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This podcast uses government documents to illuminate the workings of the American government, and offer context around the effects of government agencies in your everyday life.
N. Rodgers: Hey, Aughie.
J. Aughenbaugh: Good morning, Nia. How are you?
N. Rodgers: I'm good. How are you?
J. Aughenbaugh: Well, I'm in a very firing mood.
N. Rodgers: I know that this episode follows our last episode, and these should be coming out together because of the way they're connected. I did not see a connection at first, and Aughie was like, yes, but let's talk lots of firings.
J. Aughenbaugh: Yes.
N. Rodgers: They're related in a couple of ways. One, what Donald Trump believes he can do informs this episode, as well. Can he do that episode. Again, remember, we're not answering the question, can he do that? Because he's trying to do that. It's on what grounds is he trying to do that, and is it likely to succeed or fail?
J. Aughenbaugh: That's right.
N. Rodgers: But also, he's got a little and sorry, I know this is a Southern phrase, and I know that it's crude, and I apologize to listeners now for saying this. He's got a little bug up his butt about the Federal Reserve. There's something particularly about the Federal Reserve that annoys him.
J. Aughenbaugh: Yeah, and he's not the first president who's been annoyed with the Federal Reserve, but good Lord, is he willing to go ahead?
N. Rodgers: Man, he's taking it personally.
J. Aughenbaugh: He's willing to try some stuff that we haven't seen tried before, which actually falls very much in line with our can you do that series?
N. Rodgers: With our previous episode about firings, which if you haven't listened to, please feel free to go listen to that one because it's again, I'm pushing the envelope of where firings can happen and how they can happen.
J. Aughenbaugh: There are a number of connections, but specifically what we're referring to in this episode, listeners, is on August 18th, President Trump announced he was firing Federal Reserve Board Governor Lisa Cook. Members of the Federal Reserve Board are called governors.
N. Rodgers: Yeah, because that's not confusing.
J. Aughenbaugh: Trump justified the firing of Governor Cook by pointing to allegations and these are just allegations. They've not been determined in a court of law that Cook may have falsified records to obtain favorable terms on a mortgage.
N. Rodgers: Can I stop you there for a second, Aughie?
J. Aughenbaugh: Yes.
N. Rodgers: That is so rich with ridiculousness. That particular accusation that Donald Trump is upset that somebody finessed their records.
J. Aughenbaugh: Their loan application when he has been convicted in New York court.
N. Rodgers: Of doing that very thing.
J. Aughenbaugh: Yes.
N. Rodgers: I'm like, oh, hello, hot.
J. Aughenbaugh: This is Kelly calling.
N. Rodgers: Exactly. My friend, perhaps you should wait till something else comes up.
J. Aughenbaugh: Until earlier this year when a New York state appeals court overturned the size of the fine that Trump would have to pay, he was looking at well over $100 million worth of fines, in regards to him lying on the value of his properties that he used as escrow to get other loans so he could do other hotel and land development projects.
N. Rodgers: You want to be careful about holding up a mirror right now. But you got to love Donald Trump's audacity.
J. Aughenbaugh: Well, hey, charges of hypocrisy have never thwarted our current president.
N. Rodgers: Oh, no.
J. Aughenbaugh: They've never deterred him. Cook has not, as I just mentioned, been officially charged with wrongdoing or convicted of a crime. In the days before, Trump made it very clear that he wanted to remake the roster of the Federal Reserve because he's been very critical of the current Federal Reserve for keeping interest rates too high, and we're going to revisit this.
N. Rodgers: He says it's a drain on the economy. That is a point, by the way, that has been argued back and forth across economists for approximately what, since the Great Depression?
J. Aughenbaugh: Well, even before.
N. Rodgers: Is whether interest rates have an effect on the economy and so that's a legitimate argument to be discussed. My concern is that one, he's going after Lisa Cook, who was a Biden appointee. She's an African American woman. She ticks some boxes that frustrate Donald Trump on any number of levels, I think. I personally believe that. I'm not saying that I have insider information to that, but he has known difficulties with what he perceives to be DEI hires. As you will notice, if you go listen to our last episode, he likes to fire women. I think there are some other greater issues with that, but that's a whole separate question. The question of whether he can fire a Federal Reserve Board Member is where we are now, which is not even, like, could he fire Jerome Powell? Could he fire anybody else on the Federal Reserve Board? Is the question that Aughie is about to answer for us.
