September 5, 2025 • 34 mins
In this week’s Votes and Verdicts podcast, Bloomberg Intelligence’s litigation and policy team looks at a handful of key catalysts coming up. Jen Rie discusses a recent remedies ruling and next steps in the Justice Department’s antitrust case against Google over search. Holly Froum explains the Federal Circuit’s Aug. 29 ruling striking down President Donald Trump’s reciprocal and fentanyl-related tariffs, and looks ahead at how the Supreme Court might rule, with implications for companies like Nike, Apple, Amazon and Ford. Elliott Stein offers insights on Federal Reserve Governor Lisa Cook’s lawsuit challenging her termination, and Nathan Dean discusses the looming possibility of a government shutdown this month.
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Episode Transcript
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Speaker 1 (00:15):
Hello, and welcome to the Votes and Verdicts podcast, hosted
by the Litigation and Policy team at Bloomberg Intelligence, the
investment research platform of Bloomberg LP on the Bloomberg Terminal.
Bloomberg Intelligence has five hundred analysts and strategists working across
the globe and focused on all major markets. Our coverage
includes over two thousand equities and credits, and we've outlooked
(00:38):
on more than ninety industries and one hundred market indices,
currencies and commodities. This podcast series examines the intersection of
business policy and law, and today is our weekly look
at the litigation and policy catalysts that we're watching currently
and that we think will impact companies across a number
of different sectors. My name is Elliott stein Ant with
(01:00):
Bloomberg Intelligence, covering litigation in the financials sector, and I'm
delighted today as always to be joined by a handful
of my Bloomberg Intelligence colleagues. As always, you can find
all of our research on the Bloomberg terminal at BI go,
and you can find all of our litigation and policy
coverage on our Litigation and Policy dashboard at BI laws Go.
(01:24):
Just timestamp this today is September fourth, twenty twenty five.
It's about one twenty pm in New York. And to
kick things off, let me bring in Jen Ree, one
of our antitrust analysts who has been covering all things
antitrust for us for about as long as I've been here.
(01:47):
We both start around the same time, about eleven years ago.
But that's neither here nor there. Jen big ruling this
week in the DOJ Google search case had to do
with the remedies. Sounds like Google sort of escaped the
worst case scenario of having to divest its Chrome browser,
(02:07):
but there were a couple other remedies. What are your thoughts,
what's your takeaway? You know, how good or bad was
this at the end of the day for Google?
Speaker 2 (02:16):
So you know, I don't think for Google this was
a slam dunk, But I do think it was a
really really good outcome. And I guess I say not
a slam dunk because some of the things, the measures
that the government asked for when they proposed a remedy,
they got.
Speaker 3 (02:30):
But if you look.
Speaker 2 (02:31):
At what Google proposed and what the government proposed early on,
as there suggested remedies, it's closer to what Google proposed
across the board than it is to what the government proposed.
So even though the government got something, this is better
for Google. And I think also what really strikes me
is that it is a slam dunk for Apple. I
know that seems kind of weird. Apple's not a defendant,
(02:53):
it's not involved in the case. But one of the
things that was an issue in the case was a
twenty billion payment per year that Google was paying Apple
to set Google Search as the default search engine behind
Apple search access points such as Safari or Siri. And
I think the consensus really was that the court was
going to say Google can't make those payments to Apple anymore,
(03:16):
because they did find those payments to be exclusionary and
to be for closed competitors. Other search engines were blocked
from this avenue of distribution for their own search engines
because of this agreement. But in fact the court didn't
do that. The court said, yes, you can continue to pay,
you can continue to pay for default placement Google to Apple,
so long as that agreement isn't exclusive and runs only
(03:39):
for a year. Now of course, that it can be
reupped after a year, and saying that it can't be exclusive,
it doesn't mean very much because there can be only
one default, right, So once you're said is the default,
it is kind of exclusive.
Speaker 1 (03:52):
People can change from the people.
Speaker 3 (03:54):
Can change, but they always could. They could change before
the liability reason. They always could.
Speaker 2 (03:59):
And that was what was so interesting about this liability
decision that there was such tests, There was testimony showing
how sticky defaults are even though people could change them
technically that the judge determined that it was exclusionary. Now,
the other companies that weren't really a part of this
tried the liability part. That also did really well with
this are AI companies, and the reason for that is
because they weren't.
Speaker 3 (04:20):
They're not part of the decision.
Speaker 2 (04:22):
They're not part of the market that was considered to
be harmed by Google's conduct. Those were general search engines
like being and doc dot go.
Speaker 3 (04:29):
But there are.
Speaker 2 (04:30):
Data sharing remedies that the judge is ordered and some
search syndication remedies that are not only that are imposed
on Google to go to general search engines and to AI.
So he included the AI entities in this data sharing
and that will help them because AI chatbots use a
search index and they use a general search engine to
(04:50):
what's called ground the AI chatbot, and also to try
to prevent hallucinations. A chatbot essentially is only as good
as the LLLM that trained it, and the LLM is
trained up to a date. So when you go to
a chatbot and you're looking for information after that date,
that chatbot goes to uses a search engine to pull
out that and also to verify the new content that
it's creating in response to one of your searches. And
(05:12):
so the better the search engine that backs the chatbot
and the search index, the better the chatbot's going to be.
Speaker 1 (05:18):
So they'll get all this Google data.
Speaker 3 (05:19):
Now, it got a lot of Google data.
Speaker 1 (05:21):
How bad is that for Google? I mean, it's sort
of at a competitive disadvantage in that sense, right if
other companies don't have to share their data, but Google
has to give everybody else it's data.
Speaker 2 (05:30):
Well it is, and Google thought really hard against any
kind of data sharing. But the data sharing is much
more minimal than what the government had asked for, and
I think actually probably still a best case scenario. It
was almost a given that they were going to have
to share some data, and in this case, the judge
really limited it to on the user side click and
query data which Google actually already has to share in
(05:52):
Europe based on European laws, and also aspects of its
search index that it only has to share once. And
that's it a snapshot of some parts of its index
once but not kind of Google's secret sauce got it right,
and so I think it's actually not awful, but it
will help Google's rifles. So it remains to be seen
(06:15):
kind of how that all shakes out, right, But.
Speaker 1 (06:17):
It really could have been a lot more onerous. Why
do you think the judge sort of went pretty light
on Google? I mean, I know part of it is
that AI offers a lot of competition now, but is
that it?
Speaker 3 (06:28):
So? I think there are two a couple of big reasons.
One is AI.
Speaker 2 (06:32):
I think the judge was really struck by the fact
that AI really didn't have any place in his liability trial,
which took place now, you know, a year and a
half ago or so. It wasn't really a big topic.
Google tried to say, hey, no, no, no, we look
at AI. They're challenging us. Everything's going to change, But
there wasn't that. DOJ didn't bring witnesses to talk about AI.
It just wasn't a subject in the remedy trial. It
(06:54):
was all about which is now a year and a
half later, everything's changed and it was all about AI.
And the judge now recognized that, and he said, look,
the market is changing. And not only did he recognize
that it could be AI that displays his google, that
the market operating in its own healthy competitive way, tech
as its own disruption on the market without any interference
from the court, but when he saw that, he also
(07:16):
realized how hard it would be for him to impose
a remedy that's forward looking in nature, that's intended to
predict how to change the way the market operates in
the future, when you have technology that's already doing that.
So I think he realized he needed to exercise caution.
And the other reason is on that caution side of things,
he really followed the Microsoft appellent opinion very carefully. That is,
(07:41):
that was binding precedent for him. This is in the DC.
Speaker 1 (07:45):
This was a Microsoft case from like twenty five years ago,
from twenty five years ago, eventually got over, got reversed
at some point, right well.
Speaker 2 (07:51):
It was, it was remanded and then it settled. There
is a Court of appeal's opinion on it, and yeah,
you say twenty five years. I know that sounds crazy,
but that is it. That's the last Department of Justice
monopolization lawsuit to go to trial. We've had FTC monopolization
seats have gone to trial, but not Department of Justice.
