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Fed Governor Sues Trump & Cashless Bail · Bloomberg Law

0:02
Speaker 1: This is Bloomberg Law with June Grossel from Bloomberg Radio.
0:09
Speaker 2: It will be an unprecedented legal battle that could reshape
0:13
Speaker 2: the Federal Reserve's longstanding political independence. No president in history
0:19
Speaker 2: has tried to fire a FED governor, but President Trump
0:22
Speaker 2: is attempting to fire Lisa Cook, the first black woman
0:26
Speaker 2: to serve as a FED governor. It's over allegations that
0:30
Speaker 2: she committed mortgage fraud before she joined the Central Banks
0:34
Speaker 2: Governing Board.
0:36
Speaker 3: She seems to have had an infraction, and she can't
0:40
Speaker 3: have an infraction, especially that infraction, because she's in charge of,
0:43
Speaker 3: if you think about it, mortgages, and we need people
0:46
Speaker 3: that are one hundred percent above board.
0:49
Speaker 2: But Cook is fighting back by filing a lawsuit against Trump,
0:53
Speaker 2: saying he doesn't have the power to remove her from
0:56
Speaker 2: office and that he violated the federal law that allows
1:00
Speaker 2: seem to remove a FED governor only for cause. This
1:03
Speaker 2: is a major escalation in the growing clash between the
1:07
Speaker 2: White House and the Fed, which has resisted Trump's demands
1:10
Speaker 2: to lower interest rates. It presents novel issues and will
1:14
Speaker 2: almost certainly end up before the Supreme Court. Joining me
1:19
Speaker 2: is Elliott Stein, Bloomberg Intelligence senior litigation analyst Elliott tell
1:24
Speaker 2: us about the big picture of Cook's lawsuit.
1:27
Speaker 1: Sure, well, I mean, you know, the four cause is,
1:29
Speaker 1: obviously if the central legal focus of her lawsuit, saying
1:34
Speaker 1: that that standard hasn't been met, But bigger pictures, she's
1:38
Speaker 1: arguing that the allegations of mortgage fraud are really a
1:42
Speaker 1: pretext to get rid of her for policy disagreement purposes,
1:47
Speaker 1: which you know goes against FED independence, which is why
1:51
Speaker 1: you have a four cause removal restriction in the first place.
1:54
Speaker 1: And you know that fits into the broader theme. And they,
1:58
Speaker 1: you know, talk about all this as well in the
1:59
Speaker 1: com how Trump has been pushing for lower interest rates
2:04
Speaker 1: for a long time, has been critical of fedhare Powell
2:08
Speaker 1: and initially was going after him for not lowering rates
2:12
Speaker 1: quickly enough. And they tried to use allegations against him
2:16
Speaker 1: of cost overruns related to the renovations of the Federal
2:20
Speaker 1: Reserve building, And so you know, they tied allegations against POLICEA.
2:24
Speaker 1: Cook into sort of that broader context.
2:27
Speaker 2: Not only a lot of legal research went into this,
2:30
Speaker 2: but a lot of factual research too about what's been
2:32
Speaker 2: happening recently. So now let's talk about the center of
2:36
Speaker 2: the legal fight, which is the four cause removal protection
2:41
Speaker 2: in the Federal Reserve Act. The Act doesn't define what
2:45
Speaker 2: cause means, how do they define it?
2:47
Speaker 1: So that's exactly right. The Federal Reserve Act says that
2:51
Speaker 1: the President can remove a Federal Reserve Board governor for cause,
2:56
Speaker 1: but as you say, it doesn't say what cause means.
2:59
Speaker 1: It doesn't give any examples of that. So the complaint says,
3:03
Speaker 1: you know, when courts have had to grapple with this
3:06
Speaker 1: question before, they usually point to the Humphreys Executor case
3:10
Speaker 1: from nineteen thirty five, which is sort of the seminal
3:13
Speaker 1: case about whether four cause removal restrictions are even constitutional.
3:17
Speaker 1: And in that case, the removal restriction said that, you know,
3:20
Speaker 1: an FTC commissioner could be removed for inefficiency or a
3:25
Speaker 1: neglective duty or malfeasance in office. So the argument in
3:30
Speaker 1: Lisa Cook's complaint is sort of twofold. One is that
3:33
Speaker 1: it can't just be bare allegations. It has to be
3:36
Speaker 1: some sort of malfeasance or some sort of you know,
3:39
Speaker 1: neglect of duty. And then the other thing is that
3:41
Speaker 1: it has to have occurred while she's been in office.
