Fed Independence Is Crucial, Abby Joseph Cohen Says

of course on the Bloomberg. Tom's going to be back. The missed the Pierre Breakfast. Breakfast at the Pierre Hotel with an amazing turnout. We've given the snow on fifth alf new pim Fox yeoman's duty is Gura called in from what do you have like eight ft of snow in Brooklyn mcale. You were out there brush Russian snow off the Kale bushes, right, This is this is a

great pleasure and privileged folks. Abby Joseph Cohen has had decades of work not only for the CFA Institute and for the academics of finance and investment, for her Golden Sex as well. She puts it, it's a Golden Sex retirement, which means she will be exceptionally active in her eighty hour work week. Still with Goldman Sex, what kind of retirement? When Steve strongand talks to you about a Goldman Sex retirement,

what does that exactly? Abby? Tom? What that basically means As I'm becoming an advisory director and I'm giving up my managerial and administrative responsibilities, but I am still senior investment strategist. I'll be working with our clients around the world, and our clients include governments, not just here in the United States, but it also in various places. And I just had a thought that maybe Mr Cohn is a

little occupying Washington. Abbey chose of Cohen could go down and help Gary con help the President of the United States, and be that much closer to her beloving agency capital. Yeah, let's let me just point out I'm not related to Gary Code. But but Tom is right that I am a big fan of the Washington capitals, So that would be a good work. Abbey. Optimism is easy when there's a bear market. There has not been when you've been a resilient bull, aw can you stay optimistic on the

development of cash flow? Tom I think the issue right now is more murky than usual because the fundamentals are good, including the cash flow data. The economy is growing, we had some acceleration coming into two thousand seventeen. Labor markets are stronger, wages are in fact rising, running about two and a half to three percent year on year growth.

The question really becomes the overlay of government policy, and as everybody knows and you have focused on so well, there is no clarity in terms of what those new policies will look like. We have some idea of what the President indicated he would like to do during the campaign, but we now we of course need to see what the legislation looks like, what will the Congress pass and

when will it be implemented. Some of the things that many investors are hoping for, including changes in the tax code, may be delayed quite a while while the Congress gets its act together in terms of actually putting things down on paper. What's your sense of the timetable here? We had the President saying yesterday we're going to get a in his words, phenomenal tax plan here in the next few weeks. He said, You mentioned the legislative wrangling that's

that's sure to follow. Uh, how what's the time to would look like to you? And how important is that to you as an investor? Sort of waiting to see these things. March is an important month because that's the point at which the president the new administration will release for the first time their draft of a budget. However, we then will go into what does the Congress do

with it? Um, My colleagues in Goldman Sachs Investment Research believe that even if something is passed by the end of two thousand seventeen, important pieces of it won't be implemented until next year. You know, I we hear so much about regulatory reform, both in financial services but also with the Affordable Care Act? How much of how much is that affecting sort of your your outlook the prospect there of of saying scaling back Todd Frank for instance,

We're not quite sure what will happen. Obviously, there has been a notable increase in the price levels of financial services stocks as many people are anticipating a less onerous regulatory environment. Let me point out and say that some regulation is very good regulation because it protects us, whether it's financial services, the f D A, and many of the environmental rigs as well, So it really depends upon

which regulations are being changed. The other thing that everyone is looking for are the adjustments to the A C A UM. It now looks like in Congress there's not very much appetite for repeal well in advance of replace, and there's not yet a plan that has come forward. We're hearing that there are four separate plans that are being discussed by the Republicans in Congress. It's not really clear to us which way the Congress will decide to go.

