August 5, 2025 • 29 mins
Kathryn Judge, a professor at Columbia Law School, discusses the resignation of Fed Reserve board member Adriana Kugler. Jimmy Gurule, a professor at Notre Dame Law School, discusses the legal battles over President Trump’s tariffs. June Grasso hosts.
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Speaker 1 (00:02):
This is Bloomberg Law with June Grosseo from Bloomberg Radio.
Speaker 2 (00:10):
I have an open spot or the Federal Reserve Board.
I'm very happy about that.
Speaker 1 (00:15):
President Donald Trump suddenly has a chance to fill an
opening at the Federal Reserve earlier than expected, after FED
Governor Adrianna Kugler announced her resignation on Friday. Kugler's exit
unfolds amid unprecedented political pressure from the White House on
the Central Bank over monetary policy, with Trump often launching
(00:38):
personal insults at your own Powell. The current chair joining
me is Catherine Judge, a professor at Columbia Law School. Kate,
what's your reaction to Kugler's departure.
Speaker 3 (00:50):
I was surprised she is the next governor to leave. Naturally,
her term expires early in twenty twenty six, so it's
clearly a spot that President Trump is going to be
able to have available in the relatively near future. But
this short window of time changes dynamics in a meaningful way.
(01:12):
Among other things, her spot was seen as a like
b position for the person that President Trump would like
to bring in to be the next chair, So this
really potentially accelerates that process and could lead to even
more intense pressure on Powell to step down from his
position as chair.
Speaker 1 (01:30):
When President Trump was leaving the White House on Friday,
he said that he was very happy to have an
open spot, and he told reporters that she was stepping
down because she disagreed with quote too late on the
interest rates. That's his derogatory term for Powell. But does
that align with her publicly stated views.
Speaker 3 (01:51):
We have not seen anything to that effect in what
she has stated publicly. We have seen disagreement with Van
Koogler and Michael Barr on the one hand, and other
members of the board on the other hand. Are matters
of regulation, and it does look as though the current board,
(02:12):
under the effective leadership of a vice chare for supervision
Michelle Bowman, is going to engage in a deregulatory agenda.
So on that front, it does look like there was
a difference of opinion, But that's not necessarily a reason
for her to accelerate her departure. If anything, that's the
reason for her to stick around and to let her
voice and vote be heard.
Speaker 1 (02:32):
Trump says he's going to appoint the next FED governor.
Will you explain why he basically has to appoint the
next FED governor to fill her spot, so.
Speaker 3 (02:42):
He has to choose the chair among the governors. Powell's
term as chair expires in May of next year. His
term his governor doesn't expire until twenty twenty eight. It
is possible that Powell stepped down as governor at the
same time he sets down share, but that is by
no means guaranteed, and because there are no other additional
(03:06):
slots open, Chris Waller, who's a Republican who Trump previously
put on the Board of Governors, is a possibility or
FED chair, as if he wants to promote Waller, then
he wouldn't need to use this slot for purposes of
introducing somebody who would then take over as chair. But
(03:26):
if he does want Kevin Hassett or Kevin warsh or
any of the other names that have been bandied about,
this slot might be his critical opportunity.
Speaker 1 (03:36):
Are there any indications as to whom he's favoring for
the role.
Speaker 3 (03:42):
There's been rumors that hast has been taking over as lead.
Kevin Worsh's names has been around for a long time.
We have certainly seen both of them actively campaigning for
the job in their public statements have been very supportive
of the lower interesting streat policies that Trump would otherwise
(04:02):
like to see in place, But we have heard nothing
official from the White House the respect who's likely to
be the next comanee.
Speaker 1 (04:10):
The Open Market Committee voted nine to two to leave
rates unchanged, so one more vote won't necessarily make a difference.
Speaker 3 (04:19):
It's hard to know. I mean, then this is really hard.
So first of all, the site is already facing an
environment in which they might be changing course independent of
a new chair coming in. The most recent jobs numbers
look weaker than they expected, and there have been some
revisions for a variety of reasons to think that there
might have already been a modest changing course underway. But
(04:41):
you're right, I mean, one of the key things to
keep in mind is the Federal Open Market Committee is
a twelve member committee, and the chair or kind of
the expected chair, is only one of those votes. As
one of the things that Trump past to kind of
keep in mind, and that we all have to keep
in mind as we're watching, is how effective is the
new going to be garnering support for a meaningfully different
(05:04):
trajectory for policy. And that's going to be one of
the open questions as something new comes in, both what
is the interest rate corrector they want to see and
what are the tools they're going to use to try
to convince fella members of the Federal Open Market Committee,
But actually a different policy courses for the best in.
Speaker 1 (05:22):
The past have fed Governor's not been able to convince
the Open Market Committee to do what they want.
Speaker 3 (05:30):
What we haven't seen in the past is quite as
clear of a mismatch between what the President wants to
see happen and what the current interust rate policy is.
So we've certainly seen nominees come in because they are
meant to kind of change the directory. Paul Volker famously
(05:50):
was appointed because there was suddenly an appreciation that inflation
and managing inflation had to be the priority. That being said,
that was an insight that the Board also shared and
that President shared. So we did have some struggle at
times with aspects of his policy getting the level of
support he wanted. On the other hand, he was actually
(06:12):
pushing against the president, pushing against short term political will
and pushing for kind of a longer term vision than
aligned with the core mission of the Federal Reserve, which
is fighting inflation and promoting maximum employment. So in that instance,
it was a very different set of dynamics. So this
is a different type of transition because we have a
(06:32):
president who had just been so outspoken for such a
long time about wanting monetary policy to look dramatically different
than it has.
