SCOTUS Trump Rulings Put Congressional Authority Into Question

pm Eastern. It's a mustless and June gar also joins us. Now, June, we have the decision then from the Supreme Court on the subpoenas to take us through the May arguments because there was a lot of questioning from many of the judges on both sides. So some of the Democratic appointees were asking questions that didn't make it obvious which way they would vote, and equally the Trump appointees, Right, Vonnie, it was really difficult to tell from those oral arguments

where the justices are going to go. You know, sometimes you think you know, sometimes you don't. But there it was just confusion. But what was clear was that the justices were more on the same page, were more amenable to the argument by Vance the District Attorney's office in Manhattan because of several things. One, because this is grand jury secrecy. So remember, I don't know what Kimberly has

already said, but this is a grand jury. So these documents, even when Vance gets them, when the District Attorney gets them, are not going to be made public. The only time they might be made public if there's an actual criminal indictment in that case. So the justices are sure that this is going to be kept secret, and they asked

a lot of questions about grand jury secrecy. I remember Justice Alito questioning whether or not you could really count on grand jury secrecy or whether the newspapers and the media atlets would be able to get hints or be able to see the documents. So I think that was very important to them. Also, it was very it was limited, and the the attorney arguing for the District Attorney's office

agreed that it was a very limited document. He said, they were, you know, there were boundaries to it, whereas with the congressional subpoena, which I'm still hitting my refresh button to see if it has come out second, perhaps maybe we may get with the congressional subpoena. The lawyer who argued wouldn't give any kind of limits on what

the subpoena could be, so I think that made a difference. Also, I just want to point out that if you remember, Justice Tavanagh, who concurred here, was part of the Whitewater investigation, so it would be he'd have to be explaining somehow how he could rule against this but still take part in that broad investigations the Clintons. So true, and that kind of goes to where I wanted to go, which was, can will this data really remain uh private as it

relates to the New York Court? I mean, it just seems like it's just you know, rife for potential leaks. I think I actually think it will. I have a lot of faith in the grand jury system. This is this is such an important concept, the fact that when you go to a grand jury, it's secret, that everything that happens in a grand jury was secret. I can't imagine any prosecutor in that office breaking that rule. And I think that the grand jurors are you know, very

very much follow their their secrecy oaths. So I'm just just see it would leak as well. June suggests that that would actually go to the main problem that the justices were having along electoral grounds. And actually we're getting another headline, High Court largely back in Trump and House

financial record a bid. So this would actually back what I've just said as well, the idea that you know, the House was seeking a lot of information, some of that was pretty vague and the Supreme fourd seemed to be uncomfortable with that. Another headline, High Court orders tougher scrutiny of Houses Trump subpoenas. So maybe this isn't over yet. Let me give those two headlines again, the High Court. That's the Supreme four largely blocking, largely backing Trump in

the House financial record bid. It's telling the lower courts to reconsider the Trump subpoenas. So let me ask both of you, Kimberly and June. The Supreme Court is actually sending this back down to the lower courts. It wants the lower courts to reconsider the Trump subpoenas. What does that mean? They were they were, they were very divided

on the various subpoenas. Who wants to take that? June, well, I think what this means is the first thing it means is you're not going to see these records before the election campaign, before that, not before November, because you think about how long it takes that would have to be sending it back, they'd have to rebrief everything, and then a decision would have to come. So there's no way you're going to see these before the November elections.

Then we'll see what happens as far as the elections, but it's going to be a long process. And this is what people were predicting that this is a way sort of a way out for the court. It's a middle ground for the courts send back to the lower courts. It's a way to sort of kick the can down the road. The Court does this a lot. They issue opinions and then they say, okay, take it lower courts, you decide. Then sometimes it comes back up, but it's

going to take quite a long time. So Kim, I want to bring you back in here, Kimberly robertson um, how do you perceive kind of what the court is trying to do here? Is this kind of a win for President Trump at this point, well, at least in the congressional cases. It seems like a temporary win and a win on the objective of not having those financial documents week before the election. But this is something that

the Supreme Court does a lot. It kind of takes a middle of the approach, a road road that June was talking about, and kind of gives half of a win to one side and half of a win to another. So, um, this is not surprising from the Court. As you say, something that's interesting is that Chief Justice John Roberts wrote

both majority opinions. And you know, as Kim and I have talked about, uh, chief Justice Roberts is in every five four decision this Court has come to this term, Chief Justice Roberts is the deciding vote, and here he vote. He wrote both of these opinions and anxious to read them. Yes, we're not gonna let you go read them just yet.

