so that's really interesting part that allowed us to preempt a lot of their arguments, actually all of their arguments. They have what's called the Sunshine Act memo. The Sunshine Act, as I mentioned, is the law that applies to the Fed that they're skirting right now by not holding these things publicly.

7:57Now, they make two arguments, Pom. The first is we talked about this yesterday very briefly, but some people might say, well, we're an independent agency and that's why we don't apply to the law, why we don't comply with the law. that's actually not the argument they make. They concede that even though the Fed is independent, the law still applies to them. They argue that the FOMC is a subdivision of the Fed. You'll know, of course, that's the Federal Open Market Committee that meets eight times a year to set the federal funds rate. They argue that that subdivision, that carve-out, does not apply to the Sunshine Act, even though they agree that the Federal Reserve as a whole applies to the Sunshine Act, which is weird, that a certain entity within the entity that it applies to would somehow be exempt.

8:42The Sunshine Act is very clear. Any federal agency or subdivision thereof is required to comply with federal transparency law. So that argument is wrong. Number two, and this is where things get interesting, is they argue, perhaps anticipating how weak their first argument was. Well, even if the Sunshine Act did apply to the FOMC that sets rates, we would use the The following exemption, exemption 9A, which says that a premature disclosure of the information of that meeting, the contents of those discussions would lead to financial speculation. That's what they argue. And our response at Azoraria very simply is this.

9:19You cannot invoke the same exemption for 50 years, eight times a year into perpetuity. That's not an exemption. That is a blanket categorical excuse. There is nothing that every single FOMC meeting is somehow the grounds for premature financial speculation. If the Federal Reserve's aim was to avoid premature financial speculation, they would never talk to reporters, never give speeches, never release minutes, never even have a press conference because that could contribute to premature financial speculation about a future policy decision. So when Chair Powell was asked, for example, in January of 2022, whether they were going to raise rates, and he said, no, not at this meeting and probably not at the next one, that would have been contributing to premature financial speculation.

10:08So how on one hand do you get to comment on future developments and be okay with it and then invoke the statutory exemption every single time? We think both of these are really, really lousy arguments. And it turns out that this judge agrees with us to the extent that she wants to have an emergency hearing before next week's Fed meeting. I spent a lot of time on Wall Street trading vol trading rates. I got to tell you, Wall Street is not prepared for this. A lot of my friends who work at banks and hedge funds have texted me and written this off. It's not going to happen because their Overton window is so small.

10:38What we've seen, Pomp, over the last six months is the Overton window has widened out unbelievably. Do not be surprised if a federal judge in Washington, D.C. orders that next week's Fed meeting be public. We shouldn't just be surprised, but as Americans, Democrats, and Republicans, we should welcome that as a huge win for transparency. Now, let's talk about this kind of mispricing of volatility. So right now, the FOMC starts their meeting on Tuesday. They basically go a day and a half ish. And then there's this kind of pull back the curtain, big reveal. They tell you what the rate is going to be.

11:13And then they also then do a little press conference and they explain kind of what their thought process is, maybe answer some questions. There is so much speculation on that press conference that I have seen people say, what color tie is he wearing? How long is he talking? What words does he use? All these different things that people are trying to get some sort of edge on what is going to be the ramifications of this rate decision and also future rate decision. So there's a lot of speculation that goes on. People are speculating today based on what they're going to do on all kinds of activities.

11:46There's someone somewhere in the world who says yesterday the White House officials, President Trump, et cetera, toward the Federal Reserve new building. And so you had Trump and Powell together and they were analyzing that video to see if they can understand what the rate decision is going to be. I mean, it's crazy speculation. What you are saying is that usually that speculation is heaviest on Wednesday when they hold a press conference, they do the rate decision. If this is live streamed, you now are going to shift the volatility and the analysis to Tuesday. And you're going to be able to understand not just what is the final rate decision, but what is the decision making and conversation that leads to that rate decision, which is a whole new ballgame from my understanding.

12:26That's exactly right. And so if you think of all of the volatility of the Fed of a two day meeting, all of it happens at the 2 p.m. release of the statement. What was the policy decision? What happened that day, along with some careful wording about what they expect to happen? And of course, the real fireworks are between two and three thirty when the Fed share comes out and takes questions from the press pool. Now, if you have a Fed meeting where all day Tuesday and half day Wednesday, there's a live stream where effectively the public, the taxpayers, the citizens of this country are a fly on the wall and they get to see what are the key disagreements?