Speaker 1 (06:42):
Have you ever seen this kind of pressure from the
White House on the FED.
Speaker 3 (06:48):
Chair, No, No one has. We've certainly seen pressure from
the White House on the FED chair in the past,
and on the pig reserve in the past. The classic
concern is that the president always wants monetary policy to
be some more accommodative than the said oftentimes wants it
to be. There's certain times that those interests are allives.
During a depression, during difficult times, accommodated monetary policy is
(07:10):
the right policy given the FEDS du a manadate. But
in moments like now, where the Fed's looking long term
and trying to think about what does it need to
do to make sure that it successfully fights off the
reason bout of inflation, there's a possibility for conflict, and
so LBJ famously kind of pushed around William mcchezie martinin.
(07:31):
So we've certainly seen presidents in those past that have
pushed around FED chairs and pushed around the FED, and
that's because they oftentimes do want monetary policy to be
somewhat more commodative. Then is prudence given the medium to
longer term interest in trying to mainstain stable prices. And
that's when those conflicts have come into place. But what
(07:52):
we haven't seen is this type of continual pressure where
the FED chair is really targeted in an ongoing and
repeated way, and where the President isn't just suggesting that
rate should be a little lower or that monetary condition
should be somewhat more accommodative, but is really seeking but
seems to be a very different approach to monetary policy
(08:15):
than the current Federal Reserve is pursuing at a time
where there is still some reason at least to worry
about inflation.
Speaker 1 (08:21):
The nominee, whoever Trump chooses, will have to be confirmed
by the Senate. But if that person is then chosen
as the chair that does or doesn't need Senate confirmation.
Speaker 3 (08:34):
That also is a Senate confirmation process. And there's also
this additional oddity this person is going to face kind
of the ringer. There's a Senate confirmation to fulfill the
remainder of Coogler's term. But the way this sat a
reserve works oftentimes for agencies, once you are confirmed, you
have a period in office that dates from when you
(08:56):
are confirms You might have five years from the time
you actually take office. For example. The way the fatal
reserve works is there are these fourteen year terms on
a staggered basis, and they are fourteen year terms in
part to limit the ability of anyone president to appoint
too many different governors, but partly because of that distinct
staggered structure. When somebody is nominated to fulfill a seat
(09:21):
for somebody who's leaving before their end of the term,
as Cooper is, they only are confirmed to the end
of that term. So in theory, if this person manages
to go through hearings and confirmations in time to fill
the seat before it naturally become vacant, there might have
(09:42):
to be a nominal second process to have a person
actually confirmed again when the term expires.
Speaker 1 (09:48):
Trump on Friday call for the Board of Governors to
usurp the power of the FED chair. He said in
all caps, the board should assume control and do what
everyone knows has to do be done.
Speaker 3 (10:01):
I mean, there's a lot of things to say there.
So first of all, as we were discussing earlier, each
member of the FMC is not just the board the FOMC.
The Federal Up the Market Committee, which determines monetary policy,
is a twelve member committee, so all seven members of
the board governors have votes on that committee, but so
do five presidents. So the policy makers involved are not
(10:22):
just governors, and the governors are exercising their independent judgments.
We saw two governors actually dissent and they did suggest
that more accommodative monetary policy was appropriate, but we saw
the rest of the governors go along and actually agree
with Powell that the preferred approach was the right approach
(10:42):
to take.
Speaker 1 (10:44):
The Supreme Court in a May decision suggested that Trump
couldn't remove Powell because of policy disagreements. Is there any
feeling for whether the administration is still trying to get
him removed.
Speaker 3 (10:59):
Yeah, there's two different issues. So one we did to
be this effort with the renovations, which really looks pretextable. Right.
What we know is Trump wants lower interest rates. He
blames Powells for the interest rates being what they are,
and so he was looking at the cost overruns and
trying to use that as potentially a basist for removing
Powell for cause that has seemed to have passed at
(11:22):
least modestly passed. But it does suggest that Trump might
still be on the lookout for other pretextual grounds for removal.
The other issue that remains an issue particularly and actually
becomes more of a live issue since Coopler is stepping down,
is might he try to appoint somebody else as chair
and not remove Powell but merely demote Powell? And here
(11:44):
are the laws little tricky and the Supreme Court decision
which wasn't even really a decision as part of their
shadow docket, did it resolve the question of whether Powell
can be devoted. The statutory language is very clear governors
of the SUTA Reserve can be moved from the role
of governors only for cost, so there's very clear statutory protection.
(12:04):
There By contrast, the chair and the various vie chairs
have four year terms. The vote is to fourteen year
terms and there's no explicit four cause removal protection. There's
arguments that he can still be demoted only for cause
and not for policy. Differences, but there is a real
risk that that legal question will be tested in a
(12:25):
more pressing way now that the window of time between
when he can get a new nominee onto the board
and when Powell's terms chair comes to a natural end.
Now that the window is to come Bonger, this falls.
Speaker 1 (12:38):
Into the more questions than answers category. Thanks so much, Catherine.
That's Professor Catherine Judge of Columbia Law School.
Speaker 2 (12:46):
The US Treasury has taken in one hundred and fifty
billion dollars from tariffs, and we'll be adding about two
hundred billion dollars next month, four totals that nobody's ever
seen before.
Speaker 1 (12:58):
Frankly, the challengers to President Trump's tariffs say they rest
on a quote breath taking claim to power that no
president has asserted in two hundred years, and a federal
appeals court appeared skeptical about Trump's authority to issue the
sweeping global tariffs under an emergency law that has never
(13:20):
been used for that purpose and doesn't even mention tariffs.