So that was his That's what he looked to for
(08:12):
this decision, and that appellate decision says judges in tech
markets where innovation is taking place need to be cautious
about the remedies and they need to exercise proper humility,
which the judge did quote to say he must exercise
proper humility, and I think it caused him to pull back,
maybe quite a bit from where he might have come
(08:33):
out if he'd done this a year ago.
Speaker 1 (08:35):
Interesting. So, speaking of appeals, what happens next to both
sides appeal?
Speaker 2 (08:41):
I think certainly, I say ninety nine percent, one hundred
percent sure Google will appeal the liability decision, that's for sure,
and they'll seek a stay of the remedy in the interim,
and I think they have a really good shot at
getting that. And I'm putting a maybe like a sixty
percent chance of the DOJ appealing the remedy. I think
the liability decision was pretty strong for them, but I
did think that they might appeal the remedy decision, particularly
(09:02):
that aspect I mentioned where where Google is allowed to
continue to pay for that default position, because that is
inconsistent with what the judge found in the liability decision.
Speaker 1 (09:12):
Got it and in terms of read across anything to
glean from this with, you know, as it pertains to
other cases, other anti trust cases that the Justice Department
and FTC are seeking against other tech companies right now.
Speaker 2 (09:26):
I think that just reaffirms what was kind of already
consensus about anti drust monopolization suits, that it's a huge,
big ask and a really big uphill climb for plaintiffs
to win a divest sure order or even to get
a judge to impose a remedy that is quite drastic
and sort of groundbreaking, right because they're just so uncomfortable
about being in the position to sort of interfere with
(09:48):
markets and the way the market's trying to try to
do something that causes a market to go in a
different direction and have more competition in the future, because
you know, there are unintended consequences to everything and and
I think that it just shows how difficult it is
to get kind of a remedy that really has teeth.
I should add, though, that the other cases that are
(10:10):
pending are really quite different factually and are not in
the DC. Well, one case is in d C. FTC
versus metam Eta is in DC.
Speaker 1 (10:21):
The others are in different not against Judge Meta, not.
Speaker 2 (10:24):
Against Judge Meta, but Meta. Yes, the case before Judge
Meta was happening at the same time as FDC be Meta.
It did cause a little confusion when I was talking
to Bloomberg News in the courtroom.
Speaker 3 (10:35):
I think that.
Speaker 2 (10:37):
That case, if liability were found in that case, it
would be super interesting to see what would happen. We
don't believe the judge is going to find We think
the FDC will lose that case, so we think it's
going to go for Meta i e.
Speaker 3 (10:49):
Facebook on liability.
Speaker 2 (10:51):
If it didn't, it would be very interesting to see
what happens. Because the conduct found to be anti conduct
alleged to be anti competitive in that case was the acquisitetions.
It's themselves of Instagram and WhatsApp, right, So the conduct
here different. So it's a little bit different, But we
don't think liability will be found there. You know. The
next one is the Google ad Tech case. You know,
we're not predicting in that case that a devestiture is
(11:13):
the remedy.
Speaker 1 (11:13):
Either, gotcha. And on that point, I should note that
you nailed your call with the Google Search case because
you said that they wouldn't have to divest Chrome, and
that's exactly what happened.
Speaker 3 (11:27):
So I did, I did. I thank you very much.
Speaker 2 (11:29):
I appreciate that I did, though, predict that this remedy
would be tougher than it is, right, so right, And
I think a lot of people thought that, and that's
why this dock reacted so so intensely when this came out,
because I think most the consensus was it would be
tougher than it was, and the.
Speaker 1 (11:47):
Apple investors also liked the outcome as as you know, yes,
as in the market reflected that as well. All right,
let's uh, we're going to switch gears and bring in
Holly from Jen Thank you. Holly also nailed a a
call this in the past week. And this was the
other big decision that we got them, you know, recently.
This has to do with the tariffs, the reciprocal tariffs
(12:09):
and the fentimyl related tariffs. Last Friday, August twenty ninth,
on the cusp of the Labor Day weekend, the decision dropped.
I was at my daughter's soccer game and got all
these alerts and Holly, you nailed that call. You said
that the Federal Circuit would rule the way it did.
It found the tariffs, the reciprocal and federal tariffs to
(12:33):
be unlawful under AEPA, but they kept the tariffs in
place as the lower court did. And we're off to
the Supreme Court. So why don't you come in tell
us sort of your takeaway from the ruling and how
you see this plane out in the Supreme Court.
Speaker 3 (12:49):
So thanks, Elliott.
Speaker 4 (12:50):
So, yeah, So the Federal Circuit ruled in a majority
opinion on August twenty ninth that AEPA doesn't clearly authorized
terrists and because neither the fentanyl nor reciprocal tariffs comport
with other tariffing powers the President has been granted by
Congress in terms of rate of the tariffs and duration
(13:11):
of the tariffs, the terrorists violate the Major Questions doctrine.
And what that means is because the tariffs have huge
economic significance. Congress had to speak clearly when giving the
president tariffing power through AIPA, and they didn't do that
because the statute doesn't mention the word tariff. The word
regulate imports, which is in the statue doesn't connote the
power to tax. They found they said that the tariffing
(13:35):
power is a power to tax, and other statutes to
use the word regulate, like the securities that a security
statute allows the sec to regulate securities transactions, but no
one has construed that power to mean that they can
tax those transactions. So the court said, because of that,
because it's not clear, and because this is huge economic
significance and the tariffs don't comport with any other terrafiy
(14:00):
power the president has that it was a violation of
the major questions doctrine, and the concurring opinions found that
the terriffs violate the non delegation doctrine as well, because
the statute doesn't really give the president guidance as to
how to impose the terroffs. So, in terms of next steps,
(14:23):
the government has filed a petition with the Supreme Court
to review the case. They've asked for an expedited appl schedule,
and in emotion that they filed yesterday, which was September third,
they asked to have briefing concludes so that oral argument
(14:44):
can be held in early November. And I think it's
possible that that happens, and if that's the case, the
court would probably roll by four Q.
Speaker 1 (14:52):
By the end of the year, right, Yeah, I mean
I thought it was I looked at the emotion for
expertit proceedings, and I think they said they want a
decision on the cert petition by September tenth, which is
less than a week away. And I thought it was
notable too that they said the other side, you know,
agreed with that schedule so and agreed that sert should
(15:16):
be granted. So it sounds like we're not really going
to have any you know, opposition briefing on the cert petition.
Is that your take?
Speaker 5 (15:24):
Yeah, I mean, I don't think.
Speaker 4 (15:25):
I think everyone knows that the Supreme Court is going
to take this case, so I think any opposition by
their responders would be feudal and they probably want it
to be decided quickly because their clients are having to
pay these tariffs. So if anything, it would be the government.
You would think, who would want to delay a ruling
on this because the tariffs are in place while this
(15:45):
appeal plays out, But so so to the extent it's
like helping them with the trade negotiations, as they'd said,
you would think that they'd.
Speaker 5 (15:53):
Want to extend the timeline on this.
Speaker 4 (15:56):
But they are going to have to refund all that money,
so it's probably you know, it's a burden to them
too if it's not decided quickly.
Speaker 1 (16:03):
What a logistical nightmare to have to refund all the money,
if you know, if the tariffs wind up getting struck down, if.
Speaker 5 (16:13):
They said something like what did they say seven hundred
and fifty billion to a trillion dollars in tariffs had
been collected so far?
Speaker 1 (16:21):
Yeah, no, that sounds right. So can you talk about
this was an interesting decision because it didn't follow along
political lines, right. Judges from appointed by both sides were
in the majority. Judges appointed by both sides were in
the descent. Can you can you just talk a little
bit about the descent and then I'm also curious to
hear your thoughts on how you think the Supreme Court's
(16:42):
going to rule.
