Welcome to NoMore Risk Better, a Credit Sites Podcast. Across the Global Strategy Team, we aim to make sense of the macro and the micro, highlighting opportunities and the risks facing the fixed income markets. As the macro makes headlines, we leverage our network of experts across fidget solutions to better understand economic trends, rates, diorations, geopolitical events, and how these factors impact corporates. At Credit Sites, we understand that credit investing comes down to picking winners to generate alpha and avoiding losers.
Our team over 100 analysts across the US, Europe, and Asia provide unmatched sector expertise and fundamental knowledge. In our weekly podcast, the strategy team offers a look at the conversations we have with our colleagues, including analysts, fellow strategists, economists, and leveraged finance market experts. If you want to know more so that you can risk better, you'll want to give this podcast a listen. Hello everyone and welcome to the Credit Sites NoMore Risk Better Podcast.
This is when he sees our Global Head of Strategy at Credit Sites. And today we have a doozy of a podcast for you. We are talking all things legal updates, Supreme Court, in the upcoming term with our Head of Special Situations Legal Research at Credit Sites, Mark Leitner. Mark, thank you so much for joining us today.
Thank you, and it's always great to be here. I know that your head has been spinning to start the year as there have been a lot of a lot of legal headlines, a lot of executive orders, following Trump's return to office in January. Mark, you are an absolute expert in so many of these different topics, and you and Zach work closely on a Fed Independence note, which was very well read. And since then, we've continued to just see so much come out of Washington a lot on kind of a sense of urgency and potential shaping of the political business, economic landscape.
We've also had a number of very high-profile, controversial cabinet appointees, pretty much all of whom have been confirmed, which is kind of wild, just given to see how we've managed to get the Republican Party to kind of coalesce around some of these maybe a little bit more controversial picks. So there's definitely a lot to follow, Zach, what have you been focused on? Yeah, it's hard to pinpoint a single or even several things, but obviously tariffs have been huge in terms of shaping the market landscape and international relations, getting a feel for how the Trump administration is using tariffs as a negotiating tactic. I think when you look at what the markets are doing, you're starting to see a bit of a dichotomy in terms of how the front end of the curve is, pricing inflation risk-related tariffs, and maybe the longer end is focusing more on the growth side.
So I think that's a really interesting dynamic from the markets perspective, but markets definitely the great guess to help us understand all the moving parts, and then we can hopefully distill that into some market takeaways as we look ahead. So today we're going to talk about executive orders, of which there have been many marks going to take us through that. We're going to go through our Fed Independence note a little bit and a Supreme Court in the 24-25 term. So Mark, without further ado, let's bring you in here.
What are executive orders and do they have the force of law, I think, is a great starting point to take this discussion? Executive orders are orders issued by the President of the United States, and they have the effect of the force of law vis-a-vis the federal government. So it's a directive to the various executive agencies and departments of the federal government to guide and shape policy. Now, just to kind of put it in perspective, there's roughly over 100 executive departments and agencies in the federal government.
They have well over 2 million employees in the federal government, and it's one of the largest players in the private markets, too, right, because it's a large contractor. They utilize the private sector a lot. So when the executive, i.e. the President, issues a directive to the federal government to do a certain thing.
It has significant implications both for the operations of the federal government but also in the private sector. So since Trump's been in office, he's issued roughly 65 executive orders. We're about 30 days in. And that's not that uncommon, right?
Presidents come in all the time. They issue executive orders to implement their policies on day one because they don't need congressional action to do that. But as we've seen President Trump issued a whole flurry of executive orders, even on the first day of his second term. So those have been in effect, and a lot of them, and we'll talk about them, have been challenged and court-already.
I think what has really stood out to a lot of people is Trump 2.0 is not the same as Trump 1.0, right? There was a very well-organized strategy, especially on the executive order from day one, I mean from our run, one after being inaugurated. And I think on the executive order side of things, there have been some really, I know dare say, sensational headlines related to some of these different executive orders. Mark, from your perspective, what are some of the really hot topic kind of first priority executive orders that Trump has issued so far that you think have pretty meaningful implications?
Yeah, no, exactly. And you're absolutely right. President Trump and his team were much more prepared, I'll say, than they were the first time around. There's actually videos and photos of President Trump signing executive orders the afternoon after he was inaugurated in the arena in Washington.