What do we know of the potential economic ramifications of a repeal or replacement or a picture we were different to put in there? But how would that affect the economy? One thing that I believe is not being adequately discussed is that this period of confusion about what will happen to UH the A C A is actually a dampener for consumers spending. Many of the families that were most benefited by Obamacare are middle income families UH. And these

are people who don't ullify for Medicaid. UH. They're not able to afford their insurance without help. And it may in fact be these middle income Americans who are most afflicted. They may get nervous, They may begin to spend less, save more, and obviously spend more on medical expenses rather than other items. You'll forgive us for being a little retrospective furiously announced your your retirement, but looking back, has there been a moment like gold, not like a John

Tucker retirement? John Tucking retirement is here's a door with jury, Abby, will you adopt me? Have we seen a moment like this though, where politics has been as big a driver as it seems to be right now, it's providing as much uncertainty or driver as you see it. Clearly, this is the most that we have seen in many decades. I think if we go back over history, and Tom and I love to reminisce because of our CIFA backgrounds, of the nineteen thirties would have been a period where

politics had an enormous impact. There was also a period when there was the big we shifting of political parties in the nineties, sixties and early seventies as a consequence of the Democrats um moving forward on things like voting rights and civil rights and so on. But this is certainly the biggest change that we have seen in several decades. Now that we have a golden Sax retirement, maybe she can go on the short short list for the new

chair of the Fed. Here here, not that I would want to start any speculation or rumors will continue with Abbe Joseph Cohen and speak of global central banks, of course, with Mr Abbe visiting uh today, Uh, well, we'll talk to Abby about not only global central banks, but of

course the Federal Reserve system. David Gerr and Tom Keane with Abby Joseph Cohen, this moment in time, after a story career in management, that golden section moves on to an advisory role makes very clear it's a golden Sas retirement, which is I think she gets to expand from seventy hours a week to seventy two. You should add way way too too young to retire. Yes, how kind of you first? Are you? Okay? I just I don't know.

You know, this is the gear the Washington. She probably went to Lloyd and said, Lloyd, I gotta see more, old Vetchkan. I mean, it's probably what happened. Abby. I want to get to the Fed. And David Brooks has a great single sentence today among all that's going on in Washington. He doesn't have to begin each day by making enemies, says Mr Brooks in The New York Times, is chair yelling President Trump's enemy? Based upon public commentary,

It's a little hard to tell. Um. Clearly he made some unpleasant comments during the campaign, but has been more quiet recently. I believe that the Federal reserves independence is crucial to its success and therefore the success of the U S economy. One of the things I'm concerned about our movements in the Congress. For example, Senator Paul has indicated he would like the feds dece visions to be audited. UM, and I think to have somebody at the General Accounting Office.

Second guests, the dedicated staff at the FED on policy changes is not a good idea. Maybe you can answer this question, because I couldn't answer it myself, and I can't find somebody answer for me. We're all becoming an expert on Guantanamo, Cuba, Ninth Circuit Court. All this law does a judicial process intrude in any threat to central

bank independence, not to my knowledge. And I believe that what we're all getting over the last few days is a terrific lesson in civics, and dare I say it's some members of the administration are receiving that lesson as well, but as a nation, our knowledge of basic civics has declined in recent decades. When Sandra Day O'Connor retired from

the Supreme Court, this was her number one focus. She developed something called ice Civics, which was an online curriculum, which is now, as I understand it, being used in half of the junior high schools throughout the United States. It's a huge deal. DA. Absolutely. Let's talk a little bit about the dollar as well. Obviously, that is something that Donald Trump has been paying attention to and talking about, or at least tweeting about where do you see the

dollar headed? And what do you make of the tweets of the of the report that he's calling up General Mike Flynn to ask sort of what's better a stronger dollar, a weeker dollars. That's an administration that understands currency flux exactly. I think most market participants understand that there are pros and cons of a strong dollar. A strong dollar all of the things being equal, suggests that there's confidence in the United States, especially relative to other nations because the

dollar is a relative price. On the other hand, a strong currency all by itself is something that could impede export growth. The United States, however, is not as sensitive to a strong currency as other nations would be, because so much of what we export is high value added goods and services, not all that that price depending. This

is critical. This goes down to terms of traits. I mean, this is just absolutely critical that a third world agricultural, single product nation can't really be compared in FX dynamics to a high value added US. Right, that's exactly every day, That's exactly right, Tom. The other thing that's very different about the US is that our dollar is the main currency, it is the reserve currency, and it is the safe