Speaker 4 (16:44):
So the Descent said that they think regulate imports. Regulate
imports is a clear authorization to impose tariffs, and that
the non delegation doctrine and the major questions doctrine which
the concurring and majority opinions relied on don't usually come
into play in the arena of foreign affairs, which this is.
And that is because Congress wants to give the president
(17:08):
the most power in this space to deal with you know,
other countries and you know the the the.
Speaker 5 (17:17):
Statute they said was it's an emergency statute.
Speaker 4 (17:20):
So they want to give the President uh sufficient power,
and they want to make it broad. They want to
word it broadly because they don't want to hamstring him
in these situations if there's you know, an actual emergency.
What I think happens at the Supreme Court is I
think it may be decided on different grounds altogether.
Speaker 5 (17:38):
And I think, you know, for for me.
Speaker 4 (17:42):
And obviously, like I would be in the minority in
this in this case, I think the language regulate imports
is clear, especially because if you look at it in
terms of the other language that statute uses, the president
can block imports under that statute, so he can, you know,
his powers are even broader than imposing terroriffs under the statute.
(18:06):
So I don't think it's unreasonable to read regulate to
as as giving him permission to impose tariffs. So that's
why I think the language is not unclear, and because
of that, I think it the better questions is doctrine
is not implicated, and I don't think non delegation the
(18:29):
non delegation doctrine is implicated either, because I think there
are you know that that comes into play when there
aren't like guardrails or limits on the president's power, and
you know, the Constitution requires a separation of powers. Congress
can't just hand over his power to delegate to the
to legislate to the president without giving him some guiding principles.
(18:50):
And I think they do give him guiding principles because
he has to declare an emergency and it has to
pose a quote unusual and extraordinary threat to the national
security or economy of the United States, and that's not easy,
you know, that's not easy to find. So that's why
I I don't think this is a non delegation problem.
But I do think that the trade deficit is not
that emergency. So for that reason, I think that the
(19:14):
reciprocal terrorists will be struck. I think that the Fentonyal
teriffs will be kept in place and will be reinstated
because I no one has challenged that the fentanyl crisis
is No one has said it's not an emergency, at
least no one in this case, and I don't think
anyone can, you know, seriously say that it's not an emergency,
especially in light of other emergencies that have been declared.
(19:35):
So for that reason, I think it will find that
the ventinal tariffs are lawful.
Speaker 1 (19:39):
And then that that would pose even more of a
logistical nightmare to to refund you know, terrorts that have
been paid, because you'd have to not refund or you
would have to refund the reciprocal you know, reciprocal terrorists,
but you wouldn't refund ventanyl related terrorists. So hopefully someone's
(20:01):
keeping track of what's what.
Speaker 5 (20:02):
Yeah, I mean, I I.
Speaker 4 (20:05):
Think that they have notebooks filled with gotta hope they're
not just hope curiously.
Speaker 5 (20:12):
No.
Speaker 4 (20:13):
So the Fentanal tariffs on China are twenty percent. There's
the ten percent tariff was the reciprocal terror and then
the rest are you know, Canada and Mexico and those are,
you know, just the funtional and penal.
Speaker 1 (20:27):
Terriffs, right, so it to be limited just to those
those countries, and it'd be a subset of all the
terrorfts collected from imports from those countries. All right, good stuff. So, yeah,
it looks like we'll probably get a decision by the
end of the year. Maybe maybe I think maybe by Thanksgiving.
Speaker 5 (20:43):
I think so.
Speaker 4 (20:44):
I mean, I said before, before this motion came forward,
I didn't even think.
Speaker 5 (20:48):
I didn't think.
Speaker 3 (20:49):
No.
Speaker 5 (20:49):
I thought they may expedite the schedule, but not this.
Speaker 1 (20:51):
This is crazy fast. Yeah, this would be crazy fast. Yeah,
but a big enough case that warrants it. All right,
good stuff, Holly, thank you, thank you. All right, Before
we turned to Nathan and the possibility of a government
shut down in Washington, I'll just say a few words
about Federal Reserve Governor Lisa Cook's lawsuit against the Trump
(21:14):
administration challenging her termination. We're waiting for the trial court
judge essentially to rule on Cook's motion for temporary restraining
order right now, which would essentially bar President Trump's termination
letter from taking effect. Written arguments on that motion are
(21:34):
supposed to end today. I haven't seen anything come through
yet the government is supposed to file its reply brief
at some point today, so we're not going to get
a ruin before that. You know, the ruling could come
any time after that. I suspect it might come after
the market closes tomorrow on Friday, September fifth, just based
(21:54):
on other cases I've seen where that happens. In terms
of who I think is favored, I've given Lisa Cook
the early edge, and part of that is because she's
drawn a pretty good roster of judges on this issue.
(22:15):
At least Judge Cobb, who's the trial court judge who's
hearing the tr emotion, is a Biden appointee. She asked
pretty tough questions of both sides at the hearing on
August twenty ninth, but she did seem particularly concerned about
fed independence, which is going to be a factor that
(22:36):
tilts in favor of Lisa Cook. And then after that
we're off to the d C Circuit, the Appeals Court,
and based on other cases, you can see who is
on which three judges are going to be on the
Emergency Motions panel for September, and that panel also looks
very favorable to Lisa Cook. You have two Biden appointees,
(22:57):
Judge Pan and Judge Garcia. Among the three judges, the
third judge is Karen Henderson, who's a George H. W.
Bush appointee. She's, you know, a thoughtful judge Conservative, but
I'd put her maybe towards the moderate end of the
conservative spectrum. And I actually think however she rules on
(23:19):
the appeal of these preliminary matters could be indicative of
how judge justices on the Supreme Court, like Justice Roberts
Cavanaugh and Amy Cony Barrett might rule. So I expect
Judge Cook, sorry, I expect Judge Cobb. I expect the
DC Circuit Panel to keep Lisa Cook in her job
while the litigation plays out. That's going to be important
(23:42):
for the September FOMC meeting, which is September sixteenth, since
it means Cook would be able to participate in that.
And then after that we're off to the Supreme Court
most likely, which is more of an open question. And again,
you know, the early rule by the Supreme Court are
just going to be mostly limited to whether Lisa Cooke
(24:04):
should continue in her role while the litigation plays out.
But to make that determination, the justices will have to
also appine most likely on who is likely to win
in the litigation. And you know, part of the reason
I think the Supreme Court may wind up rulein in
favor of Lisa Cook is that in May, the Supreme Court,
(24:26):
in a case that concerned the firing of commissioners at
the National Labor Relations Board and the Merit Systems Protection Board,
the Supreme Court said that those commissioners should not be
reinstated while the litigation plays out, sort of suggesting that
those commissioners were likely to lose their arguments regarding their termination.
(24:46):
But the Supreme Court and that same rule and really
went out of its way to distinguish the Federal Reserve.
They called it quasi private. It said it has this
unique structure and unique history, and it really didn't need
to insert that language. So I think that was a
clue as to have the Supreme Court thinks about FED
independence and how important it thinks FED independence is. But
(25:10):
we'll sort of see how that plays out over the
next few weeks. So I think similar to the terrorists case,
I don't think it'll move quite as quickly as the
terrorist case, but I do think we could get a
Supreme Court ruling by the end of the year on
whether Lisa Cook will stay in her role as a
Federal Reserve governor while her lawsuit plays out. All right,
(25:32):
so a lot of interesting stuff on litigation, got to
say between Google, tariffs, fed independence. But let's switch over
to the policy side of things and bring in Nathan Dean,
our chief policy analyst down in DC. Nathan, we headed
for a shutdown or what?
Speaker 6 (25:48):
So?