So they were prepared to go out of the gate on day one. And there's a whole flurry of what I'll describe as controversial or sensationalistic executive orders that have been issued. The first, at least in terms of impacts for investors and the like, was a directive issued by the director of the office of management and budget to freeze all federal spending, federal assistance programs. And that was really troublesome for a lot of people to market, particularly in the meaning market.
For example, I had a lot of people reach out to me and said, hey, are all these municipalities that are expected to receive federal funding? Are they going to receive those funding? And so there's a lot of confusion, concern and the like, but that was ultimately rescinded. So I think that was probably the most controversial in terms of day one.
But there's been a whole flurry of additional executive orders related to diversity, equity, inclusion, the hot topic of DEI. One of the additional very interesting things that Elon Musk and the Doge group have done is they've sent an email out to every federal employee over two million offering them the opportunity to resign by September 30th in order to kind of call the federal workforce. So those are two big initiatives, executive orders, and probably the biggest one in the news that we're all very familiar with. And when you and I have discussed this on several occasions, and that relates to the ban on Tik talk.
So Donald Trump came into office on January 20th. The ban on Tik talk went into effect the day before on January 19th. The Supreme Court earlier in January had upheld the ban on Tik talk. And Trump basically came in and wanted to save Tik talk and come up with a way to sell it to an American interest.
So he negotiated with Oracle, which was the cloud service provider, and more recently negotiated with the App Store owners, Google, and Apple to put it back on the App Store. But that was a huge initiative in executive order that Donald Trump dealt with on day one. Mark, I want to jump in and this temporary pause of federal assistance programs, the offering of a buyout for these federal employees. I actually anecdotally have a friend that is a federal government employee who was skeptical that the buyout would actually get paid having worked with some of these contracts.
She noted that there's really not a line item to address that. I don't know the ins and outs of it, but I think there was some skepticism on that front on what it would ultimately mean. And she's down here in Charlotte. She has been called back to DC, so we'll have to move if she wants to stay with the federal government.
So there's certainly a ton being shaken up. I am personally experiencing it, or at least know someone that is personally experiencing it. This kind of brings me to the idea of not spending money that's been approved to be spent by Congress. And I believe that's impoundment.
Can you take us through what's going on with impoundment, how it relates to this first topic, and how perhaps it's a little bit broader in nature in the constitutional challenge that that type of procedure would face? Yeah, absolutely. It's a super interesting constitutional and legal question that the Trump administration, Elon Musk, Doge, and the like are setting up for a clash that will ultimately be resolved by the United States Supreme Court. And I've heard political commentators outright say, I heard Steve Bannon tell the Wall Street Journal recently that their activities and actions are intending to set up a constitutional challenge to this notion of impoundment.
And so, exactly what the heck is impoundment. So let's talk about what the concept of impoundment is. Congress, let's go to first principles. Congress has the power to enact legislation, and the president has the constitutional duty to be the administer of duly enacted laws.
So Congress has the power of the purse. It raises money through taxes and the like, and it instructs the executive to spend money in accordance with the directive set forth by Congress. So you have the co-equal branches of government, the Congress that enacts the laws and imposes the taxes and then you have the executive, which is headed by the president, who is supposed to spend the money and enforce the laws as enacted by Congress. Well, what we have here is we have a situation where the executive is saying, notwithstanding, the fact that Congress has raised the money and determined how to spend it.
For policy reasons, the executive is saying, I don't want to spend it. I'm going to impound the money and withhold the spending of that money. And so there's actually not a ton of case law on this issue because it hasn't been addressed that often in our country's history. There's some sparse case law related to something called a line item, Bito from the 1990s.
President Nixon in the 70s tried to do this. The Supreme Court shot him down. But that has never been addressed from a purely constitutional perspective, which is can the president withhold the spending of money that has been duly authorized by Congress because the president doesn't want to for policy reasons? And that's the fundamental question that Trump and his associates and his supporters are trying to tee up to be decided by the Supreme Court.
Now, I've profound implications if the court says that the president can simply decide what to spend money on. It's been duly authorized and directed to by Congress. So I want to follow up, Mark. What would an example of this be?
You know, there's doge that's trying to cut employees, cut expenses. How would we, how do you think about the cross section of the pause of federal assistance programs versus outright impoundment? Is that what does that have to apply to be considered impoundment? Yeah.