3:45
Speaker 1: And you refer to some of the factual underpinnings of
3:48
Speaker 1: the complaint related to that. They talk about how the
3:52
Speaker 1: mortgage applications that are being accused of, you know, being
3:56
Speaker 1: fraudulently completed, those were filled out in twenty twenty one,
3:59
Speaker 1: and she wasn't even appointed and confirmed to the board
4:02
Speaker 1: until the following year. So part of the argument is
4:06
Speaker 1: that the four cause removal restriction really applies to misconduct
4:12
Speaker 1: that took place while in office.
4:14
Speaker 2: Let's take a step back and look at the allegations
4:17
Speaker 2: of mortgage fraud. Trump claims that Cook fraudulently listed homes
4:23
Speaker 2: in Michigan and Georgia as her primary residences when she
4:27
Speaker 2: got mortgages in twenty twenty one. So explain where these
4:32
Speaker 2: allegations of mortgage fraud came from.
4:37
Speaker 1: They first appeared in social media posts by Bill Poulti,
4:43
Speaker 1: who is the director of the Federal Housing Finance Agency,
4:46
Speaker 1: the Fahferry, which is the conservator and essentially the regulator
4:50
Speaker 1: for Fannie May, Freddie Mack, and the Federal Home Loan banks.
4:54
Speaker 1: Poulty posted those on social media. He made a referral
4:57
Speaker 1: to the Justice Department saying that these were indications of
5:01
Speaker 1: mortgage fraud. The President then sort of adopted those allegations
5:05
Speaker 1: as well and posted on his social media about them,
5:09
Speaker 1: and then ultimately those documents were also used as justification
5:14
Speaker 1: for the President's letter on August twenty fifth attempting to
5:19
Speaker 1: fire Lisa Cook.
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Speaker 2: The complaint also refers to other criminal referrals that Poulty
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Speaker 2: made before, where he referred Adam Schiff, the Democratic Senator
5:30
Speaker 2: from California, and Letitia James, the Democratic Attorney General of
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Speaker 2: New York, with similar allegations. And they say quote, each
5:39
Speaker 2: of Director Poultice's criminal referrals have notably been, at one
5:43
Speaker 2: time or another, political targets of President Trump's aire prior
5:47
Speaker 2: to any mortgage fraud allegations. Both Schiff and James have
5:53
Speaker 2: denied the allegations, and there have been no criminal charges
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Speaker 2: brought against either of them. And here with Cook, there
6:00
Speaker 2: hasn't even been an investigation, has there.
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Speaker 1: That's exactly right. We don't know any more about these
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Speaker 1: documents than we've seen in Bill Polti's posts. And so
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Speaker 1: you know, in order for there to be fraud, you
6:15
Speaker 1: need some sort of fraudulent intent, right, you have to
6:18
Speaker 1: have intended to deceive another party, essentially, and that other
6:22
Speaker 1: party has to have relied on your misrepresentations to their detriment.
6:27
Speaker 1: We don't know any of that, right, I mean, we
6:29
Speaker 1: don't even know if these documents are accurate or if
6:33
Speaker 1: they're real. In this day and age, impossible to know
6:36
Speaker 1: whether a social media post is real or made up.
6:38
Speaker 1: But taking you know the director at his word that
6:40
Speaker 1: these are accurate documents and reflect what's on them. We
6:44
Speaker 1: don't know what Lisa Cook meant when she signed both
6:48
Speaker 1: of them. We don't know if it was a clerical error,
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Speaker 1: which is what her complaint suggests. And we don't know
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Speaker 1: what kind of communications she may have had with the
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Speaker 1: mortgage lenders on the other side and whether they were
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Speaker 1: deceived or whether they were harmed, because you also need
7:04
Speaker 1: that in order for there to be mortgage fraud.
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Speaker 2: Now, the lawsuit doesn't provide an explanation for why she
7:10
Speaker 2: might have listed two residences as her primary residence, but
7:14
Speaker 2: it does suggest that she could have quote mislabeled a
7:18
Speaker 2: home's purpose unintentionally, and that wasn't in the complaint, that
7:23
Speaker 2: was in the motion for a tro So are they
7:27
Speaker 2: trying to offer an innocent explanation and to blunt the
7:31
Speaker 2: fraudulent intent.