haven currency in this world. Whenever something goes wrong, including in the United States, there's a rush of foreign capital into the US UM. And we have to understand that there are large amounts of reserves sitting around the world. UM. The two largest holders outside the US China and Japan, and we have seen that China has been reducing its level of reserves of US dollars as interestingly, they have been trying to manipulate their currency, but manipulating it to

the side, not to the down side. Babby, thank you, thank you, thank you for coming in Emmy, Joseph Cohe of Goldman Sachs and not enough market talk there for those who want to know what Abby thinks about the SMP. But certainly there was a sense of caution versus alright, bullish. She may have more time to join us in the future. Yeah, back, maybe she she she can, she can she do traffic, Yes, particularly in Queen's now your Queen's traffic board. There they flow, queens.

They did very late last night, very like four in the morning. Joseph Cohen with Goldman Sachs at the point, Thank you, Greg Belly Horizon, Greg eight ways to go here. It's just been an extraordinary twenty four hours for all of us and our president. The certitude of his tweet last night assumes we vault to the Supreme Court. I have seen this morning alone, three or four experts say maybe not. What is the path from the Ninth Circuit Court And to begin the discussion, why don't they just

go to a larger appeals court decision? Well, I think you're right, good morning time. I think that, uh, if if he's going to lose in the Supreme Court with a four or four tie, which would uphold the Ninth Circuit, or loses five to three in the Supreme Court. He doesn't like to lose. So I think the White House now is considering other options. Maybe they modify the immigration man,

maybe they seek another court. So all of a sudden, that's a little cloudy within this in the greeting today and all the emotion of the Prime Minister of Japan visiting Arlington and the tomb of the unknown soldier folks, one steps, the salute, the second pause by the the officers and enlisted people there at the tomb. Within the drama and the picture is chaos. What is the part of the cacophony, Greg that you're focused on right now? Well, I don't want to be contrarian this morning with you, Tom.

I think that they do things like this masterfully. It'll be well orchestrated. There's going to be talk of Japanese jobs coming to the US. They won't talk about currency issues. They're going to play golf this weekend. It will be labeled as a success. This guy, for all of his flaws for this horrible week he's had, can still manipulate

the news cycle and brand himself brilliantly. Let me ask you about this phone call that we we heard about last night at President Trump calling Chinese president She's and being reaffirming the US commitment to the One China policy. Greg, what precipitated this and how important is it that the President made that call. I think it's a big deal, David, and it shows once again he can manipulate the news cycle. But a financial markets, this really alleviates fears of the U. S.

China trade war. It's a good story, just like Japanese jobs are a good story, just like his talk yesterday about tax cuts is good. So he knows how to push the right buttons to change the subject when the subject gets pretty ugly, like it did yesterday. You mentioned the symbolism that we'll see today at Arlington at the White House. How about in the budget. Are we going to see a budget from this White House that's going

to be replete with a lot of symbolism? And we've heard about cuts to the National Endowment of the Arts, National Endowment for the Humanities, et cetera. A small budget line items, but as I said, replete with symbolism. Is that what you're expecting when we get that document, it's going to be an epic battle. It will. It will far far surpass the fights we had with Ronald Reagan and his budget. The cuts he will propose will be enormous. Defense will get a boost, but everything else I think

would get a severe cut. And of course he's now going to start talking about taxes. We've got a long way to go on that, but he he will start talking about that as well. Greg, I know on the shortlist David Gura comparely, he had to be medicated yesterday. The Kale Council will be cut back there subsiden Yeah, Gregg, thank you so much for perspective. I you know, I think I said last time, Gregg, I can't get crazier. Well, guess what, folks, it did last night was extraordinary. Gregg