So look, this is all going to be settled out in specific instances and facts that are presented to courts in order for them to decide these cases, right? So you're going to have a situation where Congress has said that the executive is required to spend X amount of money on Y cause and Y cause is going to be unpopular to Trump and doge and the like. And he's simply going to say, I'm not going to authorize treasury to spend the money on cause Y, right? It could be anything from, you know, COVID vaccines to the like or any other kind of unpopular cause.
The Congress has said you have to spend this money and Trump is saying I don't want to spend it because I don't like the reason why we're spending it. And so that is setting up the specific legal issue. I mean, it seems wild to me that in a theoretical separation of powers type governments, we have just one person saying, okay, I don't, I don't want to spend this money, even though Congress has already passed it. I think that there's been a lot around, you know, are we in a constitutional crisis?
Does the action so far kind of rise to that? Can you just talk a little bit about kind of the path to the Supreme Court for an empowerment constitutional challenge? Have there already been lawsuits filed? How long would something like that take to play out?
Yeah. So there have been lawsuits that have been filed to basically all of the executive orders that have been issued by this administration, which is not surprising or controversial, right? And you know, like I said, there's been lawsuits to the first executive order related to the federal assistance program. And lawsuits related to the federal buyout, the TikTok ban and the like.
So there's a number of lower federal courts have decided against the federal government, decided against Trump. Some have decided in favor of the administration and some have decided against him. So the Simpama challenge will really likely come up in the context of a recipient of federal funds who is entitled to those funds as a matter of law, soothes for the release of those funds and Trump says no. And that issue will, you know, percolate and make its way up presumably through the court system over time.
All right. So I guess we're just in wait and see mode on the other executive orders that you detailed, you know, those on DEI, the federal government employee buyouts. What do you think is kind of most important for markets and the outlook for corporate America, right? We've seen a lot of headlines around banks and their DEI initiatives and then, you know, headlines around Bank of America wasn't banking conservatives and that has to change.
And then Jamie Diamond saying, well, we would have rolled back some of these DEI initiatives anyway, you know, versus the federal government employee buyouts where we've seen government job ads as a pretty significant chunk of payrolls over the past couple of years. How are you thinking about kind of the order of priority in terms of impact for some of these different executive orders? Yeah, I think so let's you mentioned DEI first. Let's talk about that briefly.
So, you know, President Trump came out with and basically wiped DEI clean from the federal government. And with the stroke of the pen, all hundred plus federal agencies were required to effectively get rid of all DEI related programs. And some of these programs and initiatives I might add have gone back several decades, like 50 years. So this is not something that is like an Obama or a Biden policy, right?
This is something that has been around for a long time and so we've really rolled that back. And one of the important things about that particular executive order, so not only does it seek to wipe the federal government clean of DEI initiatives, right? It requires any person that's entering into a contract with any federal agency to also effectively try and wipe away their DEI programs. So it has a huge market impact related to the way the companies behave more generally in the private sector.
And in addition, Pam Bondi, who is the newly appointed attorney general, sent out a memorandum to the entire Department of Justice, like on her first day of employment like a week ago, and she basically said that we're going to use the Civil Rights Division of the Department of Justice to investigate private employers who have DEI initiatives, right? So they really view this as a civil rights cause. And so large companies, as you mentioned, large banks are rolling back their DEI initiatives daily. And in fact, the Wall Street Journal just yesterday reported on the large banks are rolling back their DEI efforts.
They're scrubbing their websites, they're scrubbing their policies. And then like because they don't want to be litigation targets in Trump 2.0. So we're seeing a real shift in corporate America away from DEI. And look, you know, a lot of companies in retrospect say it would have been really nice not to have DEI.
We were going to roll it back anyway and then like. But this is truly kind of a tidal wave change in the way corporate America is viewing DEI initiatives. Yes, crazy to think about the government taking that aggressive of an approach in private companies handling of DEI initiatives. Mark, I want to go to something I alluded to earlier.
I think I conflated the positive federal assistance programs with the federal government employee buyout. Can you just take us through some of the details of that fork in the road initiative, kind of what the goal is and how the unions are handling it, how you're thinking about this situation relative to employee rights and the like? Yeah, sure. About two and a half, three weeks ago, the Office of Management and Budget sent an email to all federal employees.
