Commerce Sec. Lutnick on Capitalism & Lisa Cook 8/26/25

0:00Bring in show music please. Hi, I'm CNBC producer Katie Kramer. Today on Squawk Pod. Fired? I don't know if she's fired. Do you know if she's fired? He said that she's fired. President Donald Trump taking action to fire a governor of the Federal Reserve Board, Lisa Cook, who his administration says engaged in mortgage fraud. Our Steve Leisman with the latest reporting and the implications. The whole purpose of having independence is to separate the long-term exigencies of making monetary policy with the immediate gratification desired by the political process. Plus, Howard Lutnick, Commerce Secretary, says this is not about politics.

0:46The policy is what matters. If the Federal Reserve actually cared about the United States of America, they'd understand that they could cut interest rates, cost the United States of America taxpayer less money. And the new activist-like approach of the government toward publicly traded companies with other shareholders? Lutnick says better investment and higher tariffs are good for business. We're not starting a sovereign wealth fund. What you're going to see is you're going to see a national and economic security fund built with the Japanese money, the Korean money and other countries' money.

1:24They're going to give us money to build our infrastructure out in America. It's Tuesday, August 26th. Squawk Pod begins right now. Stand and or by in three, two, one. Q Andrews. Good morning and welcome to Squawk Box right here on CNBC. We're live at the Nasdaq market site in Times Square. I'm Andrew Ross Sorkin, along with Leslie Picker this morning and Wilford Frost in all week for this last week of August. But boy, is it a busy one. And every day has been a little bit busier than the next. Steve Leisman's also on set. Story of the morning could become the story of the week, story of the month.

2:02I don't know. We'll Let's see. President Trump saying he is firing Fed Governor Lisa Cook over alleged issues with her mortgages. And Mr. Leaseman, as I mentioned, is at the table. He's been up late digging into all this, working the phones. A lot of issues here, Andrew. The firing of Fed Governor Lisa Cook raises dramatic questions about the legality of the move, the independence of the Fed, and the outlook for monetary policy. The president saying he fired Cook for, quote, allegedly making false statements on one or more mortgage agreements. He said in a letter to Cook,

2:42Cook, in a statement late last night, responded, President Trump reported to fire me for cause when no cause exists under the law and he has no authority to do so. I will not resign. I will continue to carry out my duties to help the American economy as I've been doing since 2022. Former Fed General Counsel Scott Alvarez telling me last night it's not caused if someone made an allegation that's untrue. To be for cause, she has to have an opportunity to explain her side of the story. We don't know what she told the banks about why she had two primary mortgage mortgages. I would note that Cook has yet to directly address the mortgage allegations, but many on both sides, both inside and outside of the Fed, have viewed the attack on Cook as political, part of an effort to strong-arm the Fed into lowering rates.

3:30If the presidential removal stands, the Board of Governors would have only five of its regular seven members. Chair Jay Powell, appointed by both Trump and President Biden, Vice Chair Jefferson and Governor Michael Barr, appointed by Biden, and Vice Chair for Supervision Michelle Bowman and Governor Chris Waller, appointed by Trump. The president has nominated CEA Chair Stephen Myron to a vacant spot. Replacing Cook would give Trump a majority on the board. Fed probabilities changing only slightly in the wake of the firing. September remained an 82 % probability of a cut, but there was a slight increase to 42 % from 34 % earlier in the evening for a second cut in October.

4:08A Trump board majority would also open the possibility that Trump could eliminate the 12 district presidents, five of whom have a vote at any one time, effectively giving the president full control of monetary policy through sympathetic surrogates. Andrew. I have a million questions, but actually Wilf asked a very good one before we began the broadcast. So I would actually like to hand the floor over to Wilf for that important question. Thanks very much, Andrew. Which is, do you think Powell will come out and publicly back her? I don't know. I think that the Fed chair may want to just sort of sit on the sidelines of this.

4:48I think other members of the board, I think, will back her in a sense of saying, we need to have a fact finding on this. And there is none so far. I asked FHFA several questions and they have not responded. I asked them how Bill Pulte came across this. Were they specifically targeting Fed officials? Were other Fed officials targeted? I asked the extent to which other people have been referred to criminal prosecution if this is and how widespread this is. So I don't know, Wilf. The allegation is out there, but whether or not that pertains and is a matter for cause is a really unclear question. I think there's a question here.