Speaker 7 (25:49):
I do not think we're headed for a shutdown. We
are headed for almost certain certain political rhetoric that suggests
we're heading for a shutdown. But the reason why I'm
at a forty percent, and I should say that, you know,
I've seen several of our friends say that potentially we're
at a twenty five percent of shutdown. I've seen people
say We're almost certain at a shutdown. But the reason
(26:10):
why I'm at at forty percent shutdown and why I
don't think a shutdown is going to occur, is because
let's go back and talk about what the wants of
every individual or every party is going into this. So
you know, the US fiscal year ends on September thirtieth,
and you have to have twelve appropriations bills passed by
then to avoid a shutdown. We only have eleven legislative
(26:33):
days because they didn't work on it this week, So
there's only eleven legislative days between now and September thirtieth,
and there's almost no chance that you're going to be
able to go for essentially just having high level thoughts
to passing twelve appropriation bills. So a stop gap solution
is the most likely scenario here. A stop gap solution
(26:54):
is beneficial to those who want certainty because you'll have
certain you know you're not going to see any massive cuts.
But in this case, the stopgap solution is almost most
likely only going to go to December or to March March,
if they're luckily, most likely December.
Speaker 1 (27:07):
So when you say a stopgap, that's the same as
like a continuing resolution.
Speaker 7 (27:11):
Correct, Yes, a continuing resolution, which is just the norm
these days. I mean, this is how the government is funded.
So what do the Republicans want? Will they want additional cuts?
They want additional cuts further than what the One Big
Beautiful Bill did, and President Trump wants around two billion
dollars in funding for Washington DC. What do the Democrats want?
Will they want to be seen fighting Trump, and they
also want to be seen trying to restore the cuts
(27:34):
they came from the one big Beautiful Bill. So you know,
both sides have these wants and then eventually they'll come
to an aggret and they they will ask themselves are
those wants worth shutting the government down and paying the
political price for it? Because every party that is seen
as the one shutting it down pays a political price. Now,
I'm not saying that when people walk into the voting
(27:56):
booth in November twenty twenty six, they're going to go
back and say, man, remember on September fourth, Nathan said
that there was gonna be a shutdown. Well, I'm going
to blame that party and I'm not going to vote
because of that shutdown that occurred in October a year
and month ago. No, it's not gonna happen. But it's
about momentum, and when parties want to try and build
momentum ahead of the midterms, the last thing they want
(28:18):
is to be seen shutting the government down in election year.
The other thing that I would just point out is
that you know, let's enter the Office of Management and
Budget and specifically OHMMB director Russ vote Now, OMB Director
Russ Vote put out a recissions package last Friday. This
was a four point nine billion dollar recisions package. The
clause back already re approved or appropriated money from Congress,
(28:42):
and that recisions package was essentially sent as a signal
to try and inflame tensions because and look, russ Vote
hasn't really shied away from this. But Director Vote, if
the government were to shut down, Director Vote would be
the one that deems who is essential and who is
not essential. And I could let's se a scenario in
which Director Vote says, you know what, let's deem ninety
(29:04):
five percent of the US government non essential. We'll send
them all home, and let's see what happens in six months.
Let's see if the country blows up, or let's see
if we can continue. And if you can continue, you know,
you get into this scenario where potentially, you know, DOGE,
the Department of Government Efficiency comes back and you begin
to see whole skill changes to the government.
Speaker 6 (29:25):
And the Democrats know this.
Speaker 7 (29:27):
And so I think that you know, because you know
of these recisions packages, and because of how omb is
acting these days, I think the Democrats would much rather
take this fight into twenty twenty six and not shut
the government down now, but have that fight at a
time in which.
Speaker 6 (29:44):
They think is politically advantageous to themselves.
Speaker 7 (29:47):
Because if you have that fight right now and this
government shuts down, what's the endgame strategy for the Democrats?
How do you get out of this thinking that there's
going to be, you know, anything that's politically advantageous. I'm
not exactly sure that's the case. And look, I know
that there's probably a lot of listeners saying, look, right
now the Democrats have to be seen fighting President Trump. Yes,
that's true, but is now the best time for it?
(30:07):
I'm not exactly sure. And that's why I think most
likely they'll kick the can. President Trump even said in
his press conference with the Polish president yesterday that when
asked about this, that he said the Republicans would most
likely be okay with a cleanish my words, not he is,
but cleanish continuing resolution. So I think that's where we're headed.
But I always go back to Bloomberg News as reporter
(30:27):
Stephen Dennis, he has a tweet that I just pull
out every single time this happens, is if you look
at how negotiations take place, No, we don't have a deal.
No no, no, no, no, Yes, we have a deal.
Speaker 6 (30:39):
Oops, no we don't. No no, no no.
Speaker 7 (30:42):
And then finally at September thirtieth, at eleven fifty eight,
after people have been saying no deal, you finally get
a deal.
Speaker 6 (30:49):
But because we are.
Speaker 7 (30:51):
Bloomberg Intelligence, it's very important for us to also reiterate
that there are a very few market or company impacts
of government shutdown. Back in the thirty one day shutdown
that occurred under the first Trump administration, the SMP dropped.
Speaker 6 (31:05):
A little bit.
Speaker 7 (31:05):
By the end, it was back up, and even for
defense contractors usually most of these large contracts are usually
in eighteen months, two year, three year contracts, so you're
not impacted. The only thing that really impacts folks is
the lack of data. Because if you're a trader and
you need the commitmentist traders report over at the CFTC,
or if you're trading commodities you need some of from USDA,
you're not going to get it. So that's usually the
(31:27):
same story that we tell every.
Speaker 1 (31:28):
Time I forgot about the thirty one day shutdown. That's
a long shutdown.
Speaker 7 (31:33):
That was the longest one in recent history. I mean,
there have been longers. But yeah, longers, I'm not even
that's the proper word. There have been shutdowns that are longer.
But you know, this thirty one day shutdown, let's go
back and let's spend a few seconds talking about what
happened here is that President Trump was the one who
paid the price politically for it. But it occurred in
December to January, and by the time the election year
(31:56):
came by, nobody really thought about the You know, if
you go back to the Biden Trumpet mistry, if you
nobody was voting based off of the government shutdown. Now,
obviously you had a lot of people here in Washington,
d C. And you had a lot of contractors who
were impacted by this, But government workers historically get paid back.
Obviously they may not be the case if the Republicans
are trying to push additional cuts. That's one of the Democrats'
(32:19):
concerns that if you shut the government down and you
don't get paid back, are people going to be harmed
by that?
Speaker 6 (32:24):
So again, it's.
Speaker 7 (32:26):
Very frustrating for those of us who live and want
to take our kids to the zoo. But I don't
think it's going to happen this.
Speaker 1 (32:32):
Month and so does Russ vote get away then with
his pocket recision.
Speaker 7 (32:38):
So the way it works is that he and the
reason why you mentioned pocket is because if Congress fails
to act on this recisions package by September thirtieth, it
takes effect and so effectively it's a pocket recisions And
you know this four point nine billion is they called
the way that the Democrats combat that is in the
(32:59):
continuing Resolution, you essentially reappropriate that money. And if you
reappropriate that money, the recisions package is declared noel and
void doesn't happen because Congress has already reappropriated it. Now
nothing would stop Russ vote from doing it again. But
then that would require an Act of Congress, which is
the majority voting the House, majority vote in the Senate.
(33:19):
And we've already seen Senator Collins and Murkowski and the
Republican side say they don't like this.
Speaker 6 (33:23):
Senator around said something similar.
Speaker 1 (33:25):
Got it all right? So interesting, All right, sounds like
you'll be able to continue going to the zoo, which
is good.
Speaker 6 (33:33):
Yeah.
Speaker 7 (33:33):
Last time, during the thirty one day shutdown, there was
one memorial that opened up during the shutdown, and that
was a group of World War Two vets showed up
and tore down the fence that was surrounding the World
War Two memorial, and all the National Park Service, police
and so forth just stood there and said, God bless
(33:54):
and yeah, do.
Speaker 1 (33:54):
Not mess you don't mess with the greatest generation.
Speaker 6 (33:57):
Nope, not at all.
Speaker 1 (33:59):
I will. I think we're on their good stuff. Nathan,
all right, I think we will wrap up this episode
of Votes and Verdicts. As always, thank you for listening.