And there were some exceptions that I think postal workers and immigration agents and members of the Department of Defense, I.E. The military didn't receive it. But beyond that, basically every federal employee received this email. And it was referred to as the fork directive or the fork in the road because it gave federal employees a choice.
And the choice was you can come back to work five days a week in your office, as Zach, you mentioned your friend may have to move back to Washington, D.C., right? Or you can take a federal buyout and leave your service with the federal government by the end of September. So it gave all of these employees a choice. And you mentioned, Zach, you're like, well, is that a real promise?
Can people rely on that and the like? And that's, I think, really, very much an open question. And a number of unions through the federal government saying, you know, this violates all sorts of different provisions of federal law, which, you know, probably is the case, but it is what it is. And the federal judge, here in that case, put in a temporary pause, but ultimately decided that the unions in that case didn't have constitutional standing in order to challenge it.
So the fork directive went ahead and went forward in the last week. So that's what happened. I understand, you know, tens of thousands of federal employees took up this offer. I don't know the exact number.
I don't know if that's been published, but it's, you know, a lot of people have taken it up. One of the criticisms of this directive is that it wasn't thoughtful in terms of targeting certain types of employees, certain types of employees with certain skills. It was just an across-the-board directive. We want to cut headcount.
And so, you know, some people may say, oh, that's a really laudable goal. I mean, there's a lot of fat in the federal government. But on the other hand, you want to cut the fat. You don't want to cut the meat, so to speak.
And so that's one of the concerns that people have had. Yeah, presumably the people who are going to take the offer have something else that they can go to that they feel is like a better opportunity. And usually those are the better performers. Exactly.
So it will be very interesting to see who's left, who takes this offer and who does not. So another executive order was the Pause a Foreign Corruptive Practices Act, Enforcement to Further American Economic and National Security. What is that? Why are we focused on this?
So this is actually a really big issue in corporate America. So under American law, under federal law, there's a law called the Foreign Corrupt Practices Act. And it prohibits American companies from engaging in corrupt, corruptive behavior on foreign soil. And the idea is it's designed to root out corruption around the world.
And there's a division at the Department of Justice down in Washington, D.C. that is responsible for effectively going after American companies and American interests for engaging in behavior that we would consider inappropriate in America that may otherwise be more accepted on foreign soil. And so this is a very expensive thing that American companies that deal internationally with have to deal with. They have to have compliance programs and the like.
And a lot of companies have spent a lot of money, both on lawyers and compliance programs and fines, just by it's almost like an ordinary course of business cost in order to do this. And the Trump administration, just last week, basically said, we're going to pause all of that enforcement and take the resources of the Department of Justice and move them elsewhere. And so that for a lot of companies, that's a big deal who, you know, interact on a foreign level is bad for law firms because law firms make a ton of money with these kinds of investigations and lawsuits and the like. But companies that will be a real shift for those who interact with foreign countries.
I guess that ticks my I'm long lawyers in this administration down a notch, but I'm sure that the lawyers will find a way to make some cash. They always do. I just read in the, and it was either Bloomberg or Wall Street Journal this morning that there's a whole flood of government lawyers that are leaving the administration and are now looking for work in Washington, D.C. So there's a huge glut of supply in D.C.
So it'll be really interesting to see how that plays out over the next. That will be really interesting. So I just, I don't fully understand what is the motivation for suspending FCPA enforcement? Why would we not want to be focused on this type of behavior?
That's a good question. I assume based on what the executive order says, it's for a competitive disadvantage that we're handicapping American companies potentially. And that's just not where we, as, you know, Department of Justice as a government wants to put our resources. In fact, I think the directive suggested that they were going to take the resources, you know, the FCPA enforcement division and use them to fight cartels and things like that.
So things that are not that interesting necessarily to corporate America. So maybe that's the first concrete step of deregulation, which really hasn't been that prominent so far. Mark, I want to go back to the TikTok ban that you alluded to earlier and the timeline with that. So as far as I can recall, Trump delayed the enforcement for 75 days to assess national security concerns.
What's the latest? I've seen some headlines. I can't remember if it was UN Musk is not interested in the TikTok US business, which is an interesting consideration altogether, but kind of take us through where that stands and how you're thinking about where we go from here. Yeah, that's a great question.