In May, the U s Court of International Trade ruled
that the vast majority of President Trump's levies were issued
illegally and ordered them blocked. The Federal Circuit Court of
Appeals gave the Trump administration a temporary reprieve, but during
(13:40):
the high stakes oral arguments last week before the circuit's
entire slate of eleven active judges, it appeared that several
were skeptical of the government's arguments. A decision finding against
the tariffs will almost certainly be appealed to the Supreme Court.
My guest is Simmy Garula, a professor at Notre Dame
(14:02):
Law School and the former Undersecretary for Enforcement at the
Department of the Treasury. Jimmy, will you start by explaining
what authority President Trump is using to impose these tariffs.
Speaker 4 (14:16):
Now, President Trump is using a law called the International
Emergency Economic Powers Act, and it goes by the acrony
i EPA, and IIPA does authorize the President to impose
economic sanctions on individuals, entities, even countries in response to
(14:39):
an unusual and extraordinary emergency. So that's the precondition for
the exercise of these economic sanctions. The President has to
declare that there is an unusual and extraordinary emergency that
has its source in whole or in substantial part outside
the United State, and further that threatens national security, foreign policy,
(15:05):
or the economy of the United States. So that's the
statute that the president is relying upon. There's a couple
of very serious problems with using IIPA. First and foremost,
AIPA never mentions tariffs. The word tariff does not occur
even one time in the text of the statute. And second,
(15:28):
AIPA was enacted to Congress in nineteen seventy seven, and
no president in the history of AIPA has ever cited
AIPA as the authority to authorize the position of tariffs.
So this is the only president in the entire history
of AIPA that's ever cited aipa's authority for imposing tariffs
(15:53):
on foreign countries.
Speaker 1 (15:55):
The challenges here were a group of democratic led states
and small businesses. Is what was their basic argument.
Speaker 4 (16:03):
Their basic argument was, first that a EPA just doesn't apply,
that it does not provide authority for the president to
impose economic sanctions. And again for the reason the basic
particulate character i'll mention of the statute, no president has
ever used a EPA to justify the imposition of terrorists,
So that's argument number one. Argument number two is that
(16:24):
even if AEFA did apply that there's some serious questions
about whether or not the president is properly using or
satisfied the requirements of a EPA. You know, for example,
what is the unusual and extraordinary emergency that justifies economic
sanctions in the form of terrorists? And here the president
(16:49):
has articulated many different so called emergency. On the one hand,
it's a trade deficit, you know, that's the unusual exurin
or emergency. On the other hand, it's the fetanyl crisis,
the importation of the fetanyl from Mexico, Canada and China.
(17:10):
And the third yes, and even cited immigration. You know,
the immigration is the emergency. But first there's a question about, well,
is a trade deficit really an unusual insternary emergency. We've
had trade deficits with countries around the world for decades.
I mean, that's nothing new. Trade deficit with China, trade
(17:33):
deficit with Mexico, Canada, with the EU, that's nothing new.
So what is so usual and extraordinary about trade deficits today?
That again triggers the application of a EPOS. And then
there's another problem with the actual application of the statute.
And when we look at the feedinyl crisis, for example,
(17:54):
approximately eighty eight percent of fetanol that consumed in the
United States comes to across the Mexican border, the border
with the US and Mexico. Only eight percent comes across
the Canadian board. So if AIPA is being used or
the emergency is fetnol involving the importation from Canada, Canada
(18:18):
is only responsible for a very small percentage of fetnol
coming across the US Canada borders. But there doesn't appear
to be a nexus or a close nexus between the
so called crisis and the targets of the tariffs and
the sanctioned They are being closed on various countries.
Speaker 1 (18:37):
So what was the government's response to that.
Speaker 4 (18:41):
One response is that, well, this involves foreign affairs, and
in the area of foreign affairs, the Supreme Court is
recognized that the president has sundery powers. You know, the
government needs to speak with one voice in dealing with
foreign affairs, and that one voice should be of them,
you know, the executive branch. So it's again the president
(19:03):
has plenary, you know, virtually unlimited powers in dealing with
other countries. On the other hand, that argument runs into
a serious problem, and that serious problem is the US
Constitution itself because Article Launce, Section eight was one state
that Congress shall have the power to lay collect taxes. Duties, infosts,
(19:26):
and excises and tariffs are really a form of attax.
It's a form of attax. And therefore the power to
lay and collect taxes fall within the power of comus,
you know, not the present. And I think there's one
other very important argument, and I don't think it came
(19:47):
up in this recent argument before the US Court of
Appeals for the Federal Circuit, and it's a very basic
fundamental principle of our democracy and our founding fathers. We're
very concerned about too much power residing in the hands
of any one person or any one branch of government.
And that's why we have a democracy based upon separation
(20:09):
of powers. And here, if you follow the government, it's
all even reasoning. Then the president has this unwomaned power.
One person can decide to impose tariffs on any country
or every country in the world, can decide what the
percentage of the tariff should be, should be, ten percent,
(20:31):
should be, twenty and twenty five percent against what countries
and for what we And so it seems to me
that the president's position really flies in the base of
this very fundamental bedrock principle of separation of powers on
which are democracy is based.
Speaker 1 (20:49):
So the panel of judges seem to sharply question the
government's position. One judge said, tariffs seemed to have no
friends in the text of the emergent see law. Do
you think that a majority of the judges might rule
against the tariffs?
Speaker 4 (21:07):
I think, based upon the questions and the tenor and
some of the questions that were asked me the oral argument,
I think the Federal opelate Court is very skeptical of
the government's position that i provides authority from the President
to impose terriffs. So I'm cautiously optimistic that the appelic
(21:29):
Court will likely reject the government's argument and then find
that i APE has been in a supply here. So
then the credible next question, the credibal next step is
going to be before the Supreme Court, because if the
government loses, there's no question that they'll appeal the matter
to the United States Supreme Court, and there the outcome
(21:51):
is really up in the air.