If you have any questions about any of the matters
we discussed on this episode, don't hesitate to reach out
to us at you're convenience with questions. As a reminder,
you can find all of our research on the Bloomberg
Terminal at big or you can go to our litigation
(34:21):
and policy dashboard on the Bloomberg terminal at bi laws Go.
We also encourage you to listen to other episodes of
Votes and Verdicts on whatever platform you'd like to get
your favorite podcasts. Thank you again for listening, and have
a great day.
Hello, and welcome to the Votes and Verdicts podcast, hosted
by the Litigation and Policy team at Bloomberg Intelligence, the
investment research platform of Bloomberg LP on the Bloomberg Terminal.
Bloomberg Intelligence has five hundred analysts and strategists working across
the globe and focused on all major markets. Our coverage
includes over two thousand equities and credits, and we've outlooked
(00:38):
on more than ninety industries and one hundred market indices,
currencies and commodities. This podcast series examines the intersection of
business policy and law, and today is our weekly look
at the litigation and policy catalysts that we're watching currently
and that we think will impact companies across a number
of different sectors. My name is Elliott stein Ant with
(01:00):
Bloomberg Intelligence, covering litigation in the financials sector, and I'm
delighted today as always to be joined by a handful
of my Bloomberg Intelligence colleagues. As always, you can find
all of our research on the Bloomberg terminal at BI go,
and you can find all of our litigation and policy
coverage on our Litigation and Policy dashboard at BI laws Go.
(01:24):
Just timestamp this today is September fourth, twenty twenty five.
It's about one twenty pm in New York. And to
kick things off, let me bring in Jen Ree, one
of our antitrust analysts who has been covering all things
antitrust for us for about as long as I've been here.
(01:47):
We both start around the same time, about eleven years ago.
But that's neither here nor there. Jen big ruling this
week in the DOJ Google search case had to do
with the remedies. Sounds like Google sort of escaped the
worst case scenario of having to divest its Chrome browser,
(02:07):
but there were a couple other remedies. What are your thoughts,
what's your takeaway? You know, how good or bad was
this at the end of the day for Google?
Speaker 2 (02:16):
So you know, I don't think for Google this was
a slam dunk, But I do think it was a
really really good outcome. And I guess I say not
a slam dunk because some of the things, the measures
that the government asked for when they proposed a remedy,
they got.
Speaker 3 (02:30):
But if you look.
Speaker 2 (02:31):
At what Google proposed and what the government proposed early on,
as there suggested remedies, it's closer to what Google proposed
across the board than it is to what the government proposed.
So even though the government got something, this is better
for Google. And I think also what really strikes me
is that it is a slam dunk for Apple. I
know that seems kind of weird. Apple's not a defendant,
(02:53):
it's not involved in the case. But one of the
things that was an issue in the case was a
twenty billion payment per year that Google was paying Apple
to set Google Search as the default search engine behind
Apple search access points such as Safari or Siri. And
I think the consensus really was that the court was
going to say Google can't make those payments to Apple anymore,
(03:16):
because they did find those payments to be exclusionary and
to be for closed competitors. Other search engines were blocked
from this avenue of distribution for their own search engines
because of this agreement. But in fact the court didn't
do that. The court said, yes, you can continue to pay,
you can continue to pay for default placement Google to Apple,
so long as that agreement isn't exclusive and runs only
(03:39):
for a year. Now of course, that it can be
reupped after a year, and saying that it can't be exclusive,
it doesn't mean very much because there can be only
one default, right, So once you're said is the default,
it is kind of exclusive.
Speaker 1 (03:52):
People can change from the people.
Speaker 3 (03:54):
Can change, but they always could. They could change before
the liability reason. They always could.
Speaker 2 (03:59):
And that was what was so interesting about this liability
decision that there was such tests, There was testimony showing
how sticky defaults are even though people could change them
technically that the judge determined that it was exclusionary. Now,
the other companies that weren't really a part of this
tried the liability part. That also did really well with
this are AI companies, and the reason for that is
because they weren't.
Speaker 3 (04:20):
They're not part of the decision.
Speaker 2 (04:22):
They're not part of the market that was considered to
be harmed by Google's conduct. Those were general search engines
like being and doc dot go.
Speaker 3 (04:29):
But there are.
Speaker 2 (04:30):
Data sharing remedies that the judge is ordered and some
search syndication remedies that are not only that are imposed
on Google to go to general search engines and to AI.
So he included the AI entities in this data sharing
and that will help them because AI chatbots use a
search index and they use a general search engine to
(04:50):
what's called ground the AI chatbot, and also to try
to prevent hallucinations. A chatbot essentially is only as good
as the LLLM that trained it, and the LLM is
trained up to a date. So when you go to
a chatbot and you're looking for information after that date,
that chatbot goes to uses a search engine to pull
out that and also to verify the new content that
it's creating in response to one of your searches. And
(05:12):
so the better the search engine that backs the chatbot
and the search index, the better the chatbot's going to be.
Speaker 1 (05:18):
So they'll get all this Google data.
Speaker 3 (05:19):
Now, it got a lot of Google data.
Speaker 1 (05:21):
How bad is that for Google? I mean, it's sort
of at a competitive disadvantage in that sense, right if
other companies don't have to share their data, but Google
has to give everybody else it's data.
Speaker 2 (05:30):
Well it is, and Google thought really hard against any
kind of data sharing. But the data sharing is much
more minimal than what the government had asked for, and
I think actually probably still a best case scenario. It
was almost a given that they were going to have
to share some data, and in this case, the judge
really limited it to on the user side click and
query data which Google actually already has to share in
(05:52):
Europe based on European laws, and also aspects of its
search index that it only has to share once. And
that's it a snapshot of some parts of its index
once but not kind of Google's secret sauce got it right,
and so I think it's actually not awful, but it
will help Google's rifles. So it remains to be seen
(06:15):
kind of how that all shakes out, right, But.
Speaker 1 (06:17):
It really could have been a lot more onerous. Why
do you think the judge sort of went pretty light
on Google? I mean, I know part of it is
that AI offers a lot of competition now, but is
that it?
Speaker 3 (06:28):
So? I think there are two a couple of big reasons.
One is AI.
Speaker 2 (06:32):
I think the judge was really struck by the fact
that AI really didn't have any place in his liability trial,
which took place now, you know, a year and a
half ago or so. It wasn't really a big topic.
Google tried to say, hey, no, no, no, we look
at AI. They're challenging us. Everything's going to change, But
there wasn't that. DOJ didn't bring witnesses to talk about AI.
It just wasn't a subject in the remedy trial. It
(06:54):
was all about which is now a year and a
half later, everything's changed and it was all about AI.
And the judge now recognized that, and he said, look,
the market is changing. And not only did he recognize
that it could be AI that displays his google, that
the market operating in its own healthy competitive way, tech
as its own disruption on the market without any interference
from the court, but when he saw that, he also
(07:16):
realized how hard it would be for him to impose
a remedy that's forward looking in nature, that's intended to
predict how to change the way the market operates in
the future, when you have technology that's already doing that.
So I think he realized he needed to exercise caution.
And the other reason is on that caution side of things,
he really followed the Microsoft appellent opinion very carefully. That is,
(07:41):
that was binding precedent for him. This is in the DC.
Speaker 1 (07:45):
This was a Microsoft case from like twenty five years ago,
from twenty five years ago, eventually got over, got reversed
at some point, right well.
Speaker 2 (07:51):
It was, it was remanded and then it settled. There
is a Court of appeal's opinion on it, and yeah,
you say twenty five years. I know that sounds crazy,
but that is it. That's the last Department of Justice
monopolization lawsuit to go to trial. We've had FTC monopolization
seats have gone to trial, but not Department of Justice.
So that was his That's what he looked to for
(08:12):
this decision, and that appellate decision says judges in tech
markets where innovation is taking place need to be cautious
about the remedies and they need to exercise proper humility,
which the judge did quote to say he must exercise
proper humility, and I think it caused him to pull back,
maybe quite a bit from where he might have come
(08:33):
out if he'd done this a year ago.
