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Welcome to Bloomberg Law. I Bloomberg Radio. I'm Madison Mills in for June Grasso. This week, We've gone from Miami to Jersey to Washington this week covering former President Trump's indictment and how Washington is responding. Today, we're going to stick in Washington, focusing on the Supreme Court nearing a decision on President Biden's student debt forgiveness program. Plus remember
Sam BigMan than fed. We'll break down the latest legal troubles ahead for him, and we'll unpack the latest wrinkle and the PGA Live deal. But first, let's start with the Supreme Court busy deciding a litany of cases, from those involving the irs to one that's closely watched by thousands of students, President Biden's loan forgiveness plan. Here to discuss the latest is our Scotus reporter at large, Greg Store. Greg. Always great to get your thoughts on all things happening
with the Supreme Court. Can you just give us the context here, remind us the details of the student debt plan and what the challenge is that's getting discussed in court.
Sure, Madison, happy to be on. So, Yeah, this is a President Joe Biden's plan to slash the student out of about forty million or more than forty million people. There are estimates that it could cost as much as four hundred billion dollars, and the legal question is whether the administration had the authority to do that, specifically the
Education Department. There's a statute known as the Hero Act, and a group of states and borrowers have sued saying that law does not give the Education Department the authority to just eliminate this a sweeping amount of student loans.
But some students have already received a little bit of student loan forgiveness.
Correct, the program did start, but it really didn't get very far before lower court injunctions got in the way. And so right now it is on hold and won't resume unless the court sides with the Biden administration in this case.
So talk me through that. What is the likelihood of that happening?
Well, the arguments sure made it seem like that the court's conservative justices didn't think the Education Department had the authority to do this. There was a lot of questioning about the statutory language of this Hero's Act. The law says the Secretary of Education can waive or modify provisions in the law so that betters are not placed in a worse position financially because of a national emergency, and so there were some real questions about whether that language
covered this this action. If the Biden administration is going to win this case, it is probably going to be on the question of standing. That is, do these states and borrowers even have the legal right to go into court to challenge this program. We didn't hear as much about that during the arguments, so that may be an open question.
So it's an open question. But given what we know about where each judge kind of sits politically, do we have any sort of insight or tell us to what the decision might end up being.
Well, you know, based on the merits question, whether you know the two thousand and three law allows this. You know, what we've seen from this court is that they are pretty skeptical of broad executive branch assertions of power. We've seen them, you know, strike down the eviction moratorium during the pandemic. We've seen them block that vaccine or testing rule from OSHA during the pandemic. We seen them limit
the power of the EPA. That standing question, though, is a little trickier because that can go a lot of different ways. We had a big case that was resolved today involving the Indian Child Welfare Act case where the Court tossed out part of a challenge to this law which gives Indian tribes and families preferences in terms of fostering and adopting children in Native American children. And the Court tossed out part of that challenge on standing grounds,
and that was a pretty broad ruling. Seven justices were on it. So standing can be unpredictable and that's kind of the reason, just based on the argument. You know, I can't sit here and tell you I'm really confident that this program is going down.
Well, it sounds like President Biden has a little bit of the same gut feeling. Here's what he had to say about his options if the Court does not side with him on this.
Some of the same members of Congress I want to cut student aid p actually received loans to keep their small business flow during the pandemic. Some of the same members of Congress who supported this bill voted through huge tax cuts for corporations and the wealthy as well. But when it comes to hard working Americans trying to get ahead dealing with the student debt relief, that's where they drew the line.
So Biden, they're talking a little bit about the political response that he's getting from Congress in particular. But Greg, I know you cover the Supreme Court for us, But if you had to put on your White House Washington hat for me here, do you think Biden has any other options to get this through in any other way if the Supreme Court does not side where he hopes they will.
Well, there are certainly things he could try. There are some options that folks like Elizabeth Warren had been pressing the White House to try, so may be a backup plan. Obviously the administration would like it Plan AID to succeed and doesn't want to talk too much about Plan B, you know, from a political standpoint, and this isn't you know the area I cover, but it's I think it's interesting to think about. You know, if the Supreme Court blocks this, does it that helped Joe Biden politically or
hurt him? Is he able to say, look, I tried, the Supreme Court got in the way. Or does it make it look like he's not effected at putting his priorities into practice?
And definitely a big question for him as that twenty twenty four election gets closer and closer by the second. Greg Store, thank you so much for joining us. Greg is our Supreme Court expert voice and reporter down in Washington. I want to bring in Claire Valentine from Bloomberg News. Claire always does a fantastic job of covering the personal stories behind these big issues that we talk about, So Claire,
thank you so much for coming in. You've done this great piece on the anxiety that this delay and student debt forgiveness is causing for students. Talk to me about what you learned in your reporting.