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Speaker 1: Yeah, they're sort of hinting at that. You know, they're
7:35
Speaker 1: sticking primarily to sort of the legal standard in this complaint, right,
7:40
Speaker 1: that essentially the actual facts of what happened aren't necessary
7:45
Speaker 1: at this point in order to allow Lisa Cook to
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Speaker 1: continue and to basically render ineffective President Trump's termination letter
7:54
Speaker 1: there arguing in their complaint that on these unsubstantiated allegations alone,
8:01
Speaker 1: that is not enough to meet the four cause standard.
8:04
Speaker 1: You know, if the case does go forward in some
8:07
Speaker 1: capacity to determine what cause means and whether at least
8:13
Speaker 1: the Cook's conduct rises to that level, then I expect
8:17
Speaker 1: development of the facts in a more fulsome way, in
8:20
Speaker 1: which case we'll probably know more about, you know, what
8:24
Speaker 1: happened with these documents.
8:26
Speaker 2: The Trump administration is going to respond. I mean, would
8:29
Speaker 2: one of their arguments be that the way for cause
8:33
Speaker 2: is being described by Cook's lawyers is incorrect.
8:38
Speaker 1: Yeah, I mean, they'll say, look, the statute only says
8:42
Speaker 1: for cause when Congress inserted that language into the Federal
8:46
Speaker 1: Reserve Act in nineteen thirty five, And the complaint talks
8:49
Speaker 1: about this how they inserted that language after the Humphrey's
8:53
Speaker 1: Executor decision right, sort of As a response to that,
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Speaker 1: the President's argument will be Congress knew that it could
9:00
Speaker 1: have articulated what four cause means. It could have limited
9:04
Speaker 1: it to inefficiency, neglect, and malfeasans, but it chose not to,
9:08
Speaker 1: and as a result, what actually constitutes cause is broader
9:12
Speaker 1: than just those three things. That is most likely what
9:14
Speaker 1: the President is going to argue, And he's also going
9:17
Speaker 1: to argue that it's within his discretion to determine what
9:21
Speaker 1: cause is because he's the president and the statue gives
9:25
Speaker 1: the president the power to remove a Federal Reserve Board
9:29
Speaker 1: governor for cause. I think that's what the president's team
9:33
Speaker 1: is going to argue.
9:35
Speaker 2: After the lawsuit was filed, the White House said that
9:38
Speaker 2: Trump was acting lawfully. Quote, the President determined there was
9:42
Speaker 2: cause to remove a governor who was credibly accused of
9:45
Speaker 2: lying in financial documents from a highly sensitive position overseeing
9:50
Speaker 2: financial institutions.
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Speaker 1: Lisa Cook is obviously going to contest a lot of
9:55
Speaker 1: what's in that statement. Right. He's going to say these
9:57
Speaker 1: aren't credible accusations because you know, there's been no investigation
10:01
Speaker 1: related to them. He's gonna take issue with the fact
10:03
Speaker 1: that he's been accused of lying when there's been no
10:06
Speaker 1: development or investigation to bolster that accusation. So we know
10:10
Speaker 1: what each side is going to say. I think what's
10:14
Speaker 1: going to be interesting is what the courts say, and
10:16
Speaker 1: you know, eventually this will go up to the Supreme Court.
10:19
Speaker 1: I think the Supreme Court's decision in May in the
10:22
Speaker 1: Wilcox case, which concerned the termination of commissioners at the
10:26
Speaker 1: National Labor Relations Board and the Merit Systems Protection Board,
10:29
Speaker 1: I think that decision is going to be key because
10:32
Speaker 1: there the Supreme Court sort of went out of its
10:34
Speaker 1: way to distinguish the Federal Reserve from these other agencies.
10:39
Speaker 1: Because for those other agencies, it seems like the Supreme
10:41
Speaker 1: Court is leaning towards finding the four cause removal restrictions
10:45
Speaker 1: in those statutes unconstitutional. But it seems like it distinguished
10:49
Speaker 1: the Federal Reserve with the intent of allowing the Federal
10:53
Speaker 1: Reserve Acts for cause removal restriction to be deemed constitutional.