Speaker 1 (08:35):
Interesting. So, speaking of appeals, what happens next to both
sides appeal?
Speaker 2 (08:41):
I think certainly, I say ninety nine percent, one hundred
percent sure Google will appeal the liability decision, that's for sure,
and they'll seek a stay of the remedy in the interim,
and I think they have a really good shot at
getting that. And I'm putting a maybe like a sixty
percent chance of the DOJ appealing the remedy. I think
the liability decision was pretty strong for them, but I
did think that they might appeal the remedy decision, particularly
(09:02):
that aspect I mentioned where where Google is allowed to
continue to pay for that default position, because that is
inconsistent with what the judge found in the liability decision.
Speaker 1 (09:12):
Got it and in terms of read across anything to
glean from this with, you know, as it pertains to
other cases, other anti trust cases that the Justice Department
and FTC are seeking against other tech companies right now.
Speaker 2 (09:26):
I think that just reaffirms what was kind of already
consensus about anti drust monopolization suits, that it's a huge,
big ask and a really big uphill climb for plaintiffs
to win a divest sure order or even to get
a judge to impose a remedy that is quite drastic
and sort of groundbreaking, right because they're just so uncomfortable
about being in the position to sort of interfere with
(09:48):
markets and the way the market's trying to try to
do something that causes a market to go in a
different direction and have more competition in the future, because
you know, there are unintended consequences to everything and and
I think that it just shows how difficult it is
to get kind of a remedy that really has teeth.
I should add, though, that the other cases that are
(10:10):
pending are really quite different factually and are not in
the DC. Well, one case is in d C. FTC
versus metam Eta is in DC.
Speaker 1 (10:21):
The others are in different not against Judge Meta, not.
Speaker 2 (10:24):
Against Judge Meta, but Meta. Yes, the case before Judge
Meta was happening at the same time as FDC be Meta.
It did cause a little confusion when I was talking
to Bloomberg News in the courtroom.
Speaker 3 (10:35):
I think that.
Speaker 2 (10:37):
That case, if liability were found in that case, it
would be super interesting to see what would happen. We
don't believe the judge is going to find We think
the FDC will lose that case, so we think it's
going to go for Meta i e.
Speaker 3 (10:49):
Facebook on liability.
Speaker 2 (10:51):
If it didn't, it would be very interesting to see
what happens. Because the conduct found to be anti conduct
alleged to be anti competitive in that case was the acquisitetions.
It's themselves of Instagram and WhatsApp, right, So the conduct
here different. So it's a little bit different, But we
don't think liability will be found there. You know. The
next one is the Google ad Tech case. You know,
we're not predicting in that case that a devestiture is
(11:13):
the remedy.
Speaker 1 (11:13):
Either, gotcha. And on that point, I should note that
you nailed your call with the Google Search case because
you said that they wouldn't have to divest Chrome, and
that's exactly what happened.
Speaker 3 (11:27):
So I did, I did. I thank you very much.
Speaker 2 (11:29):
I appreciate that I did, though, predict that this remedy
would be tougher than it is, right, so right, And
I think a lot of people thought that, and that's
why this dock reacted so so intensely when this came out,
because I think most the consensus was it would be
tougher than it was, and the.
Speaker 1 (11:47):
Apple investors also liked the outcome as as you know, yes,
as in the market reflected that as well. All right,
let's uh, we're going to switch gears and bring in
Holly from Jen Thank you. Holly also nailed a a
call this in the past week. And this was the
other big decision that we got them, you know, recently.
This has to do with the tariffs, the reciprocal tariffs
(12:09):
and the fentimyl related tariffs. Last Friday, August twenty ninth,
on the cusp of the Labor Day weekend, the decision dropped.
I was at my daughter's soccer game and got all
these alerts and Holly, you nailed that call. You said
that the Federal Circuit would rule the way it did.
It found the tariffs, the reciprocal and federal tariffs to
(12:33):
be unlawful under AEPA, but they kept the tariffs in
place as the lower court did. And we're off to
the Supreme Court. So why don't you come in tell
us sort of your takeaway from the ruling and how
you see this plane out in the Supreme Court.
Speaker 3 (12:49):
So thanks, Elliott.
Speaker 4 (12:50):
So, yeah, So the Federal Circuit ruled in a majority
opinion on August twenty ninth that AEPA doesn't clearly authorized
terrists and because neither the fentanyl nor reciprocal tariffs comport
with other tariffing powers the President has been granted by
Congress in terms of rate of the tariffs and duration
(13:11):
of the tariffs, the terrorists violate the Major Questions doctrine.
And what that means is because the tariffs have huge
economic significance. Congress had to speak clearly when giving the
president tariffing power through AIPA, and they didn't do that
because the statute doesn't mention the word tariff. The word
regulate imports, which is in the statue doesn't connote the
power to tax. They found they said that the tariffing
(13:35):
power is a power to tax, and other statutes to
use the word regulate, like the securities that a security
statute allows the sec to regulate securities transactions, but no
one has construed that power to mean that they can
tax those transactions. So the court said, because of that,
because it's not clear, and because this is huge economic
significance and the tariffs don't comport with any other terrafiy
(14:00):
power the president has that it was a violation of
the major questions doctrine, and the concurring opinions found that
the terriffs violate the non delegation doctrine as well, because
the statute doesn't really give the president guidance as to
how to impose the terroffs. So, in terms of next steps,
(14:23):
the government has filed a petition with the Supreme Court
to review the case. They've asked for an expedited appl schedule,
and in emotion that they filed yesterday, which was September third,
they asked to have briefing concludes so that oral argument
(14:44):
can be held in early November. And I think it's
possible that that happens, and if that's the case, the
court would probably roll by four Q.
Speaker 1 (14:52):
By the end of the year, right, Yeah, I mean
I thought it was I looked at the emotion for
expertit proceedings, and I think they said they want a
decision on the cert petition by September tenth, which is
less than a week away. And I thought it was
notable too that they said the other side, you know,
agreed with that schedule so and agreed that sert should
(15:16):
be granted. So it sounds like we're not really going
to have any you know, opposition briefing on the cert petition.
Is that your take?
Speaker 5 (15:24):
Yeah, I mean, I don't think.
Speaker 4 (15:25):
I think everyone knows that the Supreme Court is going
to take this case, so I think any opposition by
their responders would be feudal and they probably want it
to be decided quickly because their clients are having to
pay these tariffs. So if anything, it would be the government.
You would think, who would want to delay a ruling
on this because the tariffs are in place while this
(15:45):
appeal plays out, But so so to the extent it's
like helping them with the trade negotiations, as they'd said,
you would think that they'd.
Speaker 5 (15:53):
Want to extend the timeline on this.
Speaker 4 (15:56):
But they are going to have to refund all that money,
so it's probably you know, it's a burden to them
too if it's not decided quickly.
Speaker 1 (16:03):
What a logistical nightmare to have to refund all the money,
if you know, if the tariffs wind up getting struck down, if.
Speaker 5 (16:13):
They said something like what did they say seven hundred
and fifty billion to a trillion dollars in tariffs had
been collected so far?
Speaker 1 (16:21):
Yeah, no, that sounds right. So can you talk about
this was an interesting decision because it didn't follow along
political lines, right. Judges from appointed by both sides were
in the majority. Judges appointed by both sides were in
the descent. Can you can you just talk a little
bit about the descent and then I'm also curious to
hear your thoughts on how you think the Supreme Court's
(16:42):
going to rule.
Speaker 4 (16:44):
So the Descent said that they think regulate imports. Regulate
imports is a clear authorization to impose tariffs, and that
the non delegation doctrine and the major questions doctrine which
the concurring and majority opinions relied on don't usually come
into play in the arena of foreign affairs, which this is.
And that is because Congress wants to give the president
(17:08):
the most power in this space to deal with you know,
other countries and you know the the the.
Speaker 5 (17:17):
Statute they said was it's an emergency statute.