J. Aughenbaugh: Before we get to the can he do this portion, we do have an update. Earlier this week, so we are recording at the end of well, it's actually October 3rd. This is when we're recording it. Two days ago, the Supreme Court went ahead and upheld a lower district court ruling that allows Cook to keep her job. However, the Court did set a January 2026 hearing to consider whether or not Trump can fire Cook. The Supreme Court's fast tracking this.
N. Rodgers: Which I'm relieved about because that's a much sooner date than we had discussed in our last episode where firing Miss Slaughter may result in a year and a half before we have any answer about what's going on with that whereas this one they're trying to make a shorter period of time. If he has the right to fire her, it should be sooner because he wants to do it sooner. If he doesn't, then it should be settled so that her job is not lost.
J. Aughenbaugh: Yes. Can he do this? Well, once again, listeners, much like in our previous episode, when Congress created the Federal Reserve, they said that members of the Federal Reserve could only be fired for cause, and again, this is usually understood, again, as gross misconduct. We're talking about inefficiency, neglect of duty, and malfeasance. This was stated in the Federal Reserve Act of 1913. The idea was to insulate, and again, I'm repeating a theme from our previous podcast episode. The idea was to insulate the Federal Reserve from political pressure so it could act as an independent, if you will, body to influence economic policy, but more specifically monetary policy. This might be good, Nia, right now for us just to pause and remind listeners. The basic idea of the Federal Reserve is to use monetary policy to ensure stable economic growth in the United States. The Fed is supposed to use monetary policy to avoid really high inflation.
N. Rodgers: Really high unemployment.
J. Aughenbaugh: Inflation, and really slow debilitating recessions and depressions. That's their purpose.
N. Rodgers: One of the reasons they act incrementally is because the economy, even though it seems like it's this big huge thing, that it would be really hard to move along in one direction or another. If they came out with a 10-point rise in interest rates, the economy would collapse approximately two hours after that. It would be instant.
J. Aughenbaugh: Because nobody would borrow money to go ahead and expand their properties.
N. Rodgers: Because if their interest rate was 37%, they'd be like, piece out. I'm not doing anything. The economy would grind to a halt instantly. That's why they go by a quarter of a point in interest rate. Exactly. That's nudge. That's an excellent word. Their job is a board of nudgers where they go nudge, and then they wait to see what happens. That's why they don't do it usually every time they meet. They'll nudge, and then they wait for a little while, and they wait for the things to settle, and they say, what effect did that have? These are people who live on the 30 year plan of dealing with life. I want this next week. That is not how they ask.
J. Aughenbaugh: When they were 18-years-old, the governors of the Federal Reserve-
N. Rodgers: They all formed retirement accounts and started putting $10 a week in it.
J. Aughenbaugh: Governors of the Federal Reserve when they were 18 pretty much had already mapped out the rest of their life. These are not people who make quick raggedy risky decisions.
N. Rodgers: Sudden decisions. We've been engaged now for 30 years. We should probably get married. They're not emotionally driven most of the time. What is it the Chair used to say? He ate oatmeal every day during the recession because he needed something that totally had no flavor, had no anything to it.
J. Aughenbaugh: I think that was Alan Greenspan. I think he did an interview on 60 Minutes, and they were like, you have the reputation, and he was just like, yeah, he goes. I eat oatmeal every morning for breakfast which led a whole bunch of news articles afterwards. We have a Federal Reserve board chair who is so boring, he eats oatmeal for breakfast.
N. Rodgers: Because I need the world to be a boring place. For the feds, they want this to be boring. They don't want there to be wild movements in the economy, wild movements in the stock exchange. They don't want that because the Federal Reserve is trying to have everything be as chill as it can be.
J. Aughenbaugh: Yes. Now, for our listeners who don't understand why Congress created the Federal Reserve, they did so in part to avoid some of the boom bus cycles that the American economy had experienced until the early part of the 20th century. They wanted to go ahead and remove the central bank from political influence. That means political influence by the president but also Congress. Not only did they have the for cause provision.
N. Rodgers: To integrate their term?
J. Aughenbaugh: Yes, the Federal Reserve is insulated from presidential control because members of the Federal Reserve Board serve staggered 14-year terms.