10:59
Speaker 1: And then you know, if you allow the President to
11:01
Speaker 1: make that decision unilaterally as to what causes, you're really
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Speaker 1: rendering toothless and meaningless before cause removal restriction in the statute.
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Speaker 2: Coming up next on the Bloomberg Lawn Show. I'll continue
11:13
Speaker 2: this conversation with Bloomberg Intelligence senior litigation analyst Elliot Stein.
11:19
Speaker 2: Cook is asking a judge for an emergency injunction to
11:23
Speaker 2: block her firing and confirm her status as a member
11:26
Speaker 2: of the Fed's governing board. I'm June GROANSO, and this
11:30
Speaker 2: is Bloomberg. No president in history has tried to fire
11:35
Speaker 2: a FED governor, but President Trump is attempting to fire
11:39
Speaker 2: Lisa Cook, the first black woman to serve as a
11:42
Speaker 2: federal governor. It's over allegations that she committed mortgage fraud
11:47
Speaker 2: before she joined the Central Bank's governing board by listing
11:51
Speaker 2: homes in both Michigan and Georgia as her primary residences
11:55
Speaker 2: when she got mortgages in twenty twenty one. Cook is
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Speaker 2: fighting back by by filing a lawsuit saying Trump doesn't
12:02
Speaker 2: have the power to remove her from office and that
12:05
Speaker 2: he violated the federal law that allows him to remove
12:08
Speaker 2: a federal governor only for cause. It's an unprecedented legal
12:13
Speaker 2: battle that could reshape the Federal Reserve's longstanding political independence.
12:19
Speaker 2: Scott Alvarez, a former General counsel at the Federal Reserve Board,
12:23
Speaker 2: expressed his concerns if the president is allowed to fire
12:27
Speaker 2: a Federal Board member without proper cause.
12:30
Speaker 3: It's definitely worse for the institution if the president can
12:35
Speaker 3: fire a member of the Board at will or based
12:39
Speaker 3: solely on an allegation that's unproven, undemonstrated. I think in
12:44
Speaker 3: that situation, there really is no independence of the Federal
12:48
Speaker 3: Reserve and its ability to act, and that's got to
12:50
Speaker 3: set markets, make markets uneasy.
12:54
Speaker 2: I've been talking to Bloomberg Intelligence senior litigation analyst Elliott Stein.
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Speaker 2: There's so many interlocking issues here. The complaint also says
13:03
Speaker 2: that Trump violated Cook's right to due process and her
13:07
Speaker 2: right to notice in hearing under the Federal Reserve Act.
13:11
Speaker 1: That argument really revolves around the fact that she has
13:15
Speaker 1: a property interest essentially in her role as a Federal
13:18
Speaker 1: Reserve Board governor, and that by taking away that seat
13:22
Speaker 1: from her without any notice or opportunity to be heard,
13:26
Speaker 1: her due process rights are being violated. So that's a
13:29
Speaker 1: constitutional argument. They also have a statutory argument related to that,
13:33
Speaker 1: which says that for roles where you have a fixed
13:37
Speaker 1: number of years in service and you're terminated, that you're
13:41
Speaker 1: entitled to some sort of notice and opportunity to be
13:44
Speaker 1: heard as well.
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Speaker 2: Cook is seeking an emergency injunction to block her firing
13:49
Speaker 2: and confirm her status as a member of the fed's
13:52
Speaker 2: governing board, and DC Federal Judge Gia Cobb has scheduled
13:57
Speaker 2: an emergency hearing for tomorrow. Explain the reasons Cook gives
14:02
Speaker 2: for asking for a temporary restraining order.
14:06
Speaker 1: So you know, right now, this is the question I
14:08
Speaker 1: get from clients a lot is is she actually still
14:11
Speaker 1: a Federal Reserve Board governor? You know, if there were
14:14
Speaker 1: a meeting tomorrow, could she participate? You know, if you
14:17
Speaker 1: asked the President, he would say, no, she's been fired.
14:21
Speaker 1: If you asked her, she would say, you know, the
14:24
Speaker 1: purport determination was improper. So yeah, void, I'm still a
14:27
Speaker 1: Federal Reserve Board governor. This tro application is a way
14:33
Speaker 1: to get the court to opine on that quickly. Right.
14:35
Speaker 1: It's an emergency application essentially to say that President Trump's
14:40
Speaker 1: termination letter on August twenty fifth has no effect. Right.