Speaker 4 (17:20):
So they want to give the President uh sufficient power,
and they want to make it broad. They want to
word it broadly because they don't want to hamstring him
in these situations if there's you know, an actual emergency.
What I think happens at the Supreme Court is I
think it may be decided on different grounds altogether.
Speaker 5 (17:38):
And I think, you know, for for me.
Speaker 4 (17:42):
And obviously, like I would be in the minority in
this in this case, I think the language regulate imports
is clear, especially because if you look at it in
terms of the other language that statute uses, the president
can block imports under that statute, so he can, you know,
his powers are even broader than imposing terroriffs under the statute.
(18:06):
So I don't think it's unreasonable to read regulate to
as as giving him permission to impose tariffs. So that's
why I think the language is not unclear, and because
of that, I think it the better questions is doctrine
is not implicated, and I don't think non delegation the
(18:29):
non delegation doctrine is implicated either, because I think there
are you know that that comes into play when there
aren't like guardrails or limits on the president's power, and
you know, the Constitution requires a separation of powers. Congress
can't just hand over his power to delegate to the
to legislate to the president without giving him some guiding principles.
(18:50):
And I think they do give him guiding principles because
he has to declare an emergency and it has to
pose a quote unusual and extraordinary threat to the national
security or economy of the United States, and that's not easy,
you know, that's not easy to find. So that's why
I I don't think this is a non delegation problem.
But I do think that the trade deficit is not
that emergency. So for that reason, I think that the
(19:14):
reciprocal terrorists will be struck. I think that the Fentonyal
teriffs will be kept in place and will be reinstated
because I no one has challenged that the fentanyl crisis
is No one has said it's not an emergency, at
least no one in this case, and I don't think
anyone can, you know, seriously say that it's not an emergency,
especially in light of other emergencies that have been declared.
(19:35):
So for that reason, I think it will find that
the ventinal tariffs are lawful.
Speaker 1 (19:39):
And then that that would pose even more of a
logistical nightmare to to refund you know, terrorts that have
been paid, because you'd have to not refund or you
would have to refund the reciprocal you know, reciprocal terrorists,
but you wouldn't refund ventanyl related terrorists. So hopefully someone's
(20:01):
keeping track of what's what.
Speaker 5 (20:02):
Yeah, I mean, I I.
Speaker 4 (20:05):
Think that they have notebooks filled with gotta hope they're
not just hope curiously.
Speaker 5 (20:12):
No.
Speaker 4 (20:13):
So the Fentanal tariffs on China are twenty percent. There's
the ten percent tariff was the reciprocal terror and then
the rest are you know, Canada and Mexico and those are,
you know, just the funtional and penal.
Speaker 1 (20:27):
Terriffs, right, so it to be limited just to those
those countries, and it'd be a subset of all the
terrorfts collected from imports from those countries. All right, good stuff. So, yeah,
it looks like we'll probably get a decision by the
end of the year. Maybe maybe I think maybe by Thanksgiving.
Speaker 5 (20:43):
I think so.
Speaker 4 (20:44):
I mean, I said before, before this motion came forward,
I didn't even think.
Speaker 5 (20:48):
I didn't think.
Speaker 3 (20:49):
No.
Speaker 5 (20:49):
I thought they may expedite the schedule, but not this.
Speaker 1 (20:51):
This is crazy fast. Yeah, this would be crazy fast. Yeah,
but a big enough case that warrants it. All right,
good stuff, Holly, thank you, thank you. All right, Before
we turned to Nathan and the possibility of a government
shut down in Washington, I'll just say a few words
about Federal Reserve Governor Lisa Cook's lawsuit against the Trump
(21:14):
administration challenging her termination. We're waiting for the trial court
judge essentially to rule on Cook's motion for temporary restraining
order right now, which would essentially bar President Trump's termination
letter from taking effect. Written arguments on that motion are
(21:34):
supposed to end today. I haven't seen anything come through
yet the government is supposed to file its reply brief
at some point today, so we're not going to get
a ruin before that. You know, the ruling could come
any time after that. I suspect it might come after
the market closes tomorrow on Friday, September fifth, just based
(21:54):
on other cases I've seen where that happens. In terms
of who I think is favored, I've given Lisa Cook
the early edge, and part of that is because she's
drawn a pretty good roster of judges on this issue.
(22:15):
At least Judge Cobb, who's the trial court judge who's
hearing the tr emotion, is a Biden appointee. She asked
pretty tough questions of both sides at the hearing on
August twenty ninth, but she did seem particularly concerned about
fed independence, which is going to be a factor that
(22:36):
tilts in favor of Lisa Cook. And then after that
we're off to the d C Circuit, the Appeals Court,
and based on other cases, you can see who is
on which three judges are going to be on the
Emergency Motions panel for September, and that panel also looks
very favorable to Lisa Cook. You have two Biden appointees,
(22:57):
Judge Pan and Judge Garcia. Among the three judges, the
third judge is Karen Henderson, who's a George H. W.
Bush appointee. She's, you know, a thoughtful judge Conservative, but
I'd put her maybe towards the moderate end of the
conservative spectrum. And I actually think however she rules on
(23:19):
the appeal of these preliminary matters could be indicative of
how judge justices on the Supreme Court, like Justice Roberts
Cavanaugh and Amy Cony Barrett might rule. So I expect
Judge Cook, sorry, I expect Judge Cobb. I expect the
DC Circuit Panel to keep Lisa Cook in her job
while the litigation plays out. That's going to be important
(23:42):
for the September FOMC meeting, which is September sixteenth, since
it means Cook would be able to participate in that.
And then after that we're off to the Supreme Court
most likely, which is more of an open question. And again,
you know, the early rule by the Supreme Court are
just going to be mostly limited to whether Lisa Cooke
(24:04):
should continue in her role while the litigation plays out.
But to make that determination, the justices will have to
also appine most likely on who is likely to win
in the litigation. And you know, part of the reason
I think the Supreme Court may wind up rulein in
favor of Lisa Cook is that in May, the Supreme Court,
(24:26):
in a case that concerned the firing of commissioners at
the National Labor Relations Board and the Merit Systems Protection Board,
the Supreme Court said that those commissioners should not be
reinstated while the litigation plays out, sort of suggesting that
those commissioners were likely to lose their arguments regarding their termination.
(24:46):
But the Supreme Court and that same rule and really
went out of its way to distinguish the Federal Reserve.
They called it quasi private. It said it has this
unique structure and unique history, and it really didn't need
to insert that language. So I think that was a
clue as to have the Supreme Court thinks about FED
independence and how important it thinks FED independence is. But
(25:10):
we'll sort of see how that plays out over the
next few weeks. So I think similar to the terrorists case,
I don't think it'll move quite as quickly as the
terrorist case, but I do think we could get a
Supreme Court ruling by the end of the year on
whether Lisa Cook will stay in her role as a
Federal Reserve governor while her lawsuit plays out. All right,
(25:32):
so a lot of interesting stuff on litigation, got to
say between Google, tariffs, fed independence. But let's switch over
to the policy side of things and bring in Nathan Dean,
our chief policy analyst down in DC. Nathan, we headed
for a shutdown or what?
Speaker 6 (25:48):
So?
Speaker 7 (25:49):
I do not think we're headed for a shutdown. We
are headed for almost certain certain political rhetoric that suggests
we're heading for a shutdown. But the reason why I'm
at a forty percent, and I should say that, you know,
I've seen several of our friends say that potentially we're
at a twenty five percent of shutdown. I've seen people
say We're almost certain at a shutdown. But the reason
(26:10):
why I'm at at forty percent shutdown and why I
don't think a shutdown is going to occur, is because
let's go back and talk about what the wants of
every individual or every party is going into this. So
you know, the US fiscal year ends on September thirtieth,
and you have to have twelve appropriations bills passed by
then to avoid a shutdown. We only have eleven legislative
(26:33):
days because they didn't work on it this week, So
there's only eleven legislative days between now and September thirtieth,
and there's almost no chance that you're going to be
able to go for essentially just having high level thoughts
to passing twelve appropriation bills. So a stop gap solution
is the most likely scenario here. A stop gap solution
(26:54):
is beneficial to those who want certainty because you'll have
certain you know you're not going to see any massive cuts.