Speaker 1 (21:53):
Because it's an on bank panel, the decision here can
be appealed directly to the Supreme Court.
Speaker 4 (21:59):
Yeah, and there. What we've seen is that, you know, historically,
just you know, the first six months of the Trump administration,
the US Supreme Court has been very differential to the
executive branch with respect to claims of executive authority or
Trump adminspiration. The Supreme Court determined, first and foremost, the
president is immutial from criminal prosecution excepting very very rare
(22:24):
limited exceptions, and the President can on his own dismantled
federalations without consulting with or attaining the approval of Commerce,
and with whole bonds that have been appropriated by commers
and fire Inspector General and fire other key government personnelities
without any consultation or approval from Congress. And so the
(22:46):
president might be a more favorable audience imported Supreme Court
than he received before the US Court of Appeals for
the Federal.
Speaker 1 (22:55):
Circuit is Supreme Court president. On the Challengers, they cited
two of the Biden administration's biggest losses before the Supreme Court,
in fights over restrictions on pandemic era evictions and canceling
federal student loan debt to support their position that Trump
(23:16):
now can't try to read more power into the economic
emergency law than it offers on its face.
Speaker 4 (23:24):
Well, here's a difference. I think the difference here is
that the Supreme Court again could focus on the fact
that these tariffs involve foreign affairs and the president's ole
oregon for the country on issues involving international affairs. The
cases that you cited involved domestic statutes, you know, domestic law,
(23:47):
not international foreign affairs. And so here the court might
seize on that recognized and the president has those plenary
powers in the field of foreign affairs, and again be
more pathetic, you know, to the argument. At the same time,
I mean, if the Court were to rule against the president,
I mean, just think of the repercussions of that ruling
(24:09):
with respect to the tariffs that the President has set,
the tariffs that have gone into effect, the tariffs that
are going to be going into effect in a few weeks.
I mean, they would have just literally global ramification of
the Supreme Court held that the President did not have
the authority to impose these tariffs foreign countries across across
(24:29):
the globe.
Speaker 1 (24:30):
Could the US then be forced to refund duties that
have already been collected, Would the ruling be retroactive?
Speaker 4 (24:38):
Would really just be you know, perspective, and so the
scope of the ruling we would have to see, you know,
what the application scope of the ruling would be. But
that certainly could be one of the one of the
implications if it rules against against the president. And so
maybe again the Supreme Court just doesn't want to take
that on. They don't want to rule in a way
(25:00):
it's going to create these kinds of political and economic
and you know, sea waves across the globe.
Speaker 1 (25:07):
Does Trump have other tools to impose tariffs?
Speaker 4 (25:10):
The tool would be the I think the appropriately too,
it would be just simply to build to Congress. And
so there's certainly nothing that prohibits the president from going
to Congress and actually Congress to enact legislation that would
authorize the president to impose tariffs of particular countries for
particular reasons. You would think, in light of the fact
that that both the House and the Senate are controlled
(25:33):
by the Republican Party, that he would receive a very
receptive audience there and they would respond accordingly. And the
legislation that the president has a question. But here I think,
you know, there's maybe something more you know, more fundamental,
more basic. That's that play here, and that's again the
(25:55):
power of the of the executive branch. And we've seen
a president that has been really pushing and stretching the
limits to his Article to powers. So maybe that's even
more important to the Presidence being able to say no,
I have it, or I don't have to go to confrege.
I can do this on my own. I don't need
Congress and support. But at the end of the days,
(26:16):
the pragmatic matter, he could accomplish what he's trying to
accomplish by going to Congress, the course and process would
be much slower in enacting the necessary legislation and procedurally.
Speaker 1 (26:30):
This is an appeal from a decision in May of
the US Court of International Trade which struck down both
the April second Liberation Day tariffs and the migration related tariffs.
Was that a forceful decision from the US Court of
International Trade?
Speaker 4 (26:49):
I think it was the written opinion articulated many of
the reasons and many of the arguments that will raised
again before the Pellet Court the Federal of Pelt Court,
and which the Federal of Pelt Coort seemed to agree
that those arguments also seem to resonate with the Federal Circuit,
(27:12):
and so I think I think the underlying decision is
sound based upon oral argument here before the Federal Circuit
Court of Appeals, it appears that they're probably going to
be incorporating many of those arguments and reasons that were
articulated below in their opinion if in fact they rule
against the President.
Speaker 1 (27:31):
You dealt with tariffs when you work for the government,
what struck you about these?
Speaker 4 (27:38):
I found it significant. I did a little bit of
due diligence on the opioid crisis in fetanol, and the
CDC in twenty twenty four reported there's been a twenty
seven percent decrease in overdoes death from fetanol compared to
twenty twenty three. And so even that that argument, the
(28:00):
unusual extraordinary emergency is the fedenyl crisis that has seemed
to have subsided or reduced significantly over the last couple
of years. Last year it is twenty twenty four, and
so I think it further under touch. The presidents claimed that,
you know, that's an emergency that justifies the imposition of
(28:22):
carols against Mexico, China, and Canada.
Speaker 1 (28:26):
It will probably be several weeks before we hear a
decision from the Federal Circuit Court of Appeals. Thanks so much, Jimmy.
That's Professor Jimmy Garoule of Notre Dame Law School. And
that's it for this edition of The Bloomberg Law Show.
Remember you can always get the latest legal news on
our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,
(28:48):
and at www dot bloomberg dot com slash podcast Slash Law,
and remember to tune into The Bloomberg Law Show every
weeknight at ten pm Wall Street Time. You're Grosso and
you're listening to Bloomberg.