Though even more questions. So Justice as Karence Thomas and Samuel Alito dissented in the Supreme Court grand jury ruling, So I guess they didn't want even the grand jury to get Tom's tax returns, assuming that that was sort of you know, an over right. There was a very during the the oral arguments. As I mentioned before, Justice Alito expressed, you know, concern that these would be leaked.

But during the oral arguments, there was also you know, a very interesting uh questioning of the President's attorney, because the President's attorney, Jay Sekulo, went for this really broad immunity. He said, the president is absolutely immune from criminal investigation even while in office. So that was this broad broad stance he took. So I'm I'm anxious to see exactly where uh Thomas and Alito thinks the line should be

if they say, but it just it shows you. And also the seven to two um A lot depends on what Justice Roberts actually wrote in his opinion to see, you know, you don't have the history I don't see at the beginning that you do in the heat during the In the other case, the the Manhattan District Attorney's case, there was this long history he gave that presidents from Monroe to Clinton have accepted this ruling that the chief executive is subject to subpoena and have uniformly agreed to

testify when called in criminal proceedings. So maybe that's the difference, but this is going to be this is a huge separation of powers issue here is as I'm sure Kim Kimberly said before, because the question now is how much has congress is oversight authority been stripped away? So, Kimberly, what do you think the response is going to be from? I guess guess what? What do you think that are

the next steps here? Well, the next steps is that these cases will go back down to the courts from which they came, Um, and they'll be some closer look at them at the House's reasoning for why it needed these cases. Again, think they're just coming out, but it looks like the Supreme Court wants the lower courts to take a better account of the separation of powers problems that the Trump that Trump is asserting here and kind

of do more work on that issue. It's a win for cs IR response for the New York District Attorney June on precedent, What can the District attorney do beyond just serving these subpoenas and serving these documents to the grand jury? Is there anything that he can use this as a precedent for Well, um would have to see

what happens. I think what was going to happen. He's already served the subpoenas, and these subpoenas as you mentioned, after third parties there to his subpoena actually is is just to the accounting firm um and so he's so the question is, you know, they'll turn it over right away. They've said before that they're going to turn it over, so there'll be that turnover. They'll look at the information there and then they'll start investigating, and they have investigators.

They'll start investigating what's behind if they find anything that and as you've mentioned, this is a huge amount of material that's going to come in. So they'll look at it and they'll see if there are any other questions what they might decide to do. I mean, grand jury has broad powers to look in directions that a normal jury wouldn't be doing. And so as you probably heard the expression that you know a prosecutor, you can get

a grand jury to indict a ham sandwich. And so the a lot depends on how much you know and advance is politically motivated, So a lot depends on how much he wants to push this grand jury what they're going to do with those with that information. But you've gotta know it's it's going there's gonna be a lot of pressure on his office now since he is the only office in the country that's going to have those.

Um uh, there's that information. A very interesting conversation coming up next now because it is time for Bloomberg opinion and a great opinion piece by the former chair of the f d i C during the Great Financial Crisis that should be noted. She La Bet. She is on

everybody's lips. She's a household name. Really. She's also founding director of the Local Alliance, which aims to build trust in government, and she is the founding chair of the Systemic Risk Council now after her at the f d i C, the vice chairman was Tom Hunig, who is also of course of Kansas City Fed President. And they have a great opinion piece out on the Bloomberg today or in recent days. Banks risks during the pandemic aren't clear.

There is a lot to unpack here. So she Labert, welcome, thank you for having me talk to us about how risky banks are these days, because right now we're seeing headlines about you know, employees being laid off and so on, and we're not actually thinking too much. I think about how, you know, how strong fundamentally banks are didn't we fix

that post Financial park crisis? Well, we did. I mean, there was certainly much better capitalized going into this crisis than they were during the Great Financial Crisis back in two two nine, But that's not saying much because they were really very highly leveraged back then. So we started from the low baseline. Yes, lots more capital, which was good because they were in a much better position going into this and and that's that's in in in large part due to the reforms we put in place after

the Great Financial Crisis. So we shouldn't be overly confident, though this is a very severe crisis and h capital levels have been declining actually leading into this crisis. The FED over the last few years have been letting banks on average distribute more in capital than they were earning, a which depletes their capital levels and so on an anonymous weighted basis, we actually saw capital ratio's declining for the last two years, So we shouldn't We shouldn't be overconfident.

