11AM Hour: Squawk on the Street 6/29/26

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Sara Eisen (0:58)

Good Monday morning. Welcome to Squawk on the Street. I'm Sara Eisen with Carl Quintanilla, live from Post 9 of the New York Stock Exchange today. Breaking news just in the past hour, important for the markets, Fed Governor Lisa Cook allowed to stay in office for now, the Supreme Court blocking President Trump from firing her.

Carl Quintanilla (1:16)

Let's bring in Daniel Tarullo this morning, former Fed Reserve Board Governor, former Clinton International Economic Advisor. He is currently the Nomura President of International Financial Regulatory Practice at Harvard Law. Dan, it's great to have you back. Thanks for the help today.

Daniel Tarullo (1:30)

You're a thinker.

Carl Quintanilla (1:31)

You have a chance to read through these opinions and your thoughts?

Daniel Tarullo (1:34)

I read through them quickly. There are 85 pages of opinions including the dissents, but yes, I've now taken a look at them.

Carl Quintanilla (1:42)

What do you think the takeaways are?

Daniel Tarullo (1:44)

Well, the key takeaway is the one that I think Sara said just a moment ago, which is that Governor Cook will be allowed to stay in her position during the pendency of the litigation, which will now be back in the district court. The Chief Justice Roberts, writing for only a five to four majority, indicated that it was a narrow ruling. The ruling was that the injunction could stand, the injunction could stand because Governor Cook had not been afforded any process by the administration before being removed. That she hadn't had an opportunity to respond to the allegations against her. So in that sense, Carl, we know that the status quo will remain the status quo.

The court said some things about what would be required to remove her, but they were at a fairly high level of abstraction. And the court made no comment at all on the facts of the case, presumably because the facts have yet to be judicially determined.

Carl Quintanilla (2:44)

Is it too early to make broad conclusions about the independence of the Fed?

Daniel Tarullo (2:51)

So as you know, Carl, this opinion was handed down at the same time as the Slaughter case, the one in which now the president is allowed to remove for his own discretion, a member of the Federal Trade Commission. In that case, also written by Chief Justice Roberts, the court went out of its way to establish the exceptionalism of the Fed. And indeed, in the Cook case, Chief Justice Roberts began with a historical survey of the first and second banks of the United States. So it's clear that a majority of the court continues to regard the Fed as different, and thus as having some immunity, some insulation from the general now law that the president can remove officials of formerly independent agencies for policy reasons. One thing to note though, Carl, is that in the Chief Justice's formulation, the emphasis was on the monetary policy powers of the Fed.

And so that leaves hanging the question of what about the Fed's regulatory policies?

Are the members of the Board of Governors independent there? And I must say, reading between the lines of the opinions, one would come to the provisional conclusion that they are not.

Sara Eisen (4:14)

Meaning what? That the Fed is vulnerable there as a regulator?

Daniel Tarullo (4:20)

Yeah, that's the big question and one that the court, I'm not even sure the court is aware of it. I mean, there was some reference to the holding doesn't extend to other powers beyond monetary policy. But it does pose the question as if the court thinks that those are the kind of executive powers that the president needs to have control over, that is bank regulation. Could the president then say to a member of the board of governors, well, I'm fine with your monetary policy, but I don't like your regulatory policy, so you're out.

If that's the case, then it wouldn't be clear exactly how much of the insulation of the Fed governors would remain.