5:35There's actually a whole bunch of questions, but you can hold two things in your mind at the same time. You can hold, and I think we've talked about this, you can hold in your mind that she may have done something inappropriate, incorrect, possibly illegal, we don't know, and believe that she's being prosecuted for political purposes. You think that's fair? Absolutely. Okay, so let's just assume that that's the case. My then next question is, you've been on this for the past week, you were in Jackson Hole. if what she did was an innocent mistake. So I'm just going on that side first. I'm surprised that she hasn't come out more publicly and said, look, this is what happened.

6:16This is the story. And I'm sticking to it. Why do you think she hasn't done that? Because if it was pretty simple, I think you'd say it's pretty simple. It's something you could go to court over and, you know, go down the line and follow that. if it's complicated and or it's wrong you don't say anything up front because it gets more complicated as you know i don't have a good answer for that i mean i think i think that um if you read her statements carefully she has not responded to the allegations themselves it may be her contention that the allegations are not relevant to the question at hand which is the authority of the president to fire her as a governor right and that's where she appears as if she and her attorneys are fighting this question, which is on the legality of the dismissal.

7:07Can the president do this? Not whether or not there's actual cause to do this. But there have been people who have left the board over controversies around trading and other things. But not fired by the president. Not fired by the president. No, but I'm trying to think of some of the examples of people who stepped down over trading, for example, just a couple years ago. How did that happen? There were referrals, I believe, to the IG, and probably the chair went up and put his arm around them and said, it's time for you to go. And I think that's important. And this goes back a little bit to Wolf's question, I think.

7:41Well, it's important in the sense that it was left inside the Fed. But this is no longer inside the Fed. Can I ask on the legal point, though, because she's saying, I'm not resigning. So what is the legal standings? Like, where are we right now? Is it that she's been fired and she's appealing that decision? Or that the letter that the president has posted publicly is completely irrelevant? We are exactly where your question implies we are, which is nobody knows. I didn't even know. She's still in place right now. Let me just say a question. I didn't even know whether or not to say in our in my report this morning that the president fired Lisa Cook.

8:20I don't know if she's fired. Do you know if she's fired? No, he said that she's fired. She says she's fired. That is, that is. She says she has no authority to fire her. That's why I wondered what Powell's going to say. Because, sure, the next time they have a vote, is he going to cap that vote? If it's supposed to be inside the Fed and they're the ones that are technically in charge, if that's the argument, then they would have to say something about this. The Fed chair has to say something. Can I fast forward a little bit as well in terms of the fairly calm markets in light of this, I would say.

8:54which is either way, if we look at the last three to six months, the president's not going to stop on this path now. One way or another, he's going to keep going. And so if we fast forward to, it's May that Powell's terms up? Yes. So fast forward to then either way. Are we not basically certain that the Fed is now going to ignore inflation data to the extent that we all used to think it would look at it? or does he have to do both of these moves? Does he have to get rid of both Lisa Cook and Powell? And the other point, to look at it the other way, if we bring up that graphic of the surrogates, as you put it, are all of the current people that you had a red bar underneath total surrogates like we think the next appointment will be or not?

9:41I don't think they're all total surrogates. I think Chris Waller for sure will exercise some independence. I don't think he would take directions of the president. Mickey Bowman, I don't know either. She's taken some direction, as Leslie Picker will tell us, in terms of aligning her views of regulatory policy with the president. But whether or not that's unusual or where it should be. Notice that Powell has a red and a blue bar. Remember, appointed by Trump and then renominated by Biden. So he's sort of, I guess, in the middle there. It's a good question. I think I have a couple of answers to that.

10:20The first is if you look down the road, the market already was priced for a dovish Fed. 3 % on the December 2026 Fed funds contract. Look at the two-year. It's down as well. About 3, what was it, 370, 360, whatever it was. I didn't check this morning. But here's the thing. I think there's also some belief that a Fed official in the driver's seat of monetary policy will only tolerate so much inflation. But I have another answer, which is this. The market not being concerned with the Fed's independence is one of the main reasons why we have Fed independence. Market says, like a dog, give me more food now and I will eat it all that you put in front of me.