I don't have any additional insight in terms of how the negotiations are going or going at all. Task JD Vance with kind of spearheading that project to find a buyer. I don't know if you're setting JDF for failure or not, but that's something that JD is going to be doing. But one of the things that's so interesting about the law, right?
So the ban went into effect on January 19th and it gave the president an additional 90 days to try and find a buyer, although the 90 day was supposed to only occur if they in fact had a buyer, but putting that to the side for a second. So we've got a very short window here to find a buyer and to close it. Otherwise, companies like Oracle, Apple, Google, they're going to get a little skittish about continuing to allow TikTok to be on their platforms to be sold in their stores because they're opening themselves up to significant civil liability. And I should note that one of the reasons that TikTok is still around is that the Department of Justice through President Trump has given assurances.
And I'm not sure exactly what those assurances are that these companies will not face civil liability, but it's not entirely clear to be a buyer, a general counsel of these companies that I would take a lot of solace in that, at least in the long term. So I think there's a time horizon on this, whether it's actually going to be 75 days or if Congress is going to intervene or whatnot. But that's the latest in terms of who the ultimate buyer is. I don't have any more information than you do or what we see in the headlines.
So my big takeaway is JD Vance is the head of the investment banking unit of the federal government, and he's on a very tight timeline to get this deal done. Well, he's been in Europe all week, so I'm not sure he's been working on it very hard, so we'll see what happens. A lot of competing priorities for him to deal with right now. Indeed.
Indeed. I'd love to see that pitch deck. Well, for now, I'm going to continue to consume my TikTok, like a grown up through Instagram, a solid month after whatever has come out. So another thing that we may or may not be looking at on TikTok is conversations around the federal reserve and independence.
This was one of those topics that was really in the news or at least a big part of the conversation during Trump's election process and campaign process. And then I felt like it died down a little bit, but I think that people are still very focused on what is the outlook for the federal reserve, what is the relationship between the Trump administration and Fed Chair Powell especially. So Mark, can you just walk us through what Trump may do to challenge the Fed's independence? Sure.
So there's been a lot of talk, as you mentioned, about the independence of the Federal Reserve and you and Zach can obviously talk about this, thoughtatively, and the importance of the Federal Reserve having that independence and why the markets think that's so important. But in terms of what Trump can do, one of the things that we've been very concerned about is that Trump would direct the Federal Reserve to do a certain thing from a policy perspective and let's just use lowering interest rates as an example. I believe it was Thursday after Trump was inaugurated, he went on a video zoom at the World Economic Conference and said, we're bringing down interest rates, I'm going to bring down interest rates. And that was, he said that about 48 hours after we published our note on Fed independence, right?
And we didn't hear anything of it for a couple more weeks, but he brought it up again, I believe it was last week. So we see that the administration's objectives, policy objectives may not always be in line with what is good economic policy and what the Fed wants to do. So there's a concern that President Trump is going to try and strong on the Fed into doing certain things. So there's really a continuum of things or potential things that Trump could do.
He could exert pressure on the Fed, Chairman Powell privately or publicly and alike, or he can even take more extreme measures and challenge the authority of the Federal Reserve more broadly. And one of the things, frankly, the concerns me is that President Trump will try and fire President, Chair Powell just outright. And Chair Powell, as a member of the Fed, enjoys statutory protection from firing at will. He can only be removed from the board for cause.
And that quote unquote, for cause standard is not clearly defined. And it's unclear from a constitutional perspective whether that statutory protection would ultimately be upheld. And so just to step back for a second or so, the Supreme Court has been very receptive in recent years in terms of giving President the power to remove heads of agencies at will. And so there's a real concern here that if President Trump tried to remove Chair Powell and if Chair Powell, of course, would resist that and try and litigate it, that there would be a fight that would ultimately have to make its way up to the Supreme Court who would decide whether the President has the power, in fact, to remove members of the Federal Reserve Board.
So I think that is kind of interesting dovetail. So what are the implications of the recent Supreme Court rulings on independent agencies and how we're thinking about how the Trump administration can interact or affect change at the Fed? Sure. Sure.