Valier with Horizon brought you by Bank of America. Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce Federan Smith Incorporated, Member s I p C. This is the most important interview of the day for all of you. Across America and worldwide. Noah Feldman in Moments from Harvard University and Harvard Law, with careful, non political, non angled discussion of what we

observed in American history yesterday. He's our most valuable players. Since January, Noah Feldman has brought clarity to the complexity of American law. Now let me start with the announcement, and everybody's punded this thing to death. You go back to eighteen sixties six. Daniel day Lewis saved the day for Abraham Lincoln late in eighteen sixty five, a tragic assassination. And then in Milligan we pick up the story of

what we observed yesterday in San Francisco. Why does a Ninth Circuit court care about Milligan of eighteen sixty six. The reason is that after Lincoln's death, the federal government kept on trying to use the same military courts that Lincoln himself had put into place during the Civil War against civilians, including civilians who were seen as having been

sympathetic to the Southern cause. And Lambdon p. Million was just such a person, a Southern Democrat, and he was put on trial for his life in a military court. Despite being a civilian, and the Supreme Court said no. It was a landmark decision holding that the criminal courts are open, and if they are open, then they have to be used to try civilians. The President United States is not the commander in chief ultimately of the country.

He's the commander chief of the armed forces. And in this instance the Court struck down the use of the miliary courts. And then you moved to two thousand and eight with a sitting Judge Anthony Kennedy, and this is Guantanamo Bay in Cuba, where the courts said to President Bush what they said basically to President Trump yesterday discuss is it Boomadian exactly? Yea, just us so and so.

In the Boden case, which is the last, the culminating case of the Guantanamo Bay cases, Congress with the signature of the President, had officially said the basic right of habeas corpus just doesn't apply to the detainees in Guantanamo. There there they can be tried by a military tribunal and the courts don't get to review the tribunal with the tribunal did and Justice Kennedy, writing for a majority of the Supreme Court, said more or less I'm quoting here.

It's not up to Congress and the President to treat the Constitution like an on off switch. The Constitution is there, and therefore we're going to apply the Constitution even in Guantanamo Bay, which less we've forgotten, isn't actually part of the United States. But Justice Kennedy says, we're going to treat it as though it is in order to make the point that nobody is outside the reach of the Constitution.

And the Court gets to say that. And as you say, that's exactly what the Ninth Circuit panel said yesterday to President Trump. Now, how did these attorneys channel deal with

the issue of standing in this case in particular? Well, as you know, it's an open question whether states rather than individuals could bring a suit challenging President Trump's executive order on immigration, and the Ninth Circuit said that the reason the states of Washington and Minnesota were allowed to bring that suit is that they basically have a job of running universities, and through their state universities, they hire professors from abroad, they bring in visiting speakers from abroad,

they have students who come from abroad. And the court bought the argument that the states in that job, essentially as university proprietors, are affected by the immigration order and therefore can come into court not only on their own behalf,

but also on behalf of their students. And then went all the way back to the beginning of the twentieth century to site cases where schools were able to bring claims on behalf of their students, including a particularly important education case called Pierce against Society of Sisters, which is all the question of whether a private religious school was allowed to teach German, which actually been prohibited as part of the anti German legislation at the time of World

War One. And it's a famous case and every law student reads it. The court ultimately said that you can teach your kids any damn thing you please. And the Supreme Court side of this for the unusual proposition that the case is actually brought by the nuns who ran the school. Help me understand how many parallel tracks we have here. There's talk of this case not going to the Supreme Court, of course, said remember the night of this band going into place. There is a decision in Brooklyn,

another one shortly followed in in Massachusetts. How do you how do you make sense of all of this stuff? How does it all fit together? You're absolutely right. There are those cases, and then there are more. There's a Maryland case, there's another case now in Dallas. You know, there are many many approaches. If you were the you know, if you were the Department of Justice right now, you'd be looking around the country and thinking that you're you know,

you're like the swordswoman in Kill Bill. You've got attackers coming you from all directions, and you've got to wield that sword and you've gotta keep on going after each and every one of them. That, unfortunately, is the reality, that's the legal reality from the perspective of the Department of Justice and the Trump administration. Because of our system of courts, we are the only person, or the only institution rather that can impose uniformity on the federal courts