11:09And I do not care about inflation next year or the year after that. I care that I have easy monetary policy now. Now, the whole purpose of having independence is to separate the long-term exigencies of making monetary policy with the immediate gratification desired by the political process. I'm saving that video. We should just put that video out so people can hear it over and over again. But if that's true, all of the arguments of people who have come on are set. And I don't know if you've ever made the argument, but there's a lot of folks who've said the market if if the Fed is not independent the market will melt down and I think what you're saying and what we're seeing is the market will not melt down the market will not actually the market will not be the reactionary function in any way it may not be and and it's important in that respect because if you think about the April 2nd uh reciprocal tariffs it was clearly the market that forced the Fed's hand the president's hand uh to backtrack on those reciprocal tariffs this This may not be the case this time, but I would watch the dollar, and then I would watch the knock-on effect of the currency to the bond market, and then I would watch the bond market's knock-on effect to the stock market.

12:23Those are the three ways, if the market is going to be concerned about independence, it would be the dollar, the bond market, and then the stock market. But to your point, if it's like, just feed me, just give me more, maybe they don't care. They don't care now, and maybe they won't. Maybe the strength of the American economy and the liquidity of U.S. dollars around the world is such that they are immune to these concerns about Fed independence. But theoretically, most people think it's a critical, critical aspect of our financial system and the global status of the dollar as a reserve currency.

13:03But just high level, Steve, I mean, you've been covering the Fed for a long period of time. Have you ever made a wall that has different Fed officials based on who appointed them? I mean, it's almost like how we talk about the Supreme Court. This person was appointed by this president. Leslie Picker, at the end of the segment here, you came up with the most striking observation of all, in my opinion. As I wrote this segment and I wrote here these words of who nominated whom, I realized we had really come to this place where the Fed is entirely a political football. In 23 years, I don't think I had ever said so-and-so nominated by such-and-such.

13:46A single time, be it an Obama, a Bush, or any appointee, I had never, ever distinguished the appointment of a Fed governor by their president, or distinguished it that way. There has never been a reason. So right now the question becomes, is the Federal Reserve permanently politically marked in a way that it will now be seen in the same way that we see the Supreme Court? We had never seen the Fed that way. And now maybe that's the prism by which we're going to be judging and thinking about the Federal Reserve. But I have to, your point about what forced him to change tack on tariffs applies in reverse today, which is, look, you can politicize it all you like it doesn't affect markets at least in the short term the 10-year is hardly look at currencies and bonds it's it's european bond markets that are rising today because of the french political situation your next your next guess is going to say how do you do this he's going to say buy buy buy you're going to be like i don't know i don't care i got i got to make money for my clients if the market is moving up i'm buying they're not you don't you don't give investment advice based on theoretical principles of independence well and also so far as far as we No, she's not actually fired.

15:00She's still there. She has vowed to fight this. So perhaps the markets are waiting on some movement on that front. Is she ultimately removed? Do the markets react to that? If she's fighting it, maybe the markets are kind of in wait and see to see how the legal system plays out. I think in my next report, I need to make a list of things that we have no idea of where we stand on. We need multiple walls for that. We don't know if she's fired and we don't know. Right, exactly. Exactly. Steve, thank you for helping us out this morning as we're all trying to make sense of a lot of things. And there are a lot of component parts to all of this.

15:34Tees will be next. Coming up on Squawk Pod, Commerce Secretary Howard Lutnick on the new ownership stake the U.S. government has taken in intel. Who pays? Free is a funny way to say it. I mean, it's correct in that the Biden administration had contracted$11 billion out the door and Donald Trump and the Trump administration turned that into$11 billion of equity. But the money was already out the door. And are there more companies, even more industries to come? Back after this.

16:13This is Squawk Pod. Three, two, one, up and Andrew. Cue this mic. You're watching Squawk Box right here on CNBC. I'm Andrew Osorkin along with Leslie Picker and Wilford Frost. in for Joe and Becky this week. Following the U.S.'s government's 10 % stake in Intel, President Trump says that more agreements like this could be ahead. If you have them as a partner, you have the United States as a partner, I think that would be a very good thing for Intel. And he thought about it a little bit different, and he said, I like that idea very much. We have a deal. And that's, I just made$10 billion or$11 billion for the United States of America.