There was a bad friend going into this, which is unfortunate because usually when you're in a good economic times for discycle, the smart thing to do is to raise capital not not to lower it. So she'll give us a sense of kind of what your your takeaways were

from the recently released stress tests, right. So I think the problem is they just were So we had as sensitivity analysis this testament and then we had this to stress test, but the stress test really didn't tell us much of anything because they were based on economic stress scenarios pre pandemic and what we're what we're experiencing now is more severe than what even the most severe assumptions of the stress tests that we're announced very pre pandemic were.

And also you were looking at bank balance sheets as at the end of the year last year, those have grown significantly because of the crisis. And ironically, the FED, this is something I supported back when I was chair of the f c I s T and later as an advocate at the s RC Systemic Risk Council, to require as part of the stress tests to show that banks can't expand their balance sheets and still have adequate levels of capital. Ironically, they fed a down away from

that they'd weakened to stress test. That was one of the many ways they'd weaken going into this. So I don't the stress test results, which were firms specific. I don't have a lot of confidence in them. There were there were some numbers that were frightening, even though they were you know, uh were stressed under much more benign economic circumstances. As I said in my piece of Tom Hanig, the leverage ratios were still quite low, which is a

non risquaited measure of financial strength of the bank. That one went down of Goldman Sacks actually dipped down a three point five perc. That was under pre pandemic conditions. And we had the sensitivity analysis that tried to incorporate pandemic conditions, but they didn't give us the leverage ratios. They didn't give this firm specific results. So that's a

long way of answering your question. We really don't know how safe these banks are, and if anything, I think they Fed well intentioned but just created more confusion and angst about this and it was not reassuring exercise. Has the President been set now, Sheila that the FED will

sort of back stop everything? I mean, the financial crisis back stops were supposed to be a one off thing, but it does seem like if the FED will back stop anything these days, well they are they kind of you know, I I supported intervention in the corporate debt markets. We had so many companies that were just barely investment grade.

I was worried if they dropped in a junk territory, they wouldn't be able to access credit markets anymore, debt markets anymore, and so you would have that would exacerbate the layoffs. So I thought, you know, there's a lot of problems with how we got to all those overlabored corporations to begin with, and some of them were took

on far too much debt. But be dead as it may, I think it was the wise thing to do to intervene, but I was guess I was thinking more that they would do primary market interventions to help the companies as employers. The line's share of the intervention has been in the secondary market, which which also helps them issue new debt, but it really is more beneficial to investors. So it is concerning. And then they're not. I guess they just recently said maybe they're gonna taper off a bit now.

But yeah, I just the last thing we wanted for everybody in the country to make too big to fail because Jpal pretty much said we're going to backstop these markets, and that had a tremendously a beneficial impact for opening up corporate debt markets. But again, some of these some of these companies probably do need to be restructured. They should be having a higher cost of capital, and to let this be, we should be trying to figure out

a way to access this. Now, that was a temporary um jolt that we needed to provide to the corporate debt markets, but really they should be thinking about the excess strategy now case. She also bottom line, how concerned are you or how concerned should we be about our nation's banks right here? Well, I think we should be

very worry. I think I think the leadership in Congress, instead of trying to you know, have election your deregulatory giveaways and pressure the FED to do that, I think the pressure should be on the regulators to hold firm suspend dividends. That's one good way to bolster bank balance sheets. Thirty billion dollars left after I insured banks in the first quarter that thirty billion dollars to take on their balance sheets. That would have supported about a half a

three in dollars of expanding capacity and resiliency. So we should suspend dividends. We should be bolstering bank balance sheets, requiring new equity issue and if necessary, I mean, why take a chance. Nobody's going to criticize you for having ho much capital in the banking system, but there's going to be a lot of adverse fallout for politically and more importantly for the real economy if this pandemic crisis

turned into a financial crisis because banks start failing. So suspend those dividends, look at maybe requiring that the issue equity um the weaker ones. And that's that's the direction I think that the FED should be going. And hopefully Congress and the Trump administration will stand down and let them do those hard decisions, or or even better, support them and encourage them to do so. Sheila, thanks so

much for joining us. We really appreciate your perspective. Sheilla Bear, former chairman of the Federal Deposit Insurance Corporation, giving us her thoughts on the banks. All right, So COVID nineteen bankrupting American companies at a relentless pace. On boy is a hundred and eleven companies right now and expect to see more on and I b c Y today a

great story with fantastic graphics. Let's bring in the author David Chilioso, who joins us now to talk about these retailers, airlines, restaurants, but also sports leagues and even an arch diocese or more. David just first of all gives rundown of the sort of variety of companies and entities that are declaring good morning, UM funny. It's it's really a cross section of corporate America.

