The Growing Risk to Fed Independence That Wall St Isn't Watching

SPEAKER_2 (0:02)

Bloomberg Audio Studios, podcasts, radio, news.

Tracy Alloway (0:18)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Tracy Alloway.

Joe Weisenthal (0:22)

And I'm Joe Weisenthal.

Tracy Alloway (0:23)

Joe, it's been a big week for us. We were cited in an SEC filing for the interview we did with Brad Jacobs. I think it's the first time I've ever seen a full podcast transcript.

Joe Weisenthal (0:34)

It was nice, because we used to write transcripts, and I was like, I was getting to be so much work. And then it turned out, so we recently were interviewed, Brad Jacobs, his team did a full transcript and submitted it to the SEC. That was very nice of them.

Tracy Alloway (0:45)

Doing our work for us. And then the other thing that happened is we were also cited in a lawsuit, all in one week.

Joe Weisenthal (0:52)

All in one week, that's right. You know, we've done some episodes. We were down in DC recently, and we had the opportunity to interview the new chair of the FTC under President Trump. And a section of that interview actually got included in a new lawsuit. Actually, you could take a listen to it.

Andrew Ferguson (1:09)

There's also, I think, some benefits in certain circumstances to having multi-member agencies with people from both parties. I mean, look, if you have an agency that is exceeding the law, abusing the companies that are proposed to regulate, it's helpful for markets, for courts, for litigants, for government transparency to have people in the other party pointing this out and saying it in dissents like, you know, I wrote 400 plus pages of dissents during my time as a minority commissioner. I think that that adds value.

Tracy Alloway (1:39)

Right. So we spoke to Andrew Ferguson. He was talking about how much he loves having minority commissioners and then the very next day there was news that Trump had fired the two Democratic commissioners, Alvaro Bedoya and Rebecca Kelly Slaughter. And so they have since filed this lawsuit in which we're cited, arguing that they were illegally fired. Commissioners are supposed to be fired based on an actual reason. You have to have cause and I don't think there was any really cited in this. And the interesting thing here is I know it seems like a very niche topic. Why are we discussing this FTC lawsuit other than the fact that we're mentioned in it? But it could have really broad implications.

Joe Weisenthal (2:23)

Yeah. No, this is the key thing, right? And so it's not just FTC. There have been some other instances already in this administration of President Trump removing people who are sort of part of various entities that exist within the federal government, which at least formally in recent administrations, they've had some notion of independence and there is this popular sort of conservative legal theory that all of these are kind of illegitimate, that there are three branches of government, judicial, legislative and executive. There's not really room for these other things that are literally outside the executive. And so what we've seen is this sort of assertion through these removals, firings of the FTC commissioners plus others of this idea like, no, these entities are all under the president. Some of the implications could be pretty big.

Tracy Alloway (3:11)

Right. Well, there is the Federal Reserve, which is an independent agency. And we know there is this populist feeling, let's put it that way, against the Federal Reserve. You know, people think about it as this sort of ivory tower filled with unelected technocrats. Speaking of unelected technocrats, did you see Elon Musk's speech in Wisconsin over the weekend?

Joe Weisenthal (3:34)

I missed that.

Tracy Alloway (3:35)

He was talking about the Fed. Someone asked him, do you plan to do something with the Fed? And he basically said, yeah, and the Fed. And then said, in a competition between a magic eight ball and the Central Bank for interest rates, I don't know exactly what that means, but he said the magic eight ball would win.

Joe Weisenthal (3:50)

Well, look, I would just say this. The premise of Central Bank independence is probably one of the most revered ideas in sort of modern orthodox economics. The premise that we have an independent. There are some critics of it, and there are some like sympathetic critics to it. But I think for like Wall Street and how we do econ policy in this country, the premise that the Fed exists independently of immediate direct political control such that it can pursue its two goals, full employment or maximum employment and price stability in a way that's outside the elections, outside of political control is this sort of core thing that we many people take for granted. And there's this building question of whether that will remain so.