16:52And yeah, there will be other cases. If I have that opportunity again, I would do that. Our next guest is going to weigh in on the administration's Intel stake, future deals, the U.S.-China chip more, and so much more. Commerce Secretary Howard Lutnick joins us this morning. Mr. Secretary, it's great to see you. We want to talk about Intel. I also want to ask your thoughts, by the way, on the Lisa Cook situation. But let's start with Intel, because I think there's a lot of questions in the business community this morning about what the administration's intention is as it relates to buying stakes in other businesses.

17:26We just had John Stanky, the CEO of AT &T, on, for example. He's doing a deal with Echo Star around broadband licenses. By the way, those licenses are U.S. licenses. The government, you could argue, subsidizes those things. And, of course, the question that we raised was, you know, what do you think about the possibility that the government's going to come and say, hey, we would like a piece of your company or to buy one through our sovereign wealth fund or what have you? Well, I think the Intel deal was a great example. The Biden administration gave G.A.V.E. gave Intel, an American company,$11 billion grant for in exchange for nothing to help them build semiconductors in America, which would be a really good thing.

18:13But why would you have I mean, talk about corporate welfare. So Donald Trump sits in the room with me and Lipu, the CEO of Intel, and says, come on, we've got to make it fair for America. And we agree we get 10 percent of the company, which brilliantly equals 11 billion dollars. Now, Mr. Secretary, I don't want to relitigate the history, but just for context, and I hope you'll agree with what I'm about to say. At the time that the CHIPS Act was put together, and we could critique and criticize the CHIPS Act all you want, the idea was that we were trying to incentivize companies to do something in the U.S.

18:50that they thought was relatively uneconomic, meaning they didn't want to do this. And so the idea was, how do you incent them effectively to do that? Most of these companies wouldn't have taken the money necessarily if equity was required on the other end. The world has changed. Obviously, the tariff policy and everything else that's been put in place, and obviously Intel's, frankly, own challenges and troubles, put them in a more diminished spot. But in terms of just contextualizing what's happened here, is that a fair way to think about it, or do you think that the original CHIPS Act was just completely mishandled?

19:27I think the latter. The CHIPS Act was mishandled. I mean, you've got TSMC, the Taiwan Semiconductor Manufacturing Corporation. It's worth a trillion dollars. It's a trillion dollar company where they almost monopoly are making wafers that you break into chips that we all know. And they agreed to build 65 billion dollar plants in America. And the Biden administration gave them 6.5 billion dollars or 10 percent. As soon as I took this office, I called C.C. Way. He's the CEO. We sat down and negotiated, and I said, look, this is ridiculous. I'm going to take back the$6.5 billion. This is just a corporate giveaway.

20:14You've got to do better for us. And if you remember, he came to the White House and announced$165 billion of investment. That's what I'm talking about. At least let's make sure Americans get the benefit of the bargain. Why do you think that all these companies didn't do this prior? Well, the Biden administration didn't even know how to ask, right? You've got tariffs and you've got a real businessman, both as the secretary of commerce and as the president of the United States, pushing these people. Micron was getting a$2.5 billion grant to build$25 billion. They now upped it to$200 billion. Texas Instruments from$23 billion to$60 billion.

20:53I mean, let's get the benefit of the bargain. You've got to push these people. You can't be a pushover. The Biden administration was just a pushover. That's all it was. It was just a giveaway of money. And the Trump administration is just not that. Howard, it's Wilfred here. Great to speak. Long time no speak. My question on this, following on from what Andrew said, is what is the bar for the government to deserve a stake in a company for free? Because lots of companies are potentially now beneficiaries, domestic U.S. companies, of your tariffs. Is that enough to warrant a 1%, a 2%, a 3 % stake for free?

21:31No, no. And free is a funny way to say it. I mean, it's correct in that the Biden administration had contracted$11 billion out the door. And Donald Trump and the Trump administration turned that into$11 billion of equity. But the money was already out the door. So I think the key is where is the United States of America adding fundamental value to your business? If we are adding fundamental value to your business, I think it's fair for Donald Trump to think about the American people. I mean, one of those issues was we give hundreds of billions of dollars to universities, hundreds of billions of dollars to universities, and they keep the patents.