N. Rodgers: Fourteen years, my folks.
J. Aughenbaugh: That means no single president can appoint all members of the board which means you're going to get inflation hawks on the board. You're going to have recession hawks on the board. When I say hawks, they don't like either inflation or they don't like recession, and that's how passionate they are.
N. Rodgers: They will drive.
J. Aughenbaugh: Yes.
N. Rodgers: They will nudge. They will try to get others to go along with them so they can nudge in one direction or another.
J. Aughenbaugh: Yes. This also cuts down on, for instance, a two term president of a particular political party being able to appoint all the members of the Federal Reserve. Statistically, it would be nearly impossible for presidents even from the same party.
N. Rodgers: We swing.
J. Aughenbaugh: We swing back and forth. If you think about it, we had Reagan, Bush. That's 12 years, but then we had eight years of Clinton. Then we had eight years of Bush 43. We had eight years of Obama. Then we had four of Trump, four of Biden, and now we have another four of Trump.
N. Rodgers: I suppose you could time it if you did a Trump or Cleveland thing where you separate yourself out. You might be able to get six of them maybe.
J. Aughenbaugh: Yeah, statistically, you're just not going to get them all. This was some really good forward thinking by the United States Congress.
N. Rodgers: Which you know, we don't say very often.
J. Aughenbaugh: We don't say very often, and for our listeners who are former students of mine, you're probably, like you spit out whatever drink you were consuming as you heard me say that because I hardly ever say that.
N. Rodgers: There are seven members.
J. Aughenbaugh: Correct.
N. Rodgers: Does that include the chair or is it the chair and seven members?
J. Aughenbaugh: Seven members plus the chair. Yes. The leaf, that's the case. Now, as Nia you're going to correct me on something.
N. Rodgers: The president appoints a chair and vice chair from among the seven governors who serve four year terms.
J. Aughenbaugh: There are seven total, and that makes sense because you want an odd number just in case there is division on the fed.
N. Rodgers: Appoints a chair and a vice chair from among the seven that serve four year terms, but some people could serve twice or three times. I think Alan Greenspan was chair almost his entire time on the Federal Reserve, wasn't he?
J. Aughenbaugh: Sure.
N. Rodgers: Jerome Powell has been, Jerome, like I'm his friend. Governor Powell has been for quite a while. I think when they find somebody that seems to be what Aughie and I are talking about, which is one of those milk toast middle of the road, it's all going to be fine people, then they stick with that person because that's very comforting to businesses. Businesses do not want the economy to swing wildly because when it's swinging wildly, they don't know whether to hire people. They don't know whether to buy extra stock. They don't do anything. Businesses will freeze if they think things are getting out of hand and going crazy.
J. Aughenbaugh: Yeah, because volatility in the markets is bad.
N. Rodgers: As far as businesses are concerned.
J. Aughenbaugh: But then if you're a liberal and you're concerned about consumers, you're also concerned because volatility in the markets lead businesses to not want to go ahead and spend on new product development. They're not going to hire new workers, which means workers don't have money to go ahead and spend on goods and services.
N. Rodgers: Can I ask a question?
J. Aughenbaugh: Yeah.
N. Rodgers: Is the problem with the relationship between the presidents and it's not as you said, not just been Donald Trump, but lots of presidents. President Bush had problems with his Federal Reserve. I know that Lyndon Johnson had problems with his Federal Reserve. Is the problem that presidents want to see things happen quickly, and the Federal Reserve Board is like, we don't do quickly. The president is basically a hare, and the Federal Reserve Board is basically a turtle.
J. Aughenbaugh: Correct. That's the conflict in a nutshell. Presidents know that at most, they have eight years.
N. Rodgers: Their party is going to be held responsible for economic stuff. They want it to be all growing and fabulous and better.
J. Aughenbaugh: That's right. But the Federal Reserves aided purpose in the Act, is a long-term focus on stable prices and stable economic growth.
N. Rodgers: They don't like bubbles. They don't like extremes.
J. Aughenbaugh: Yeah, because if you get too much inflation, then people's take home pay doesn't go as far, which then means-
N. Rodgers: They're crappy.
J. Aughenbaugh: Then they're going to retrench, and then you might see a recession as a result. In the ideal world, the Fed wants every year, about 2-2.5% economic growth. Why? Because that means that we are producing more companies.