Speaker 4 (29:07):
Mhmm.
This is Bloomberg Law with June Grosseo from Bloomberg Radio.
Speaker 2 (00:10):
I have an open spot or the Federal Reserve Board.
I'm very happy about that.
Speaker 1 (00:15):
President Donald Trump suddenly has a chance to fill an
opening at the Federal Reserve earlier than expected, after FED
Governor Adrianna Kugler announced her resignation on Friday. Kugler's exit
unfolds amid unprecedented political pressure from the White House on
the Central Bank over monetary policy, with Trump often launching
(00:38):
personal insults at your own Powell. The current chair joining
me is Catherine Judge, a professor at Columbia Law School. Kate,
what's your reaction to Kugler's departure.
Speaker 3 (00:50):
I was surprised she is the next governor to leave. Naturally,
her term expires early in twenty twenty six, so it's
clearly a spot that President Trump is going to be
able to have available in the relatively near future. But
this short window of time changes dynamics in a meaningful way.
(01:12):
Among other things, her spot was seen as a like
b position for the person that President Trump would like
to bring in to be the next chair, So this
really potentially accelerates that process and could lead to even
more intense pressure on Powell to step down from his
position as chair.
Speaker 1 (01:30):
When President Trump was leaving the White House on Friday,
he said that he was very happy to have an
open spot, and he told reporters that she was stepping
down because she disagreed with quote too late on the
interest rates. That's his derogatory term for Powell. But does
that align with her publicly stated views.
Speaker 3 (01:51):
We have not seen anything to that effect in what
she has stated publicly. We have seen disagreement with Van
Koogler and Michael Barr on the one hand, and other
members of the board on the other hand. Are matters
of regulation, and it does look as though the current board,
(02:12):
under the effective leadership of a vice chare for supervision
Michelle Bowman, is going to engage in a deregulatory agenda.
So on that front, it does look like there was
a difference of opinion, But that's not necessarily a reason
for her to accelerate her departure. If anything, that's the
reason for her to stick around and to let her
voice and vote be heard.
Speaker 1 (02:32):
Trump says he's going to appoint the next FED governor.
Will you explain why he basically has to appoint the
next FED governor to fill her spot, so.
Speaker 3 (02:42):
He has to choose the chair among the governors. Powell's
term as chair expires in May of next year. His
term his governor doesn't expire until twenty twenty eight. It
is possible that Powell stepped down as governor at the
same time he sets down share, but that is by
no means guaranteed, and because there are no other additional
(03:06):
slots open, Chris Waller, who's a Republican who Trump previously
put on the Board of Governors, is a possibility or
FED chair, as if he wants to promote Waller, then
he wouldn't need to use this slot for purposes of
introducing somebody who would then take over as chair. But
(03:26):
if he does want Kevin Hassett or Kevin warsh or
any of the other names that have been bandied about,
this slot might be his critical opportunity.
Speaker 1 (03:36):
Are there any indications as to whom he's favoring for
the role.
Speaker 3 (03:42):
There's been rumors that hast has been taking over as lead.
Kevin Worsh's names has been around for a long time.
We have certainly seen both of them actively campaigning for
the job in their public statements have been very supportive
of the lower interesting streat policies that Trump would otherwise
(04:02):
like to see in place, But we have heard nothing
official from the White House the respect who's likely to
be the next comanee.
Speaker 1 (04:10):
The Open Market Committee voted nine to two to leave
rates unchanged, so one more vote won't necessarily make a difference.
Speaker 3 (04:19):
It's hard to know. I mean, then this is really hard.
So first of all, the site is already facing an
environment in which they might be changing course independent of
a new chair coming in. The most recent jobs numbers
look weaker than they expected, and there have been some
revisions for a variety of reasons to think that there
might have already been a modest changing course underway. But
(04:41):
you're right, I mean, one of the key things to
keep in mind is the Federal Open Market Committee is
a twelve member committee, and the chair or kind of
the expected chair, is only one of those votes. As
one of the things that Trump past to kind of
keep in mind, and that we all have to keep
in mind as we're watching, is how effective is the
new going to be garnering support for a meaningfully different
(05:04):
trajectory for policy. And that's going to be one of
the open questions as something new comes in, both what
is the interest rate corrector they want to see and
what are the tools they're going to use to try
to convince fella members of the Federal Open Market Committee,
But actually a different policy courses for the best in.
Speaker 1 (05:22):
The past have fed Governor's not been able to convince
the Open Market Committee to do what they want.
Speaker 3 (05:30):
What we haven't seen in the past is quite as
clear of a mismatch between what the President wants to
see happen and what the current interust rate policy is.
So we've certainly seen nominees come in because they are
meant to kind of change the directory. Paul Volker famously
(05:50):
was appointed because there was suddenly an appreciation that inflation
and managing inflation had to be the priority. That being said,
that was an insight that the Board also shared and
that President shared. So we did have some struggle at
times with aspects of his policy getting the level of
support he wanted. On the other hand, he was actually
(06:12):
pushing against the president, pushing against short term political will
and pushing for kind of a longer term vision than
aligned with the core mission of the Federal Reserve, which
is fighting inflation and promoting maximum employment. So in that instance,
it was a very different set of dynamics. So this
is a different type of transition because we have a
(06:32):
president who had just been so outspoken for such a
long time about wanting monetary policy to look dramatically different
than it has.
Speaker 1 (06:42):
Have you ever seen this kind of pressure from the
White House on the FED.