So there was a recent case just a few years ago and the issue was whether the President could remove the Director of the Consumer Financial Protection Bureau. And in that case, the Director had statutory protections that were somewhat similar to the protections that Chair Powell and the rest of the Federal Reserve enjoy. And the Supreme Court said no, notwithstanding the fact that the statute itself gave the Director of the CFPB statutory protections from firing at will by a President, the President still had the constitutional power to do that. And interestingly, just in the last week, the Acting Solicitor General of the Department of Justice, which is the Solicitor General is the government's primary lawyer at the Supreme Court, issued a memo stating that they're going to take the position that the protections for the Directors of the Federal Trade Commission, the National Labor Relations Board, and the Consumer Product Safety Commission, who all have statutory protections that are similar do not have protections as a matter of constitutional law.
So the government's lead lawyer is starting to take the position that all of these people who run these agencies do not have such protections. And so they didn't mention the Federal Reserve, so they haven't gone after the Federal Reserve at this point, probably for who knows what kind of reasons we can speculate, but they haven't done that yet. But on February 12th, took that position publicly. So they're setting the groundwork in some ways.
And there's no legal or constitutional difference between the statutory protection of the heads of these agencies and the Fed. Is that correct? Well, lawyers are very smart. They can look at a statute and say, you know, the statute says, X, that statute says, Y, they're different.
They serve different purposes, right? The Federal Reserve is more important, for example, than the National Labor Relations Board, and we should treat those officers, those directors and board members differently in the like. And the receptivity of members of the court may view those things differently for different reasons. I'm not prepared to say that the protections are different because they hold different purposes, both legally and in the economy.
So it's just a matter of what the courts will ultimately say. Of course, and it all assumes that there's some kind of challenge to the Fed's authority. OK. So perhaps, and hopefully, the Fed is not mentioned specifically for good reason, which I think is certainly hugely important for the markets.
The one other follow-up I had for you, are there any other aspects of the Federal Reserve Act that you think could be in the Trump administration's crosshairs as, again, we think about the interaction between the Trump administration, the Treasury, and the Fed? Yeah, I mean, we talked about this a little bit in the note that we issued a few weeks ago, which is that the Federal Open Market Committee is made up of a mix of, obviously, the Federal Reserve Board members who receive presidential nomination and confirmation by the Senate. But they're also made up of individuals who are presidents of the different Reserve Banks, and they rotate on and off the F1C. And there's a constitutional doctrine known as appointment.
So if you are an officer of the United States and you exercise significant authority under the laws of the United States, if you set policy and the like, you were required as a matter of constitutional law to be appointed by a president and confirmed by the Senate. And so scholars have argued that some of the members of the FOMC who did not receive presidential appointment and confirmation by the Senate may not have the requisite constitutional authority to act on behalf of the United States by implementing such important policy decisions, like, you know, changing interest rates and like. So there's a lot of grumblings about that, a lot of professors have talked about these issues. We talked about it in our note.
So that could potentially be an avenue of attack. But I haven't seen anything publicly or the like that that's something that's imminent. I guess it would require one of these regional Federal Reserve Bank presidents to start voting for rate hikes and maybe that would change the situation a little bit. That could potentially cause people to go or.
Yeah, I think that that's a really good point, Zach, because, you know, right now the market seems to think that the Fed is on track, right? Like the market is continuing to make new highs and equities, rates, volatility has come down a little bit this year. Credits are super tight. We haven't seen a lot of spread volatility.
But I think that if there is the perception that the Fed has perhaps started to make some sort of policy error and is behind the curve or if the Fed starts to say, oh man, this inflation, it is not coming down like we'd like it to. We might have to open the door to rate hikes. Then the market is going to push back on that. And so there could be this kind of dichotomy between the market response to some sort of perception of a regime change of the Fed and the institutional response, which I think would be much more negative.
So, you know, if there's talk around, you know, we need a more double fed or whatever it is, the market could take that and be positive on it because that brings lower interest rates. And, you know, there's that kind of cascading effect. Whereas the institutional response, and I'm thinking specifically at about the sovereign rating for the US, Moody's has the US on negative outlook. And as part of that, it's kind of a loss of faith in the institution and the deficit and all of these things.
We could be setting up for a really kind of interesting fireworks show if the market and broader institutions are operating with perhaps different motivations in mind. And that can only last so long, right? Like at some point, those two things have to coalesce and be on more of the same page, but you can get some dislocations. All right.
So I think that we've talked a lot about what has happened so far. And some of our expectations for the Fed and some of these executive orders. But, you know, the Supreme Court has a pretty high profile docket coming up. Mark, when you are looking through what the Supreme Court is going to be analyzing this year, what stands out to you is most important.