That's was the interesting part of this exercises their names like Hurts and J. C. Penney, even Brooks Brothers recently that you know, nearly everyone is familiar with. But in the research that we did for this story, we also found a lot of smaller companies whose stories have gone largely unnoticed. And as you said, there is a lot of retail restaurants um in there a lot of energy companies with the fall in order prices and entertainment spectors

that are directly impacted by COVID. But then you find also a lot of companies that had financial issues from before UM and for for whom COVID was just like you know, the last the last drop UM. The archdiocese case that you that you brought about, you know, it's the New Orleans archdioceses. It's one of over twenty that you know, over the past several years of used bankruptcy as a way to settle sexual abuse allegations. UM. So they obviously had issues before, but COVID is just one

more challenge that they faced. And in their core papers they said, you know, a drop in collections and offerings added to an already strained budget. So, David, you know, it's interesting. I think what we've heard just anecdotally about some of these bankruptcies in certain industries is that the ones that went in to this pandemic, the companies that went into this pandemic with a over LEVELALERGYT obviously the

most at risk here. Are you finding that's still the case or are we finding companies that are relatively healthy in terms of capitalization they're also being pushed to the brink. I think we've found both. UM. There are definitely companies that were struggling with like heavy debt loads from before UM, and in some cases those were the results of leverage buyout UM. But in other cases, and especially with some of the smaller companies UM, the companies were doing fine.

They weren't over levered. Uh and they just happened to be inspectors that are directly impacted by COVID. So, for example, UM and interviewed the owner of Bounce for Fund, which is a small company outside of Dallas that rents out water slides and and bounce houses. UM the company was on track for the record year um and business was was going exceptionally well. The problem is they had cancelations

as soon as shutdown orders came in. UH and the owner, you know, he said he got a p P P loan that lasted for a couple of months, but he just didn't see a way for the business to continue. Uh, not over the next few months, but probably not even the next season. So the one I found particularly sad is the XFL. I mean, whether or not you're a fan of Vince Mygmahan and all that he's done, this was a way for football players who maybe weren't fully able to continue at the highest levels or didn't make

it the highest levels to play right. It was a pro football league. It declared bankruptcy and fired about five football players. Alpha Entertainment was the company. There is there any chance that companies like this will come out of this maybe small or more streamlined, but still an entity absolutely. I mean, I guess it depends on the sector and whether there are you know, willing buyers for the company

or it slim down version of the company or its assets. UM. But you know, filing for bankruptcy doesn't necessarily mean you're going out of business for good, So some of these companies may re emerge in a different forms. They may be bought by a competitor or an organization UM that is active in that in that space. UM. We have come across a few cases where the company is actually liquidating, so they're selling off all of their assets and shutting

down for good. But I would say that's not the majority of cases that we have come across the farm. So that how bad is this going to get? Or how it could this get? Uh? Do you expect to see, you know, an acceleration of these bankruptcies over the next several months. It remains to be seen. And you if you look at the timeline, we definitely see a few cases in May. Then we had a big increase during April May, uh, in June, and you know, we started seeing quite a few cases in July as well. UM,

I think much will depend on how much access to financing. Uh, these companies have both in terms of you know, capital markets if they're large enough, or you know, loan from banks or government programs if they are smaller. Obviously, some of the stimulus that was put in place as running out, like in the case of p P p UM, so you can rule out the possibility that as the effects of that simulus kind of fade away, you may see more cases for sure. Thanks so much for joining us.