Yeah, so this has been a three year saga for a lot of people. Loans have been on pause, and then there's been dates where government officials say loans are going to resume, and then they get extended again. So right now we're pretty certain that loans are going to come back on August thirtieth. So that means that people will be required to make monthly payments again. And from looking at prior statistics, we see that most people have an average of about four hundred dollars a month in
student loan payments. That's a big chunk of cash and people are going to have to add that onto already tight budgets. So in addition to that monetary hit, you're also seeing people stressed and just really confused about what's going on with forgiveness and payments restarting.
And I know some of your sources talked about how there's this misconception that this is just extra stimulus money for people who already have enough. Talk to me about what you learned about that piece.
Yeah, so this money really is designed for people who are not making a ton of money. This is not for people who are you know, got law degrees and suddenly are making six figures. This is all designed for people who maybe got a degree and are working hard, but their income is just not matching up with their expenses and not allowing them to make those loan payments
without sacrificing other areas of their life. And even if Biden's free offness program does go through, no more than forty five percent of borrowers will have their loans wiped out completely. So you've still got a ton of people with, you know, in some cases six figures worth of student loan debt that they're paying on.
Yeah, I'm just looking at your story here. You start off with Ali Rooker, who is a thirty year old in Detroit with eighty thousand dollars in federal loans.
Yeah, and that really just impacts your whole life. I mean, you know, Ali is trying to buy a home right now, and even with just this limbo that we're in with the Supreme Court, she doesn't know how much of a home she can afford. I mean, ten thousand dollars is a big chunk in terms of looking at your whole financial picture, So even beyond just the monthly budgets, people are having to put big life decisions on hold as we wait to see what happens with Biden's forgiveness plan.
And because it's Bloomberg, I'm going to end with a question for you on just kind of the economic impact of that, Right, what do we anticipate happening as we are anticipating that this is not going to end up going through, Right, So, once these student loan payments have to restart, how big is the economic.
Impact of that?
Yeah, so pre pandemic, about fifteen percent of borrowers were behind on payments. That's expected to return and maybe even surpass that. We've seen some reports. There was one from financial firm Jeffreys that was comparing the potential impact of student loans returning to the twenty thirteen physical cliff. So it really is expected to hurt the consumer, to decrease the amount of disposable income people have for eating out,
for spending on goods and services. And you know, just like we saw inflation hit people hard, this is expected to also hit people hard and make them have less money to spend on everyday items.
Did you mainly speak with sources. Who are those individual people or did you talk with any investors or economists about their outlook for it as well?
Are we focused on Yeah, so there's mostly what I've spent my time focusing on with reporting is is student loan is issue or student loan holders? But they're definitely it's something that economists are starting to look at. And I think for so long, you know, financial experts and economists didn't know what was going to happen with this.
The restart date got extended so many times. But now you know, especially when we're looking at what the Fed's doing and trying to decide on rate hikes, this is going to play a big picture role.
Yeah. Absolutely, Claire, Well, thank you so much for bringing us the people behind the story. As always really appreciated. That was Claire Balentine with Bloomberg News. If you're listening to Bloomberg Law, I'm Madison Mills in for June Brasso. This is Bloomberg. This is Bloomberg Law with June Grasso from Bloomberg Radio. This is Bloomberg Law. I'm Madison mills
in for June Grasso. This week US prosecutors in that case again, Sam Bankman Freed asked the judge to set aside five counts the FTX co founder is contesting why to avoid trial delays. This comes after bankman Freed won a Bahamian court ruling earlier in the week on those five counts. Here to discuss what it all means and the impact is Ava Benny Morrison, Bloomberg News Legal reporter, Ava,
thank you so much for being here with us. Before we get into the specific updates here, I kind of feel like the FTX situation is on the back burner for me and my coverage as I've moved on to coinbase and finance. Can you give us a little recap legally where SBF is at here?
Sure?
Yes, it certainly does say in a long time ago that he was arrested in the Bahamas. He's about four months out from his scheduled trial in federal court in Manhattan. He's pleaded not guilty to thirteen different criminal charges. We're in the stage at the moment where the lawyers are arguing over discovery. What different material thereafter and in this case, specifically as we heard today, are the validity of some of those charges?
And talk me through that argument. What is the case for why some of those charges would be invalid.