Yeah, that's a really interesting question. When you know, we've obviously already had the TikTok decision that came out in January. So that's what I'll describe as a big watershed decision for the Supreme Court this term. But there are a number of cases that were obviously following it.
But there are two that I wanted to highlight today. And the first relates to certain subsidies for the federal telecom subsidy program. And the second relates to California emissions for the sale of new vehicles. We'll start with the California emissions for the sale of new vehicles.
Interestingly, under the Clean Air Act, the Clean Air Act sets emission standards across the United States for the sale of new vehicles. If you go buy a new car, it has to meet emission standards set forth by the Environmental Protection Agency. The Environmental Protection Agency under the Clean Air Act gives California the option, if it so chooses, to set emission standards that are higher than the federal standard. So the EPA can give California a waiver from the federal standards if it imposes standards that are in excess of the California standards.
And Congress has also allowed other states to adopt the more strict California standards. That's really interesting. And this all happened in the 1960s. So for 30, 40 years, there was no controversy related to this because California had all kinds of smog issues and so California had stricter emission standards.
For its vehicles for a long time. Fast forward to the Obama administration. California at the time said, hey, we want to put our footprint on stamping out greenhouse gases. So as opposed to regulating smog and particulates, they wanted to impose certain requirements on auto manufacturers to reduce greenhouse gases and promote electric vehicles.
And so the Obama administration granted California a waiver to do that. And I should note that California is really important from a macro perspective because California is such a huge part of the American economy. It can drive market expectations and dynamics and the light. So whatever California does, it drags the market for new vehicles with it.
And so California imposed these higher standards. The Trump administration revoked this waiver. So the Trump administration said, no, you can't impose these more stringent standards. And the Biden administration gave California the waiver again.
And so a bunch of industry participants who have an interest in fossil fuels challenged this waiver in federal court. And the federal court threw out on the grounds that the fossil fuel companies do not have constitutional standing to challenge this particular waiver. And the Supreme Court granted review on that particular issue. And the question is whether these fuel participants, right, the National Petroleum Institute and the like, have standing in order to challenge this constitutional waiver.
So I think this is a really interesting case, both for the auto sector as well as the fuel sector, the gas industry in terms of the ability to challenge California's kind of trend setter, you know, spot in the market. Now, of course, the Trump administration may revoke that waiver. So this issue may not actually come to a head from a merits and fundamental perspective for a number of years, but we're setting the groundwork to allow people to challenge this waiver on a go forward basis. So it's really interesting from that perspective.
So that's, that's the first case. The second case relates to subsidies that are imposed pursuant to the Federal Communications Act of 1934. Just by way of background, Congress has kind of an overarching goal that they want universal access for people who live in rural areas to have access to, you know, telephone, high speed internet and the like, right? So there's this overarching policy in order to do that.
When Congress gave the Federal Communications Commission authority to tax telecommunication companies in order to fund what's known as the universal service fund to subsidize access to these kind of rural areas and people who had to pay this tax complained and they said that the delegation of authority from Congress to the Federal Communications Commission in order to impose those taxes was an unconstitutional delegation of power that Congress has to tax and they improperly delegated that authority to the Federal Communications Commission. The Fifth Circuit Court repeals how that that was an unconstitutional delegation and the Supreme Court is set to decide or hear arguments on that case in March of 2025. So in about four weeks from today and that's a really important case and a lot of court observers think this case has the potential to be even bigger as from an administrative law perspective than the lower bright case last term that overruled the Chevron deference doctrine because if the court tinker with the long understanding of delegation of authority between Congress on the one hand and the president on the other hand, it could have the potential to open up a can of worms with respect to the entire administrative apparatus of the federal government. So depending on how the case is decided and where the court goes with this case, it has the potential to be a watershed case, an administrative law and constitutional law and the way that federal agencies operate.
So those are two of the cases that I think are really interesting from investors and business perspective and of course there's all kinds of other interesting cases as well. It certainly seems like the Supreme Court has a their work cut out for them, this session. I would imagine that they are also going to be involved in some of the executive orders that we discussed earlier. Do you have any high level thoughts of just kind of what might happen with the Supreme Court and some of these executive orders in the near term?