Speaker 3 (06:48):
Chair, No, No one has. We've certainly seen pressure from
the White House on the FED chair in the past,
and on the pig reserve in the past. The classic
concern is that the president always wants monetary policy to
be some more accommodative than the said oftentimes wants it
to be. There's certain times that those interests are allives.
During a depression, during difficult times, accommodated monetary policy is
(07:10):
the right policy given the FEDS du a manadate. But
in moments like now, where the Fed's looking long term
and trying to think about what does it need to
do to make sure that it successfully fights off the
reason bout of inflation, there's a possibility for conflict, and
so LBJ famously kind of pushed around William mcchezie martinin.
(07:31):
So we've certainly seen presidents in those past that have
pushed around FED chairs and pushed around the FED, and
that's because they oftentimes do want monetary policy to be
somewhat more commodative. Then is prudence given the medium to
longer term interest in trying to mainstain stable prices. And
that's when those conflicts have come into place. But what
(07:52):
we haven't seen is this type of continual pressure where
the FED chair is really targeted in an ongoing and
repeated way, and where the President isn't just suggesting that
rate should be a little lower or that monetary condition
should be somewhat more accommodative, but is really seeking but
seems to be a very different approach to monetary policy
(08:15):
than the current Federal Reserve is pursuing at a time
where there is still some reason at least to worry
about inflation.
Speaker 1 (08:21):
The nominee, whoever Trump chooses, will have to be confirmed
by the Senate. But if that person is then chosen
as the chair that does or doesn't need Senate confirmation.
Speaker 3 (08:34):
That also is a Senate confirmation process. And there's also
this additional oddity this person is going to face kind
of the ringer. There's a Senate confirmation to fulfill the
remainder of Coogler's term. But the way this sat a
reserve works oftentimes for agencies, once you are confirmed, you
have a period in office that dates from when you
(08:56):
are confirms You might have five years from the time
you actually take office. For example. The way the fatal
reserve works is there are these fourteen year terms on
a staggered basis, and they are fourteen year terms in
part to limit the ability of anyone president to appoint
too many different governors, but partly because of that distinct
staggered structure. When somebody is nominated to fulfill a seat
(09:21):
for somebody who's leaving before their end of the term,
as Cooper is, they only are confirmed to the end
of that term. So in theory, if this person manages
to go through hearings and confirmations in time to fill
the seat before it naturally become vacant, there might have
(09:42):
to be a nominal second process to have a person
actually confirmed again when the term expires.
Speaker 1 (09:48):
Trump on Friday call for the Board of Governors to
usurp the power of the FED chair. He said in
all caps, the board should assume control and do what
everyone knows has to do be done.
Speaker 3 (10:01):
I mean, there's a lot of things to say there.
So first of all, as we were discussing earlier, each
member of the FMC is not just the board the FOMC.
The Federal Up the Market Committee, which determines monetary policy,
is a twelve member committee, so all seven members of
the board governors have votes on that committee, but so
do five presidents. So the policy makers involved are not
(10:22):
just governors, and the governors are exercising their independent judgments.
We saw two governors actually dissent and they did suggest
that more accommodative monetary policy was appropriate, but we saw
the rest of the governors go along and actually agree
with Powell that the preferred approach was the right approach
(10:42):
to take.
Speaker 1 (10:44):
The Supreme Court in a May decision suggested that Trump
couldn't remove Powell because of policy disagreements. Is there any
feeling for whether the administration is still trying to get
him removed.
Speaker 3 (10:59):
Yeah, there's two different issues. So one we did to
be this effort with the renovations, which really looks pretextable. Right.
What we know is Trump wants lower interest rates. He
blames Powells for the interest rates being what they are,
and so he was looking at the cost overruns and
trying to use that as potentially a basist for removing
Powell for cause that has seemed to have passed at
(11:22):
least modestly passed. But it does suggest that Trump might
still be on the lookout for other pretextual grounds for removal.
The other issue that remains an issue particularly and actually
becomes more of a live issue since Coopler is stepping down,
is might he try to appoint somebody else as chair
and not remove Powell but merely demote Powell? And here
(11:44):
are the laws little tricky and the Supreme Court decision
which wasn't even really a decision as part of their
shadow docket, did it resolve the question of whether Powell
can be devoted. The statutory language is very clear governors
of the SUTA Reserve can be moved from the role
of governors only for cost, so there's very clear statutory protection.
(12:04):
There By contrast, the chair and the various vie chairs
have four year terms. The vote is to fourteen year
terms and there's no explicit four cause removal protection. There's
arguments that he can still be demoted only for cause
and not for policy. Differences, but there is a real
risk that that legal question will be tested in a
(12:25):
more pressing way now that the window of time between
when he can get a new nominee onto the board
and when Powell's terms chair comes to a natural end.
Now that the window is to come Bonger, this falls.
Speaker 1 (12:38):
Into the more questions than answers category. Thanks so much, Catherine.
That's Professor Catherine Judge of Columbia Law School.
Speaker 2 (12:46):
The US Treasury has taken in one hundred and fifty
billion dollars from tariffs, and we'll be adding about two
hundred billion dollars next month, four totals that nobody's ever
seen before.
Speaker 1 (12:58):
Frankly, the challengers to President Trump's tariffs say they rest
on a quote breath taking claim to power that no
president has asserted in two hundred years, and a federal
appeals court appeared skeptical about Trump's authority to issue the
sweeping global tariffs under an emergency law that has never
(13:20):
been used for that purpose and doesn't even mention tariffs.
In May, the U s Court of International Trade ruled
that the vast majority of President Trump's levies were issued
illegally and ordered them blocked. The Federal Circuit Court of
Appeals gave the Trump administration a temporary reprieve, but during
(13:40):
the high stakes oral arguments last week before the circuit's
entire slate of eleven active judges, it appeared that several
were skeptical of the government's arguments. A decision finding against
the tariffs will almost certainly be appealed to the Supreme Court.