is the Supreme Court. And you can't get to the Supreme Court right away. You've got to work your way up through the lower courts. And so that's what happens when an administration gets challenged. You know, something similar happened in the Obama administration when there were various challenges across the country to the Affordable Care Act. They happened all over the country, and they gradually made their way up to the Supreme Court. So that's the That's the way

the game is played. It's not how you or I would probably design the game from scratch, but that is how the several court system has devolved in US history, for better or worse. What's your sense of how equipped

the Justice Department is to deal with with that? To be a swordsman fighting so many adversaries here, Remember how on the night of this argument in Seattle, how that telephone argument that the lawyers who were assigned of the case were removed from it because of their previous affiliation with Jones Day and a backup I think we can say was was shifted into to argue the case. Now the Justice Department has a new Attorney General, Jeff Sessions,

sworn in, confirmed and sworn in. How how prepared, how ready is this Justice Department to defend this in so many venues? Well under normal circumstances, my answer would be extremely ready. You know, the d o J is not just an institution run from the top by an Attorney in General, though it of course is that. It's also got a huge deep bench of excellent lawyers who are what are called career employees, that is to say, they're not political employees hired and fired by each new president.

There are people who have devoted their lives and also their pocketbooks because they make a lot less money in the Department of Justice than they would in private practice to defending whatever positions the federal government takes, and also to litigating issues on behalf of the government, and those professionals are ordinarily often the best people for the job. You also often you almost never see the Department of

Justice outsmarted or outguns in their litigation. What makes this case a little different is that, in a way, the position of the administration is a bit of a moving target. And I'm trying to say this is objectively as I can. Because of the way this executive order was rolled out without first being vetted through the usual d J channels, there wasn't a kind of fully developed defense of every last aspect of this order that you would usually have

when a government plan was put out. And you've seen this in the court challenges, and it actually was an important factor in the Ninth Circus decision yesterday as well. So where we are this morning. Do they go back and do it right, or did they barrel forward all of the style of our president. Go to the Supreme

Court and confront Justice Kennedy and the rest. If the real goal was or is, to get some version of the executive order in place that will survive judicial review and make it through the Supreme Court, and if I were saying they're advising the presidents on that, I would say, that's your goal. Go back and do it again. Write a new order that says it doesn't cover green cardholders, it doesn't apply to anyone inside the US. You can keep on talking about these countries, but make it very

clear that it's not a ban on Muslims. Take out the part that says that once we restart immigration, we're going to favor religious minorities, which means Christians. And then you have a very good chance of getting this to the courts. Without that, the odds seems very high that this will go down, both on its merits and also because you know, the courts are just like anybody else.

They don't like somebody stepping on their toes. They don't like the president stepping to them, and Justice Kennedy and the rest of the liberal justices, regardless of what they think of the executive order itself, are going to experience

the White House statements as a as a threat. A tweet crossing the transom, just a moment to go from real Donald Trump, the president's personal account, he writes, citing law Fair, the National Security Law website run by Benjamin Wittes in cooperation with the Brook Institution, saying law Fair remarkably in the entire opinion, the panel did not bother even to cite this the statute. He then writes, a

disgraceful decision. Want to bring a Feldman again. He is professor of law at Harvard University and the Twitter two oh two at Harvard Law. We'll have to ask Noah Felton joining us here on the Special Enterprise phone line, Special Enterprise nationwide fiber based networking I T infrastructure solutions. Now, I'll just have your react to this. You can tell us if there is Twitter two out two at Harvard Law. But I guess the broader question here is we have

the President waiting and very vociferously on this decision. Well, I think it would be great to offer Twitter two or two, But first I'd have to take it. I'm just learning how to use the darn thing myself. However, at this point it's part of our It's gonna have to be part of the curriculum. Since the president's litigating this case on Twitter. You know, my short answer is, had I written the opinion, I think I would have spent a little bit more time addressing specifically the statute.