12:58What are the data points that the Fed is focusing on and is neglecting? Is there a political bias on the committee one way or another? And that political bias is not going to be pomp. Well, Trump said this and we're going to do that. The political bias is going to be in the very subtle responses to certain data points. The conversation around tariffs, which we know at this point have not had any evidence of being inflationary in any way, shape or form. Five consecutive, as I said, five consecutive back to back to back better than expected, lower than expected readings in core CPI. But the last and most important when you touched on, Pomp, is the reaction function.

13:32What is the reaction function of the Federal Reserve going forward? We will be able to understand that committee's collective reasoning, not just at this meeting, but going into the fall and next year. How are they thinking about the economy? And if the economy does X, the Fed will do Y. That is the most important thing I would be looking at as a macro investor watching that meeting. I'd be looking at it one way as a citizen, but as a macro investor, I'd want to know, well, if inflation data comes in for a sixth and seventh consecutive month, Would that be enough to satisfy Chair Powell's incessant concern that tariffs are massively inflationary?

14:09Or is there anything that would satisfy that concern? And so that discussion, that debate, I think debate and transparency are good. We would actually see the debate around that table. Chris Waller, a Fed governor who President Trump appointed previously the head of research at the St. Louis Fed, he wrote in a speech two weeks ago that he is likely to dissent at this meeting. Now, otherwise, we would just see a dissent checkbox at the bottom of the statement that Waller dissented and wanted to cut. But we wouldn't see the extent of his reasoning and the extent of the pushback on the committee.

14:39We wouldn't see who else is likely to dissent in the future. These are these folks are paid by the taxpayers. They are in a taxpayer funded building. A building of the president is right, by the way, is way too extravagant and way too expensive of a renovation that's undergoing right now. But that transparency, that debate, that discussion should be public and that volatility would broaden out. You would see less vol during the press conference because now the market would have already seen folks would have already seen what the proceedings were like on Tuesday and on Wednesday morning. Let's say that we get to watch this.

15:12One of my takeaways, there's a book, I think it's called Lords of Easy Money, if I remember correctly. And in it, what they talk about is the 2008-2009 playbook. And essentially, how did we get to this QE-driven kind of money printing, interest rate suppression kind of aspect of monetary policy? In it, though, throughout the book, they talk about, I forget the gentleman's name, who is on the FOMC. And he continues to dissent. And he said that he kept doing it, even though he knew it wouldn't impact the monetary policy decision, because he wanted to sound the alarm to the American people that there was way more issues than they realized.

15:48Now, it would take a kind of a Fed watcher to understand the nuances of what does that dissent checkbox mean? And what is he trying to signal? What you're saying in the age of modern social media is that if there's a live stream, people are going to say, well, X person said this, Y person said this. You get way more analysis. And I actually think that maybe the most interesting part is they may take the meeting even more seriously, right? If you know that the meeting is going to be live streamed and it's going to have armchair quarterbacks who are going to dissect it, you'll probably come more prepared.

16:24You'll probably put your best foot forward, right? When there are hearings, the politicians, frankly, they put on a show. It is complete theater because they realize everything's going to be dissected. And so if this is live stream, do you worry about either negative side effects to it or do you think we actually get better policy decisions? Like what is the ramifications of being able to actually watch the media? Well, I think we're to get much better policy decisions. To your point, Pomp, it's going to raise the bar for these people. I fear that a lot of these Fed governors and Federal Reserve regional presidents who sit on the FOMC that decides the interest rates for every mortgage, every credit card, of course, not directly, but it's influenced through that policy rate channel that they are not taking their job very seriously.

17:06They are phoning it in. They are relying on lazy outsourced analysis either to their staff or to a D.C. think tank. Think tank's probably more appropriate or to the Congressional Budget Office who says that everything is going to be massively deficit heavy and inflationary and so on. What we are going to get to see is each and every one of those people gets to show the country the level of rigorous analysis. And that level of rigorous analysis, by the way, Pomp, I say this as someone who's unapologetically a supporter of the president. If that analysis disagrees with the president, so be it. But let it be done on the substance of the disagreement.

17:40Let it not be done on this incessant paranoia from the panicans about tariff this and inflation that if there's going to be disagreement, let it happen in public. when people know the cameras are watching. Now, that is a really good thing because right here, right now, the way a lot of these Fed governors speak, I read every single one of their speeches. A lot of it is lazy analysis. Let's see the debate and the conversation around that table. I think that we won't be able to compare it to anything because we won't know what it looked like beforehand. But I think if next week's meeting is open to the public, open to that live stream, you will see some really good policy debate and really good analysis from both sides that we otherwise would not have seen.