My guest is Simmy Garula, a professor at Notre Dame
(14:02):
Law School and the former Undersecretary for Enforcement at the
Department of the Treasury. Jimmy, will you start by explaining
what authority President Trump is using to impose these tariffs.
Speaker 4 (14:16):
Now, President Trump is using a law called the International
Emergency Economic Powers Act, and it goes by the acrony
i EPA, and IIPA does authorize the President to impose
economic sanctions on individuals, entities, even countries in response to
(14:39):
an unusual and extraordinary emergency. So that's the precondition for
the exercise of these economic sanctions. The President has to
declare that there is an unusual and extraordinary emergency that
has its source in whole or in substantial part outside
the United State, and further that threatens national security, foreign policy,
(15:05):
or the economy of the United States. So that's the
statute that the president is relying upon. There's a couple
of very serious problems with using IIPA. First and foremost,
AIPA never mentions tariffs. The word tariff does not occur
even one time in the text of the statute. And second,
(15:28):
AIPA was enacted to Congress in nineteen seventy seven, and
no president in the history of AIPA has ever cited
AIPA as the authority to authorize the position of tariffs.
So this is the only president in the entire history
of AIPA that's ever cited aipa's authority for imposing tariffs
(15:53):
on foreign countries.
Speaker 1 (15:55):
The challenges here were a group of democratic led states
and small businesses. Is what was their basic argument.
Speaker 4 (16:03):
Their basic argument was, first that a EPA just doesn't apply,
that it does not provide authority for the president to
impose economic sanctions. And again for the reason the basic
particulate character i'll mention of the statute, no president has
ever used a EPA to justify the imposition of terrorists,
So that's argument number one. Argument number two is that
(16:24):
even if AEFA did apply that there's some serious questions
about whether or not the president is properly using or
satisfied the requirements of a EPA. You know, for example,
what is the unusual and extraordinary emergency that justifies economic
sanctions in the form of terrorists? And here the president
(16:49):
has articulated many different so called emergency. On the one hand,
it's a trade deficit, you know, that's the unusual exurin
or emergency. On the other hand, it's the fetanyl crisis,
the importation of the fetanyl from Mexico, Canada and China.
(17:10):
And the third yes, and even cited immigration. You know,
the immigration is the emergency. But first there's a question about, well,
is a trade deficit really an unusual insternary emergency. We've
had trade deficits with countries around the world for decades.
I mean, that's nothing new. Trade deficit with China, trade
(17:33):
deficit with Mexico, Canada, with the EU, that's nothing new.
So what is so usual and extraordinary about trade deficits today?
That again triggers the application of a EPOS. And then
there's another problem with the actual application of the statute.
And when we look at the feedinyl crisis, for example,
(17:54):
approximately eighty eight percent of fetanol that consumed in the
United States comes to across the Mexican border, the border
with the US and Mexico. Only eight percent comes across
the Canadian board. So if AIPA is being used or
the emergency is fetnol involving the importation from Canada, Canada
(18:18):
is only responsible for a very small percentage of fetnol
coming across the US Canada borders. But there doesn't appear
to be a nexus or a close nexus between the
so called crisis and the targets of the tariffs and
the sanctioned They are being closed on various countries.
Speaker 1 (18:37):
So what was the government's response to that.
Speaker 4 (18:41):
One response is that, well, this involves foreign affairs, and
in the area of foreign affairs, the Supreme Court is
recognized that the president has sundery powers. You know, the
government needs to speak with one voice in dealing with
foreign affairs, and that one voice should be of them,
you know, the executive branch. So it's again the president
(19:03):
has plenary, you know, virtually unlimited powers in dealing with
other countries. On the other hand, that argument runs into
a serious problem, and that serious problem is the US
Constitution itself because Article Launce, Section eight was one state
that Congress shall have the power to lay collect taxes. Duties, infosts,
(19:26):
and excises and tariffs are really a form of attax.
It's a form of attax. And therefore the power to
lay and collect taxes fall within the power of comus,
you know, not the present. And I think there's one
other very important argument, and I don't think it came
(19:47):
up in this recent argument before the US Court of
Appeals for the Federal Circuit, and it's a very basic
fundamental principle of our democracy and our founding fathers. We're
very concerned about too much power residing in the hands
of any one person or any one branch of government.
And that's why we have a democracy based upon separation
(20:09):
of powers. And here, if you follow the government, it's
all even reasoning. Then the president has this unwomaned power.
One person can decide to impose tariffs on any country
or every country in the world, can decide what the
percentage of the tariff should be, should be, ten percent,
(20:31):
should be, twenty and twenty five percent against what countries
and for what we And so it seems to me
that the president's position really flies in the base of
this very fundamental bedrock principle of separation of powers on
which are democracy is based.
Speaker 1 (20:49):
So the panel of judges seem to sharply question the
government's position. One judge said, tariffs seemed to have no
friends in the text of the emergent see law. Do
you think that a majority of the judges might rule
against the tariffs?
Speaker 4 (21:07):
I think, based upon the questions and the tenor and
some of the questions that were asked me the oral argument,
I think the Federal opelate Court is very skeptical of
the government's position that i provides authority from the President
to impose terriffs. So I'm cautiously optimistic that the appelic
(21:29):
Court will likely reject the government's argument and then find
that i APE has been in a supply here. So
then the credible next question, the credibal next step is
going to be before the Supreme Court, because if the
government loses, there's no question that they'll appeal the matter
to the United States Supreme Court, and there the outcome
(21:51):
is really up in the air.