And before you do that, Mark, I just want to jump in with a little fun fact for our listeners or the first month or so of Trump 1.0, he signed 13 executive orders since he took office about a month ago, he has signed 64, which I think you mentioned at the outset, Mark. So about five times more quote unquote productive. If he can keep that up for four years, it's going to be a while, four years. Well, I think I'm not sure that it's quote unquote keeping it up for the next four years.
I mean, one of the strategies that at least commentators have talked about is that it's I've heard terms like blitzkrieg, I've heard terms like flood the zone, right? If you come in on day one and you make so much change so fast, the opposition runs around with their head spinning and doesn't even know where to begin to complain, right? And that's clearly what's happened. We all thought that was going to happen.
We knew that was going to happen. It doesn't make it any more fun to live with when you actually live through it. But I think that's a lot of what's going on, right? I had a certain spending.
Yeah, I know exactly. And so that actually dovetails perfectly to me. His question is like, how is the Supreme Court? How are the courts going to get involved here?
And as I mentioned earlier, the courts have at least the lower courts have heard challenges to all sorts of these executive orders. We haven't even talked about birthright citizenship, for example, which has been thrown out by three separate courts already, right? So that the federal courts are definitely getting involved, but they're slow and deliberate, right? So they take time, right?
And so between the time that an executive order is issued, the public reacts, the markets react, it changes behavior, and then courts months down the road come in and have their final say, right? A lot of things can happen. So if they're slow, deliberate, and eventually it will serve potentially as a check on some of these things, but you know, only time will tell on these things. And so when it's the answer to your question, when will the Supreme Court get involved?
It really depends on the case and the significance. One of the problems is that we're already well into this term. And so the Supreme Court probably isn't going to add a lot of big cases to their docket for consideration this term. So if there is a new case, it's going to come out.
It's likely going to be heard in the 2025, 2026 term. So we're looking at a year 18 months before any of these big watershed issues will be decided, assuming they even make it to the court by that time. Yeah. I mean, so much of this is wild to me because presumably these executive orders, if we have a 2028 election that swings the other way with the pendulum could just go way overnight, right?
So let's create of new executive orders. And so I think that my big takeaway is we are shifting from what was a status quo, which would was very beneficial to markets, especially in 2024, into a much more question mark period. Some of these things might be good for markets, good for business. Some of these things might be bad for markets, bad for business, but taken collectively, there is a lot of uncertainty around, you know, the path for these executive orders, how the courts get involved with the Supreme Court ultimately does.
You know, if the Supreme Court says, no, President Trump, this is not okay executive order. If he complies with that, he has said that he will. You know, I know that there's a lot of conversations around is that, you know, reality or is that just kind of what he's been saying. And so I am feeling, I don't know, a little unease about how complacent the markets have been given all of the uncertainty that I think is percolating around some of these big changes.
All right. So we have made it almost 49 minutes in the world of law and what has happened in the new political administration. We've talked about the Fed, we've talked about executive orders, we've talked about impoundant, we've talked about what is on the Supreme Court docket. I think that staying on top of these things is going to be really important for 2025 and beyond.
And so I recommend that everyone check out the note that Mark and Zach put together on Fed independence. That's going to remain quite topical, I think in the near term. I always take a look at the amazing content that Mark is putting out on these special situations, legal side of things. And of course, we will continue to discuss these topics on the No More Risk Better podcast.
If you ever have any recommendations or topics that we should explore, please feel free to reach out to me or Zach or Mark. Or if you just have lots on any of these topics, we always love to hear what clients are thinking about considering about considering worrying about all of those things. I know that the wall of worries is big and yet cash balances are very low right now. Investors are risk on, more risk on since they have been since 2010.
So that's a really interesting development in terms of how the markets are thinking about these things versus what is going on on the political side of things. Thank you, Zach and Mark for joining me today. Thank you to everyone listening and we will be back next time with more really fun topics. Thanks guys.
Thanks. Thanks very much. Thanks to Slamar. All great references correspond to the data this morning.
This podcast should not be copied, it should be that it reproduced in whole world and it translates to North civilians, makes any representation or word to you as to the accuracy or cleanness of any information contained in this podcast. Crowdsite does not provide a investment, legal, accounting or tax advice. It's not providing research or making any recommendations nor is it offering or soliciting any transaction with respect to the purchase or sale of any security. Received by this listener, others podcast is not the giving other guys by the site's core it's a billion.
Thank you.