So Sam Bagminfried was extradited back from the Bahamas to the US in December after he was arrested, and he consented to extradition. At that point, the US prosecutors had presented an ad count indictment mainly dealing with the alleged fraud at FTX, and he agreed to come back to the US to face those charges. In the months after he returned, filed five additional charges against him. So he is essentially challenging that, saying that wasn't part of my agreement,
and under extradition law, you can't file those charges. You need consent from the Bahamas, and you haven't got that yet.
So is the key piece there? Would you say, does it hinge on the extradition?
It hinges on the Bahamas? We heard today prosecutors said that they had been in communication with the government down there and were of the view that they were going to provide that consent well before the trial. But that hasn't happened yet. Behind the scenes, Sam Beakman Free's legal team has gone directly to the Bahamas and said, before you provide that consent, we want to be heard on
why we don't think these charges are valid. So there's been a They're fighting his battle on a number of fronts at the moment, and.
Those are going to be very critical to monitor as we continue to cover this trial. Can you walk me through more broadly what his defense might look like as we get closer to the trial day, even if it does face some delays.
Here, sure, once we get over this legal hurdle and the judge makes a decision on whether the post and tradition charges can be separated. He has given a little bit of a hint as to what his defense might be.
Part of that hinges on the advice he said he got from council, is trying to subpoenas some information from a law firm that provided a lot of advice and guidance to FTX and Alameda, and he's essentially suggesting that he acted on the advice of counsel in doing a lot of the things that pop up in the indictment as well. We've also got a little bit of the insight into some of the arguments he might make at the trial based on his rebuttal in the weeks after
that he was charged. He's essentially in a few difference blog posts has put down the multi billion dollar hole at FTX to FTX being a victim of the successive market collapses and it all being sort of a problem with accounting as opposed to criminality, and.
From your legal standpoint, talk to me about those defenses, right, is that something that you've seen hold up in court previously. How likely is he to be successful with that type of legal argument.
It's hard to tell. I think the defense of acting on the advice of your counsel is an interesting one that hasn't come up too frequently. But unfortunately for him, the crux of the criminal allegations here is that he misused billions of dollars in customer funds and spent that
on personal expenses, property investments through element of research. The legal advice doesn't address that from what we've seen, so he still needs an argument against the core of those criminal allegations as well as opposed to putting it down to you know, issues with accounting and being just a
victim of the market downfall. I think, you know, you could see someone making that argument before a jury, and you're dealing with his complicated matters when we're talking about cryptocurrency and you know hedge funds, crypto hedge funds and different investments and whatnot. So I think the prosecution will really make an effort to sort of simplify the jury so they understand what the core issues are.
So what's next then for this case, what's the next step that we can expect to have you back on to cover.
So next up will be the judge making a decision on whether he is going to split the case, so Sam Bankminfrid will go to trial on those eight original charges, which include the fraud charges, the core allegations of the case, and then the remaining five will be essentially kicked down the road till next year and potentially go to trial then. So we're really keeping an eye app for that decision.
And forgive me if this is totally not a smart question, but I just cut off the week covering a lot about former President Trump and his indictment and how there are several trials surrounding the former president right now. I'm curious if there is going to be any read through of that for SBF. Could we expect to see further indictments, further charges either federally or in other states?
Against Sam Bakman Free. Yes, I don't think so, because we're seeing this tension over the superseding indictments that have already been filed against Sam bankman Fred specifically in New York. It seems like he is going really hard to challenge the validity of those, So I can't imagine that federal prosecutors in Manhattan are sort of gearing up to file even more charges on top of him while they're still
trying to navigate this conflict. But that said, there's still a question mark around some other people who were central to FTX that haven't signed cooperation agreements like some of the executives have. So we'll be watching to see if I guess there will be any other criminal charges brought against other people who are tied to FTX.
Right, that's a great point in our final minute with you. The one thing that we haven't talked about is this accusation of Sam BigMan Freed bribing officials to free that forty million dollars frozen on the crypto exchange. What do we need to know about that charge?
But this was the latest charge that was filed. Prosecutors filed that in any superseding indictment in March accusing Sam Bankman Freed of directing the bribe of Chinese government officials, organizing to pay them forty million dollars to help free unfreeze crypto assets that were on a crypto exchange over in that country. So he was charged under with foreign bribery, but the penalty for that is a lot lower than
the penalties he is facing in the fraud charges. And I will make the note that that foreign bribery charge is one of the offenses that he is challenging and arguing is invalid.
All right, well, thank you so much Eva for joining us to run through all of the details there. That was Ava. Benny Morrison, Bloomberg News Legal reporter, breaking down everything you need to know about the latest with Sam Bankman Fried and the FTX case. I'm Madison Mills in for June Brasso, coming up moron Crypto