N. Rodgers: But not extremely more.
J. Aughenbaugh: That's right.
N. Rodgers: We're producing a little bit more.
J. Aughenbaugh: Companies are optimistic. When companies are optimistic, they tend to hire more people. They're willing to pay higher wages, but not so high that they then turn around and charge consumers higher prices.
N. Rodgers: More than they can afford for whatever it is.
J. Aughenbaugh: That's the growth that the Federal Reserve wants.
N. Rodgers: The Federal Reserve likes to have a little bit of unemployment because that means there's churn in the market. There are things that they don't want too much because then you have the depression or recession and nobody can afford anyway.
J. Aughenbaugh: Most mainstream economists, Nia will tell you that in a capitalist economy, like the one in the United States, a healthy unemployment rate is between 4-5%.
J. Aughenbaugh: Because that means there are enough workers available for companies to expand if they do so, but it's not so high that a whole bunch of people don't have disposable income that they can go ahead and spend and generate economic activity. Presidents, however, have a short-term focus. As you mentioned, Trump is not the first one. In my research, I found presidents who openly ward with the Federal Reserve, including- and they cover both political parties, Truman, LBJ, and LBJ infamously pushed the then Federal chairperson, William Martin, against a wall because the Federal Reserve refused to increase the monetary supply so that LBJ could go ahead and fund the Vietnam War effort.
N. Rodgers: Although in fairness to LBJ, he pushed lots of people against a wall.
J. Aughenbaugh: We're not saying that that's appropriate behavior.
N. Rodgers: No. We're just saying he did that a lot. He was a very tall man.
J. Aughenbaugh: Nixon, Reagan, Bush 41. Bush 41 until he died, asserted that because the chair of the Federal Reserve, Alan Greenspan, was so hyperfocused on inflation that it led to a really slow post-recession recovery because there was a recession during the middle part of the Reagan years. We have a large number of presidents
N. Rodgers: Who've had conflict with the Federal Reserve. That gives us our background. But how do we get to Ms. Cook? Ms. Cook has been accused of lots of stuff, but she has not been indicted. We don't know what grand juries do because grand juries always do their stuff in secret. We don't know whether there's been a grand jury or not, but we know that no charges have been made currently. That's true?
J. Aughenbaugh: No, there's an investigation with federal
N. Rodgers: Is it that he has found that that is enough?
J. Aughenbaugh: Well, that's what he's claiming.
N. Rodgers: Because he's trying to change the makeup of the Federal Reserve.
J. Aughenbaugh: Yeah. But back to your previous question, there's an investigation right now by the Federal Housing Authority, and there's been a referral from the Federal Housing Authority to the Justice Department. That's where we're at right now. We don't know if a grand jury has been impaneled, we don't know if the Justice Department is actively investigating. Though if I had to venture a guess, since it's the Justice Department for the Trump administration, they probably have opened an official investigation. But that's where we stand. The issue here is, what will the Supreme Court do? The Supreme Court announced this week that it is not stopping a lower court injunction that prohibits Cook from being fired. So as we are recording, Lisa Cook is still an active voting member of the Federal Reserve. However, the Supreme Court has announced that they will take the case. Now, you might be wondering, how might the Supreme Court rule? Well, on one hand, as we discussed in our previous podcast episode, the Supreme Court, or at least a majority of the Supreme Court, seemingly is willing to overturn its decision from 1935 in Humphrey's Executor that would allow the president to terminate members of independent regulatory commissions. But is the Federal Reserve different than independent regulatory commissions? Well, as recently as early summer, when the Supreme Court allowed Trump to terminate members of the Merit Protection Service Board and the National Labor Relations Board, the unsigned opinion from the courts, said, I'm quoting here, "The Federal Reserve is uniquely structured quasi private entity that follows in the distinct historical tradition of the first and second banks of the United States."
N. Rodgers: So it may actually hold it separate and different from those other cases that we discussed in the last Can He Do That episode. So while they may not get their jobs back, Lisa Cook may hold onto hers because the Federal Reserve is treated differently.