Speaker 1 (21:53):
Because it's an on bank panel, the decision here can
be appealed directly to the Supreme Court.
Speaker 4 (21:59):
Yeah, and there. What we've seen is that, you know, historically,
just you know, the first six months of the Trump administration,
the US Supreme Court has been very differential to the
executive branch with respect to claims of executive authority or
Trump adminspiration. The Supreme Court determined, first and foremost, the
president is immutial from criminal prosecution excepting very very rare
(22:24):
limited exceptions, and the President can on his own dismantled
federalations without consulting with or attaining the approval of Commerce,
and with whole bonds that have been appropriated by commers
and fire Inspector General and fire other key government personnelities
without any consultation or approval from Congress. And so the
(22:46):
president might be a more favorable audience imported Supreme Court
than he received before the US Court of Appeals for
the Federal.
Speaker 1 (22:55):
Circuit is Supreme Court president. On the Challengers, they cited
two of the Biden administration's biggest losses before the Supreme Court,
in fights over restrictions on pandemic era evictions and canceling
federal student loan debt to support their position that Trump
(23:16):
now can't try to read more power into the economic
emergency law than it offers on its face.
Speaker 4 (23:24):
Well, here's a difference. I think the difference here is
that the Supreme Court again could focus on the fact
that these tariffs involve foreign affairs and the president's ole
oregon for the country on issues involving international affairs. The
cases that you cited involved domestic statutes, you know, domestic law,
(23:47):
not international foreign affairs. And so here the court might
seize on that recognized and the president has those plenary
powers in the field of foreign affairs, and again be
more pathetic, you know, to the argument. At the same time,
I mean, if the Court were to rule against the president,
I mean, just think of the repercussions of that ruling
(24:09):
with respect to the tariffs that the President has set,
the tariffs that have gone into effect, the tariffs that
are going to be going into effect in a few weeks.
I mean, they would have just literally global ramification of
the Supreme Court held that the President did not have
the authority to impose these tariffs foreign countries across across
(24:29):
the globe.
Speaker 1 (24:30):
Could the US then be forced to refund duties that
have already been collected, Would the ruling be retroactive?
Speaker 4 (24:38):
Would really just be you know, perspective, and so the
scope of the ruling we would have to see, you know,
what the application scope of the ruling would be. But
that certainly could be one of the one of the
implications if it rules against against the president. And so
maybe again the Supreme Court just doesn't want to take
that on. They don't want to rule in a way
(25:00):
it's going to create these kinds of political and economic
and you know, sea waves across the globe.
Speaker 1 (25:07):
Does Trump have other tools to impose tariffs?
Speaker 4 (25:10):
The tool would be the I think the appropriately too,
it would be just simply to build to Congress. And
so there's certainly nothing that prohibits the president from going
to Congress and actually Congress to enact legislation that would
authorize the president to impose tariffs of particular countries for
particular reasons. You would think, in light of the fact
that that both the House and the Senate are controlled
(25:33):
by the Republican Party, that he would receive a very
receptive audience there and they would respond accordingly. And the
legislation that the president has a question. But here I think,
you know, there's maybe something more you know, more fundamental,
more basic. That's that play here, and that's again the
(25:55):
power of the of the executive branch. And we've seen
a president that has been really pushing and stretching the
limits to his Article to powers. So maybe that's even
more important to the Presidence being able to say no,
I have it, or I don't have to go to confrege.
I can do this on my own. I don't need
Congress and support. But at the end of the days,
(26:16):
the pragmatic matter, he could accomplish what he's trying to
accomplish by going to Congress, the course and process would
be much slower in enacting the necessary legislation and procedurally.
Speaker 1 (26:30):
This is an appeal from a decision in May of
the US Court of International Trade which struck down both
the April second Liberation Day tariffs and the migration related tariffs.
Was that a forceful decision from the US Court of
International Trade?
Speaker 4 (26:49):
I think it was the written opinion articulated many of
the reasons and many of the arguments that will raised
again before the Pellet Court the Federal of Pelt Court,
and which the Federal of Pelt Coort seemed to agree
that those arguments also seem to resonate with the Federal Circuit,
(27:12):
and so I think I think the underlying decision is
sound based upon oral argument here before the Federal Circuit
Court of Appeals, it appears that they're probably going to
be incorporating many of those arguments and reasons that were
articulated below in their opinion if in fact they rule
against the President.
Speaker 1 (27:31):
You dealt with tariffs when you work for the government,
what struck you about these?
Speaker 4 (27:38):
I found it significant. I did a little bit of
due diligence on the opioid crisis in fetanol, and the
CDC in twenty twenty four reported there's been a twenty
seven percent decrease in overdoes death from fetanol compared to
twenty twenty three. And so even that that argument, the
(28:00):
unusual extraordinary emergency is the fedenyl crisis that has seemed
to have subsided or reduced significantly over the last couple
of years. Last year it is twenty twenty four, and
so I think it further under touch. The presidents claimed that,
you know, that's an emergency that justifies the imposition of
(28:22):
carols against Mexico, China, and Canada.
Speaker 1 (28:26):
It will probably be several weeks before we hear a
decision from the Federal Circuit Court of Appeals. Thanks so much, Jimmy.
That's Professor Jimmy Garoule of Notre Dame Law School. And
that's it for this edition of The Bloomberg Law Show.
Remember you can always get the latest legal news on
our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify,
(28:48):
and at www dot bloomberg dot com slash podcast Slash Law,
and remember to tune into The Bloomberg Law Show every
weeknight at ten pm Wall Street Time. You're Grosso and
you're listening to Bloomberg.
Speaker 4 (29:07):
Mhmm.
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