David Uzo certainly the name of the day, corporate financier reporter for Bloomberg News, bring us a fascinating story about unfortunately this relentless path of bankruptcies that we're starting to see as a result of the pandemic. March sixth low up almost nine still down or year today, but up from that March low. Just extraordinary continued volatility. But crypto is here to stay. To get some latest, we welcome Rich Rosen bloom He's co founder and co had of

trading at g S are based in New York City. Rich, thanks so much for joining us here. Give us a sense of kind of maybe just how crypto and blockchain and bitcoin and all those things have kind of performed over the last several months of this new world that we find ourselves in. That's a great question. If you look at bitcoin it's itself over the last two months, it's been mired in a rather thin range between the

eight thousands to ten thousands. But I think what's what's more interesting is that you have a whole parallel ecosystem that, even though it was fueled by bitcoin, it's rather independent. And I'd say that and since the traditional financial market is focused on bitcoin as proverbial digital gold, but there's this entire ecosystem that serves a variety of other functions and um even though on a broad scale the market gets said I believe more in bitcoin, I'm not as

focused on alf coins. If you take a smaller snapshop such as as this week, bitcoin's rally a few percent from nine thousands to adding roughly ten billion of market value.

But if you take two other cryptos that are in the top fifteen, they've added over twenty billion of market value and rallied in these three days alone between fifteen and so I think there's there's a lot of action in the space that doesn't get it quite enough focus as it should, because I think that the broad market is just focused on the big belt bell leather, which

is Bitcoin. But in terms of the activity in the space for groups are are more looking for the activity in the crypto natives G s R. We we trade with exchanges, we still take business with the miners, with the issuers. Uh. We're doing more business in the alt coin space uh than in bitcoin. And I think that's really the story of this week, since we're seeing a

bit of a mini all coin boom. So if you're looking at bitcoin prices and seeing them up down a percent per day, uh, you're missing that there's some other assets that are up in a single day. And I think that some of these groups, it might be that appears more speculation and it's based on Chinese economy operating back at full cylinders and there's some trading elements that there's a momentum trade people want to buy um the

groups that are are meeting new highs. But I think from speaking to these projects directly, there's a lot of building um onto these ecosystems, and we're going to see the benefits of these products being built as we move out of that prototype phase and more of the stage where you see the emerging crypto economy as one where it's more of its own tech ecosphere of its own. Yeah.

Whatever happened to all of the companies that were trying to build out the blockchain and the ecosphere and then sort of run into a little bit of difficulty right when everyone thought that they were taking over the world. Yeah. I think that there's always cycles of hype and bust for for any new products, especially if it's tech focus UM and might have gotten too much attention to certain projects.

But if you look at early stage investing, angel investing, most of the projects are are not going to succeed in the end, and as long as there's gonna be still a handful of very successful projects, then they can remain leaders in this in this space and be a

good place to invest for the future. So I think that the hype in two thousand seventeen, um, you know, it was early for bitcoin itself, and at that point, I think he needs more a structure to be in place, and we're we're in a world different place as far as custody, UM, clearing, execution, UM. But I think there are some other parts of the ecosystem that they just

need some more time to play out. And if you look at the three thousand different I C O s UM, I'm sure that the bulk of them uh aren't going to succeed, just like any three thousand groups of tech

companies that are are brand new. But you know, if there's a hundreds that end up powerhouses and changing um, you know, the global ecosystem, then you know, I think it's still gonna be a good sign for things to come in uh decades UH that we are to see since UM, you know, looking at the baseball framework, were certainly very much in the second, if not the first inning. So rich kind of where are we in terms of adoption of crypto as an investment asset class by institutional investors?

I know you trade with a lot of folks out there, and where do you do you think we are there? So in terms of the saturation, the all the data would point to UM decently high saturation as much as but I think that that might be reaching that UM an institution tangentally has some type of access to some

investment related to crypto. But I think there's some demographic issues in which UM age wise, you know, people that are part of the older generation, they still feel that even if the point goes up, they don't know if that's a real gain. It seems like it's some type of you know, interestring currency that can't be translated into real dollars versus UH. Millennials or younger generations below thirty years old, they tend to believe more in crypto than

they do in the normal stock market. UM, and so I think that, you know, give it five ten years, these demographics are certainly going to be in favor of crypto investing. But as far as today, UM, while bitcoin is a powerhouse and gets a lot of attention from both the media and investors, it's still wouldn't be one of the top twenty stocks in SMP. So I think that if that saturation in terms of people going buying and putting in their portfolio is more at I think

that's pretty pretty good and there's room to build. Rich. Thank you the fascinating discussion. Rich Rosen was co founder and cohead of trading at g s R, which trades in digital assets and provides derivatives and volatility hitting products as well. Thanks for listening to Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever a podcast platform you prefer. I'm Bonnie Quinn. I'm on Twitter at Bonnie Quinn. And Paul Sweeney I'm on

Twitter at pt Sweeney. Before the podcast, you can always catch us worldwide at Bloomberg Radio