22:14Don't you think America should get a stake in the patents that we finance the research? We give the money. I mean, if it was commercial, we surely would get a piece of these patents. What about defense companies for America, Secretary? Why shouldn't the U.S. government say, you know what? We use Palantir services. We would like a piece of Palantir. We use Boeing services. We would like a piece of Boeing. There are a lot of businesses that do business with the U.S. government that benefit by doing business with the U.S. government. I guess the question is, where's the line? Oh, there's a monstrous discussion about defense.

22:50I mean, Lockheed Martin makes 97 percent of their revenue from the U.S. government. They are basically an arm of the U.S. government. They make exquisite munitions. I mean, amazing things that can knock a missile out of the air when it's coming towards you. But what's the economics of that? I'm going to leave that to my secretary of defense and the deputy secretary of defense. These guys are on it and they're thinking about it. But I tell you what, there's a lot of talking that needs to be had about how do we finance our munitions acquisitions. I think a lot of that is talking. And now you have the right people in the jobs and Donald Trump at the head thinking about what is the right way to do it.

23:35I tell you, the way it has been done has been a giveaway. Mr. Secretary, it's Leslie Picker here. As we're kind of thinking about this concept of a U.S. sovereign wealth fund, would the administration commit to having an independent board oversee it? How exactly would these stakes be assessed to prevent politicization? Well, let's be clear. There's no sovereign wealth fund now. We're not spending the American taxpayers' dollars on anything, right? Biden gave away$11 billion and Donald Trump took back an equity stake for the money that Biden had given away. We're not starting a sovereign wealth fund.

24:14What you're going to see is you're going to see a national and economic security fund built with the Japanese money, the Korean money, and other countries' money. They're going to give us money to build our infrastructure out in America. Those are the deals that Donald Trump made using his tariffs, not using the money from the tariffs, but using the commitment of these countries that fundamentally understand a strong and powerful America is necessary for the world to be successful. Mr. Secretary, I'm really interested in how you personally would see it if another country did something of this ilk back.

24:55Because I know how much you don't like non-tariff barriers. You mean like China does it every day? You mean China does it every single day? That's exactly what I want to ask about, because I totally get that perspective on China. And it's obviously led to so much of the last year's policy towards China in the last decade since President Trump came in. But what about from a U.K. perspective? You've struck a deal with the U.K. And I know we've got better terms than some other countries. And I know you're against, for example, the digital sales tax. And there's still discussions going on there. And that's seen as a non-tariff barrier.

25:27What if the UK started to take stakes in domestic companies that kind of act as a China-like approach to this? No, no, but does that count as a non-paraparic? Oh, you mean, I mean, you don't, you're not really thinking about the fact that the UK government nationalized British steel a couple of months ago? Yeah. I mean, really? No, no, but I'm genuinely asking about that. Do we get punished for that now? Do we deserve to be? No, you don't get punished for it because what they did is what happened is the Chinese, a Chinese company bought British steel, put British steel out of business and was just importing, you know, subsidized Chinese steel, put the British steel industry out of business.

26:08And the British figured out, along with the Trump administration, teaching them that you need steel to be a real country to be able to defend yourself. And the British figured that out. They nationalized British steel. And now, because they nationalized British steel, America can do a deal with Britain on steel, because otherwise we would just be inviting the Chinese in. Imagine British steel was really Chinese steel. Mr. Secretary, so let's just base case it. So we just put it on the floor here, because I think, as I said, a lot of business leaders and other policy leaders are watching you right now.

26:44what types of circumstances would amount to the U.S. government and the administration deciding to take a stake in the business either for free or buy-in or something else just so that everybody understands what we're actually talking about okay so if if a company comes to the United States of American government and says we need your help we want to change everything right uh You know, NVIDIA goes to President Trump and says, I'd like to sell a new kind of chip to the Chinese. I know it's not allowed. I'd like to do that. Will you work with me to do that? I think that's a question between the CEO and the president of the United States of whether he will listen to them and change the rules.

27:31and if he's willing to change the rules and he wants something for it for the American people then that sounds like a good idea to me. And there are other times where if the United States of America is completely making your business or I'll give you the example we need rare earths right we need rare earth magnets to make motors in America. The Chinese had closed that off and they were threatening us to not deliver that and were choking us with that. So what happens? The Chinese have a 90 plus percent market share and they choke this business. You can't be in business because they sell those magnets for half, put you out of business so they have 100 percent market share.