18:21That is going to be good for the country, but also good for the best policy outcome. Powell, if he's going to go up there and say, we should not cut rates again, he better be prepared to defend himself from the debate that's going to come from someone like Waller, who's brilliant. And I want to see that back and forth. And I think Americans do too. If you win the TRO on Monday, what can they do? They can appeal it. Can they move the meeting? What are their options? So it's a great question. They can try to appeal it to the appellate court and potentially even ask the Supreme Court for an emergency intervention.

18:54I think that if the TRO is won by Azoria on Monday after the hearing, that they will accept it. There will be utter paranoia in that room, but I think they will have to proceed with it. They'll set up the technical stream. We'll get an announcement from the Fed likely on Tuesday morning. They may push the meeting back a few hours to get everything set up. But the government has to submit, the Federal Reserve's lawyers have to submit a brief to the judge this evening on what their response to our arguments are. And that brief is due Friday, 6 p.m. Eastern. And so look online. We're going to be posting all of this on investazoria.com.

19:30That's my investment firm that brought this case against Jerome Powell. And we'll see what happens. But I think we'll prevail. And if we do, I think they will likely just comply. It's a really bad look, Pomp, to say when a federal judge appointed by President Obama says you have to comply with transparency law and you say, no, we don't, and we're going to go find another judge to agree with us. Now, before I let you go, we got to go here in a second. Let's talk very quickly about you have this S &P 500 meritocracy ETF via Azoria. What exactly is this and why do you think it's a better way to look at the kind of 500 largest companies in the United States?

20:04Absolutely. It's called SPXM. That's the ticker. The fund is called the Azoria 500 Meritocracy ETF. Now, as someone who's thought a lot about portfolio allocation, one thing I think about is passive investing, index investing is an incredible phenomenon. It's the ninth wonder of the world, of course, eighth being compound interest. It allows you to own the top companies no matter who they are, what they are at any given point in time because the index keeps revaluing its market weight, et cetera. But one thing that I found with this whole focus on index is could you apply a single negative screen to remove one type of company from the index to do even better than the S &P 500 has consistently done over time?

20:46The negative screen we applied is removing companies with explicit DEI hiring quotas, not the mere presence of a DEI department that hosts an affinity group for certain races or minorities. That's performative. That doesn't actually affect the bottom line, despite how stupid it may be. What we focus on is companies like Nike, Intel, Starbucks that have come out in the case of Nike and Pomp. They have mandated in writing that 35 % of their US corporate workforce must be racially and ethnically diverse. That's problematic for three reasons. The first of which is it forces them to hire people who may not yet be qualified.

21:25There are, of course, massive inefficiencies, turnover, and training costs when you're forced to hire someone to merely satisfy a racial or gender hiring quota. The second is it prevents them from hiring folks who are extremely qualified, but do not fit that rigid definition of diversity. Think a white male or an Asian male who's extremely qualified, but is not diverse enough. That person doesn't get hired. They don't get to contribute. They don't get to drive innovations at the company. And that doesn't just happen once that could happen hundreds, if not thousands of times every given year, given that this policy has been in place for five years at Nike.

22:02And then lastly, it contributes to, of all things, a cultural breakdown of the company itself. All of these employees who some of whom may have been hired by DEI quota, some of whom have not, they all look around wondering, wait, was I the one hired because of my race or gender? Or was the guy across from me hired because of my race or gender, Harvard Business Review found that this type of animosity, this type of really this inferiority complex, it breeds a lack of cohesion and belonging in the company. Very interesting words for us to say, but yes, a lack of belonging that contributes to higher turnover, more sick days, less innovation.

22:43And so these three factors combined, wouldn't you know if you take the 38 companies in the S &P that have DEI quotas, those 38 companies, Pomp, have underperformed the index by 19 points over the past 24 months. So our solution is very simple. Remove the 38 companies so long as they have a DEI quota. And our hope, our aim is to outperform the S &P 500 accordingly. Kick out Nike, kick out Intel, kick out Starbucks, kick out Airbnb. So long as a company says we are going to hire on race and gender as opposed to skill and merit. They cannot be a part of our index, and we don't believe they can outperform in any way, shape, or form.

23:26So our thesis is simple. Your S &P 500 ETF, SPY, IVV, VOO, that ETF is holding you back. So long as these companies mathematically are underperforming, they are holding back your index. Your S &P index would be doing even better had you not been held back by these companies. Our goal is kick them out. And then lastly, the dollars that would have gone to those 38 pump, they get to go to NVIDIA, to Tesla, to Palantir, to the other 462. You have an even larger stake in NVIDIA, in the Azoria 500 fund, SPXM, than you would in the S &P 500 ETF, because the dollars that don't get invested in the DEI quota companies get reallocated, reinvested in the companies that They're hiring the best Americans no matter what they look like and not apologizing for it.