J. Aughenbaugh: Differently.
N. Rodgers: So Donald Trump would have to show cause within her job.
J. Aughenbaugh: And the unique institution, that is the Federal Reserve.
N. Rodgers: That may be impossible for him to do even if she were found guilty of mortgage fraud, that may not necessarily have anything to do with her federal reserve job.
J. Aughenbaugh: Well, if she was found guilty, at that point, the Trump administration could go back to federal court and say, she was engaged in malfeasance.
N. Rodgers: I see. Then they would have cause. But currently, they don't have cause.
J. Aughenbaugh: They don't have cause.
N. Rodgers: Because nothing has been proven.
J. Aughenbaugh: That's right.
N. Rodgers: I see.
J. Aughenbaugh: This is where it gets really complicated because as Elena Kagan pointed out in the firing of the Merit Protection Service Board and the National Labor Relations Board, well, if you're not going to adhere to Humphrey's executor for those positions, how's the Federal Reserve different?
N. Rodgers: Elena Kagan likes consistency.
J. Aughenbaugh: Yeah. The basic idea behind independent regulatory commissions, but also the Federal Reserve, is that you want them to be independent from political influence. Meaning, if there are policy disputes between a president and those independent regulatory commissions or the Federal Reserve, the president shouldn't be able just to go ahead and fire the members. Now, here's my prediction.
N. Rodgers: Tell me.
J. Aughenbaugh: I don't usually do this?
N. Rodgers: Yeah, because the justices listen to this podcast, and then they'll just do it to be difficult.
J. Aughenbaugh: If only they listen to our podcast.
N. Rodgers: I know. Would that be something?
J. Aughenbaugh: Yes, here's my prediction. The Supreme Court will hold that the Federal Reserve is different than other independent regulatory commissions or agencies The vote will be five to four and it will be the chief justice joining with the three Supreme Court liberals plus either Coney Barrett or Brett Kavanaugh and Roberts will assign the majority opinion to himself.
N. Rodgers: Will take the heat.
J. Aughenbaugh: I think John Roberts is enough of an incrementalist, institutionalist where he will go ahead and say, the Federal Reserve is different, and historically, we have always allowed Congress to create national bank systems that are supposed to be free from political branch influence.
N. Rodgers: I was going to say, influence of the parties. They don't want.
J. Aughenbaugh: Well, either Congress or the president. You got to remember, one of the reasons why we create the Federal Reserve and Independent Regulatory Commissions is that Congress frequently went ahead and viewed regulations of key parts of the economy as patronage opportunities.
N. Rodgers: So do presidents.
J. Aughenbaugh: Yes.
N. Rodgers: So do presidents. Being able to avoid that would be useful. I guess the conservatives, how will they vote?
J. Aughenbaugh: I think Thomas, Alito, and Gorsuch will all claim that because the Federal Reserve makes policy, they are implementing a law passed by Congress that presidents should be able to go ahead and fire them per the take care to faithfully execute the law clause of Article 2 of the constitution. Those three conservatives will pick up either Coney Barrett or Kavanaugh, but they won't get both. It'll be five to four, and the court will go ahead and say, the Federal Reserve is different. This is where I think John Roberts will once again be accused by Republicans-
N. Rodgers: Of selling out.
J. Aughenbaugh: As being an unfaithful conservative.
N. Rodgers: Well, I'll meet you back here in January of 2026 and we'll know they'll actually hear it in January. We may not see that until.
J. Aughenbaugh: That's a case that will take until the end of June.
N. Rodgers: It may be the last one that gets put out because the finessing that everybody will want to do.
J. Aughenbaugh: Because let's face it, If Roberts assigns a majority opinion to himself, it probably won't satisfy completely the three liberals. At least either Kagan or Brown Jackson will write separately.
N. Rodgers: Can I make a prediction?
J. Aughenbaugh: Go ahead.
J. Aughenbaugh: My prediction is that because it's going to take so long, Donald Trump will lose interest in Lisa Cook. Unless there is actually fire where there is smoke, unless there's actually a thing they can prove that she did that's malfeasance, which I would be willing to bet that somebody who's been on the federal, just saying the Federal Reserve governors, we know are planners I doubt, but anyway. I don't know if the case will go against her, but if it did, they would come back for cause. But if they don't think it will take so long, Donald Trump will lose interest in her.