And there are legal arguments to be made on both sides. The Statute on one level, does appear to give discretion to the president. On the other hand, the Supreme the Ninth Circuit made it really clear that that that statute is still trumped by the Constitution and that the President can only exercise this authority pursuant to the Statute through the lens of not violating people's rights to do process

and against religiou discrimination. But yeah, if I had written it, I would have put a lot more discussion of those issues into the opinion. That said, I do teach my students that the way to litigated cases through your briefs and not through public communication, primarily because it tends to get the judges back up, and judges are human beings and this is not historically the best way to convince judges to be sympathetic and the onlyad to try to

bully and insult them using Twitter. Maybe the president has some idea that's going to be different this time, but at least so far, he's discovered that the courts are pretty different from other people whom you can sometimes pressure through external media. The courts tend to react the other way. We had Happy Joseph Cohen of Goldman sax Here a few minutes ago. She was talking about the lesson in

civics we're getting right now. When you look at the the integrity of these three branches of government right now, are you are you confident in how how great the integrity is. I would say that I am enthusiastic, but not utterly confident. The Republic has been tested before, and our record is mixed. Sometimes, especially in wartime, the executive branch has been able to get away with some pretty

outrageous things in recent memory. You know, even great presidents like Franklin Delano Roosevelt, who, regardless of what you think about the New Deal, was great in terms of winning World War Two, managed to suppress Japanese American rights and in turn, a couple hundred people and the courts let him get away with it because they were loyal to the president. So you know, we shouldn't pat us us on the back and say the courts will always work.

On the other hand, we also have a consistent line of cases, some of which were sided by the Ninth Circuit, in which the courts have stood up to the president. And since we're not I mean, we have wars going on in the world, but we're not in a kind of war that we were in in World War Two, my guess is that the courts will sufficiently send up

to the president on this one. Give us a civics lesson, Professor. Finally, here, where does Judge Roberts fit into the debate, the dialogue, the process if we go to the Supreme Court very soon.

You know, the Chief Justice, to my mind, is a follower of the great Justice Felix Frankfurter, who was significant because he started his career as a liberal arguing for judicial restraint, which was a liberal position, and then when the Court got a majority of liberals, the rest of them said, okay, well, let's let's get beyond that judicial restraint business. Let's just start deciding cases the way we want to decide them, and he said, well, wait a minute,

that's not how we got here. We believe in judicial restraint. And so then he became a conservative and by the end of his career he had no friends. I have the feeling that that is where Chief does Is Roberts himself,

maybe maybe headed. He believes in judicial restraint, and he's exercised it more or less when the chips were down in the important cases before him, including the Obamacare case, and that has made the conservatives very, very very skeptical of him, even though he began as a conservative hero. And you know, that's to me, that's what a judicial hero is is someone in the middle of his sticks by his guns, no matter which side is against him. And I have faith in the Chief does Is Roberts,

that that's the direction he's headed. It's not the way to be loved, but it is the way to be honored. Professor, we are on it that you've been with us here a number of days recently, somehow, I think will speak

again soon. I should point out that Noah Feldman is the Felix Frankfurt Professor of Law at Harvard Law School, bringing full circle uh important law of the twentieth century into the cacophony known as UH February two thousand seventeen, I urge you to consider Noah Feldman's Bloomberg View columns.

They are exceptional valued and you can tell David There's killing himself not to have a political angle yesterday, So addressing this the ninth Circumcision and then also the the ethics concern Serna, Kelly and Conway, and there's been very good, very very good coverage on other networks. I mean, we were very fortunate to have a lot of actual legal

talent with background in depth a pontificating. Unfortunately, wrapped around it is a fair amount of punditry, David there is, so we stray away from that as much as we can. Thanks for listening to the Bloomberg Surveillance podcast. Subscribe and listen to interviews on iTunes, SoundCloud, or whichever podcast platform you prefer. I'm out on Twitter at Tom Keene. David Gura is at David Gura. Before the podcast, you can

always catch us world. I'm Bloomberg Radio, brought you by Bank of America Mary Lynch, dedicated to bringing our clients insights and solutions to meet the challenges of a transforming world. That's the power of global connections. Mary Lynch, Pierce, Fenner and Smith Incorporated, Member s I p C