But in this case, the stopgap solution is almost most
likely only going to go to December or to March March,
if they're luckily, most likely December.
Speaker 1 (27:07):
So when you say a stopgap, that's the same as
like a continuing resolution.
Speaker 7 (27:11):
Correct, Yes, a continuing resolution, which is just the norm
these days. I mean, this is how the government is funded.
So what do the Republicans want? Will they want additional cuts?
They want additional cuts further than what the One Big
Beautiful Bill did, and President Trump wants around two billion
dollars in funding for Washington DC. What do the Democrats want?
Will they want to be seen fighting Trump, and they
also want to be seen trying to restore the cuts
(27:34):
they came from the one big Beautiful Bill. So you know,
both sides have these wants and then eventually they'll come
to an aggret and they they will ask themselves are
those wants worth shutting the government down and paying the
political price for it? Because every party that is seen
as the one shutting it down pays a political price. Now,
I'm not saying that when people walk into the voting
(27:56):
booth in November twenty twenty six, they're going to go
back and say, man, remember on September fourth, Nathan said
that there was gonna be a shutdown. Well, I'm going
to blame that party and I'm not going to vote
because of that shutdown that occurred in October a year
and month ago. No, it's not gonna happen. But it's
about momentum, and when parties want to try and build
momentum ahead of the midterms, the last thing they want
(28:18):
is to be seen shutting the government down in election year.
The other thing that I would just point out is
that you know, let's enter the Office of Management and
Budget and specifically OHMMB director Russ vote Now, OMB Director
Russ Vote put out a recissions package last Friday. This
was a four point nine billion dollar recisions package. The
clause back already re approved or appropriated money from Congress,
(28:42):
and that recisions package was essentially sent as a signal
to try and inflame tensions because and look, russ Vote
hasn't really shied away from this. But Director Vote, if
the government were to shut down, Director Vote would be
the one that deems who is essential and who is
not essential. And I could let's se a scenario in
which Director Vote says, you know what, let's deem ninety
(29:04):
five percent of the US government non essential. We'll send
them all home, and let's see what happens in six months.
Let's see if the country blows up, or let's see
if we can continue. And if you can continue, you know,
you get into this scenario where potentially, you know, DOGE,
the Department of Government Efficiency comes back and you begin
to see whole skill changes to the government.
Speaker 6 (29:25):
And the Democrats know this.
Speaker 7 (29:27):
And so I think that you know, because you know
of these recisions packages, and because of how omb is
acting these days, I think the Democrats would much rather
take this fight into twenty twenty six and not shut
the government down now, but have that fight at a
time in which.
Speaker 6 (29:44):
They think is politically advantageous to themselves.
Speaker 7 (29:47):
Because if you have that fight right now and this
government shuts down, what's the endgame strategy for the Democrats?
How do you get out of this thinking that there's
going to be, you know, anything that's politically advantageous. I'm
not exactly sure that's the case. And look, I know
that there's probably a lot of listeners saying, look, right
now the Democrats have to be seen fighting President Trump. Yes,
that's true, but is now the best time for it?
(30:07):
I'm not exactly sure. And that's why I think most
likely they'll kick the can. President Trump even said in
his press conference with the Polish president yesterday that when
asked about this, that he said the Republicans would most
likely be okay with a cleanish my words, not he is,
but cleanish continuing resolution. So I think that's where we're headed.
But I always go back to Bloomberg News as reporter
(30:27):
Stephen Dennis, he has a tweet that I just pull
out every single time this happens, is if you look
at how negotiations take place, No, we don't have a deal.
No no, no, no, no, Yes, we have a deal.
Speaker 6 (30:39):
Oops, no we don't. No no, no no.
Speaker 7 (30:42):
And then finally at September thirtieth, at eleven fifty eight,
after people have been saying no deal, you finally get
a deal.
Speaker 6 (30:49):
But because we are.
Speaker 7 (30:51):
Bloomberg Intelligence, it's very important for us to also reiterate
that there are a very few market or company impacts
of government shutdown. Back in the thirty one day shutdown
that occurred under the first Trump administration, the SMP dropped.
Speaker 6 (31:05):
A little bit.
Speaker 7 (31:05):
By the end, it was back up, and even for
defense contractors usually most of these large contracts are usually
in eighteen months, two year, three year contracts, so you're
not impacted. The only thing that really impacts folks is
the lack of data. Because if you're a trader and
you need the commitmentist traders report over at the CFTC,
or if you're trading commodities you need some of from USDA,
you're not going to get it. So that's usually the
(31:27):
same story that we tell every.
Speaker 1 (31:28):
Time I forgot about the thirty one day shutdown. That's
a long shutdown.
Speaker 7 (31:33):
That was the longest one in recent history. I mean,
there have been longers. But yeah, longers, I'm not even
that's the proper word. There have been shutdowns that are longer.
But you know, this thirty one day shutdown, let's go
back and let's spend a few seconds talking about what
happened here is that President Trump was the one who
paid the price politically for it. But it occurred in
December to January, and by the time the election year
(31:56):
came by, nobody really thought about the You know, if
you go back to the Biden Trumpet mistry, if you
nobody was voting based off of the government shutdown. Now,
obviously you had a lot of people here in Washington,
d C. And you had a lot of contractors who
were impacted by this, But government workers historically get paid back.
Obviously they may not be the case if the Republicans
are trying to push additional cuts. That's one of the Democrats'
(32:19):
concerns that if you shut the government down and you
don't get paid back, are people going to be harmed
by that?
Speaker 6 (32:24):
So again, it's.
Speaker 7 (32:26):
Very frustrating for those of us who live and want
to take our kids to the zoo. But I don't
think it's going to happen this.
Speaker 1 (32:32):
Month and so does Russ vote get away then with
his pocket recision.
Speaker 7 (32:38):
So the way it works is that he and the
reason why you mentioned pocket is because if Congress fails
to act on this recisions package by September thirtieth, it
takes effect and so effectively it's a pocket recisions And
you know this four point nine billion is they called
the way that the Democrats combat that is in the
(32:59):
continuing Resolution, you essentially reappropriate that money. And if you
reappropriate that money, the recisions package is declared noel and
void doesn't happen because Congress has already reappropriated it. Now
nothing would stop Russ vote from doing it again. But
then that would require an Act of Congress, which is
the majority voting the House, majority vote in the Senate.
(33:19):
And we've already seen Senator Collins and Murkowski and the
Republican side say they don't like this.
Speaker 6 (33:23):
Senator around said something similar.
Speaker 1 (33:25):
Got it all right? So interesting, All right, sounds like
you'll be able to continue going to the zoo, which
is good.
Speaker 6 (33:33):
Yeah.
Speaker 7 (33:33):
Last time, during the thirty one day shutdown, there was
one memorial that opened up during the shutdown, and that
was a group of World War Two vets showed up
and tore down the fence that was surrounding the World
War Two memorial, and all the National Park Service, police
and so forth just stood there and said, God bless
(33:54):
and yeah, do.
Speaker 1 (33:54):
Not mess you don't mess with the greatest generation.
Speaker 6 (33:57):
Nope, not at all.
Speaker 1 (33:59):
I will. I think we're on their good stuff. Nathan,
all right, I think we will wrap up this episode
of Votes and Verdicts. As always, thank you for listening.
If you have any questions about any of the matters
we discussed on this episode, don't hesitate to reach out
to us at you're convenience with questions. As a reminder,
you can find all of our research on the Bloomberg
Terminal at big or you can go to our litigation
(34:21):
and policy dashboard on the Bloomberg terminal at bi laws Go.
We also encourage you to listen to other episodes of
Votes and Verdicts on whatever platform you'd like to get
your favorite podcasts. Thank you again for listening, and have
a great day.
Host
Elliott Stein
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