J. Aughenbaugh: Well, and also Trump may lose interest if the Federal Reserve continues to incrementally lower interest rate.
N. Rodgers: Because he stopped calling for Powell's head after the September meeting where they lowered interest rates.
J. Aughenbaugh: The statement from the Federal Reserve is, they are closely watching economic data and might consider future interest rate drops if the economy continues to show signs of weakening. Which is code for-
N. Rodgers: Pre recession or sliding into a recession.
J. Aughenbaugh: Well, it's code for the Federal Reserve is concerned. They don't even use, normal language.
N. Rodgers: They don't say we're concerned. In fairness, if the Federal Reserve ever came out and said, we're concerned about something, the markets would go bananas. It comes back to them as personalities and how that is not a thing they do. They just don't say, sure, we're going to just wing it. Again, these people eat oatmeal for breakfast. An oatmeal for breakfast is good for you. So there's nothing wrong with that.
J. Aughenbaugh: The doctor, it's highly recommended for a person of my age.
N. Rodgers: There's nothing wrong with it. But it is a chill kind of thing. Thank you, Aughie. I appreciate this. I'm glad that Lisa Cook is holding onto her job, if and or until a court case comes about because she's innocent until she's proven guilty. I think they did the right thing. I wish they had done the right thing before, but I think they did the right thing in this case when they said, Whoa, whoa, whoa, we don't even know if there is cause. Like slow down there, Cheetah, which I would like to see them do more of that. They've handed an uncomfortable number of wins to Donald Trump for me.
J. Aughenbaugh: Fall at the Supreme Court level.
N. Rodgers: Yeah. No, he's losing left and right at the lower court levels, which is why he then goes to mom and dad and says, they're picking on me.
J. Aughenbaugh: He's like the clever kid who doesn't always go to mum or dad.
N. Rodgers: That's true. He picks his moments. Or his advisors. Probably a lot of this is driven by his advisors. I would think. Donald Trump probably says something like, I want X. Then they try to figure out how to get X because that's what good advisors do. When I am president and I say to Aughie, I want every single person in the United States to own a parakeet. Aughie will be like, well, let's see what we can do about bringing that about, Madam President, because that's part of why you work for a president.
J. Aughenbaugh: The reason why I bring up the fact that he doesn't appeal every lower court decision that he loses, is that in part, I think the popular press is once again done us a disservice by emphasizing Trump's success percentage on the Supreme Court's emergency docket. Scholars are beginning to go ahead and distinguish between Trump's success on the Supreme Court's emergency docket with the fact that he doesn't appeal every lower court loss. He is picking and choosing, and so far, he seems to be picking pretty well.
N. Rodgers: We should let him pick the lottery numbers next. You and I could retire.
J. Aughenbaugh: Or at least the people in the solicitor general's office of the Justice Department, because that's the office that decides which cases to appeal and whether or not they will appeal on the Supreme Court's emergency docket. Those are the folks who I want to go ahead and have them, pick the lotto numbers the next time.
N. Rodgers: That's true. That's what we need to have too. Because they're clearly doing a good job.
J. Aughenbaugh: I like their winning percentage.
N. Rodgers: Well, Aughie, do you think we're going to be continuing to do these? I think we are.
J. Aughenbaugh: Oh, my goodness, yes. Again, listeners, we apologize. We can't get to all of you all's requests for, in the news, can he do this? Simply because the sheer volume, and this goes beyond what we had already planned for the fall.
N. Rodgers: We had a whole plan for the fall.
J. Aughenbaugh: We had a whole plan and, what does the old Steinbach novel, the best laid plans of mice and men often go astray?
N. Rodgers: Well, and there's also, if you want to make God laugh, tell him you have a plan. I think it is one of the religious philosophers.
J. Aughenbaugh: Men make plans-
N. Rodgers: God laughs.
J. Aughenbaugh: God laughs.
N. Rodgers: Anyway, we will at some point, get to what we had as a regular series, which is we are going to discuss the courts.
J. Aughenbaugh: The Ors at the Supreme Court.
N. Rodgers: The Ors at the Supreme Court, but we don't know when. If you'll stick with us, we're going to try to navigate together.
J. Aughenbaugh: Right. Thanks, Nia.
N. Rodgers: Thank you, Aughie.