14:44
Speaker 1: And you know what's interesting is that, in addition to
14:46
Speaker 1: President Trump being named as a defendant, the Federal Reserve
14:50
Speaker 1: Board is named as a defendant, as are the governors,
14:53
Speaker 1: as is FED Chair Powell. Because part of Lisa Cook's
14:58
Speaker 1: tro application is to stop the Federal Reserve Board from
15:03
Speaker 1: effectuating President Trump's termination letter.
15:06
Speaker 2: Who has the stronger argument for.
15:08
Speaker 1: The TRO Well, I think Governor Cook got a very
15:12
Speaker 1: good judicial draw so to speak. The judge, as you said,
15:15
Speaker 1: is Biden appointee. I think it's likely that the judge
15:20
Speaker 1: is going to view favorably Lisa Cook's arguments for FED
15:24
Speaker 1: independence and going to view unfavorably President Trump's arguments, saying
15:29
Speaker 1: that allegations alone are enough for cause and if the
15:31
Speaker 1: president alone can make that determination. So I would not
15:34
Speaker 1: be surprised to see Judge Cobb grant the tro potentially,
15:39
Speaker 1: you know, as soon as the end of the hearing
15:40
Speaker 1: tomorrow which starts at ten am, or perhaps later in
15:43
Speaker 1: the day. Just given the magnitude of this case, I
15:47
Speaker 1: think a very quick decision is warranted.
15:50
Speaker 2: The Supreme Court in May block the reinstatement of NLRB
15:56
Speaker 2: and Merit Systems Protection Board commissioners while their suits played out.
16:00
Speaker 2: Did the same for Consumer Product Safety commission heads in July.
16:05
Speaker 2: Might the Court do the same here?
16:07
Speaker 1: I think this is where that decision in May is
16:10
Speaker 1: so important, because the Supreme Court really went out of
16:12
Speaker 1: its way to distinguish the Federal Reserve from these other agencies.
16:17
Speaker 1: It wasn't a definitive rule in it was sort of
16:20
Speaker 1: dicta but it didn't even need to include that language.
16:22
Speaker 1: And when you talk about whether you know someone like
16:27
Speaker 1: Lisa Cook or these other commissioners should serve while the
16:30
Speaker 1: litigation plays out, you know, the factors you consider are
16:33
Speaker 1: likelihood of success on the merits, whether there's irreparable harm
16:36
Speaker 1: to either side, and you also look at the public
16:38
Speaker 1: interest in terms of likelihood of success on the merits.
16:42
Speaker 1: I think Lisa Cook has very good arguments that the
16:46
Speaker 1: four cause provision can't be satisfied by mere allegations alone,
16:51
Speaker 1: because then that really again renders meaningless the standard because
16:56
Speaker 1: anyone could drum up accusations in terms of mobile harm.
17:00
Speaker 1: I think it's important that again, in the May ruling,
17:04
Speaker 1: the Supreme Court essentially carved out the Federal Reserve from
17:09
Speaker 1: the executive branch in the sense that it suggested strongly
17:14
Speaker 1: that the Federal Reserve is quasi private. It has a
17:18
Speaker 1: unique historical structure, and as a result, it doesn't really
17:22
Speaker 1: wield executive authority like other agencies do. So in terms
17:27
Speaker 1: of the president's executive authority being harmed by her continuing
17:32
Speaker 1: to serve on the board. I think it's unlikely that
17:35
Speaker 1: the court is going to say that he is suffering
17:38
Speaker 1: harm like it did in the Wilcox case. And then
17:41
Speaker 1: in terms of the public interest, you know, I think
17:43
Speaker 1: the Supreme Court is likely to consider things like Federal
17:47
Speaker 1: Reserve independence very strongly, and so all these things I
17:50
Speaker 1: think wigh in favor of Lisa Cook's arguments.
17:53
Speaker 2: Elliott tell us what the Fed's response to the lawsuit
17:57
Speaker 2: has been.
17:58
Speaker 1: The FED is sort of staying silent and not picking
18:02
Speaker 1: aside and saying they'll abide by any court decision, which
18:06
Speaker 1: is why Lisa Cook's complaint names the Federal Reserve Board
18:10
Speaker 1: governors both collectively and in their individual capacity as defendants,
18:14
Speaker 1: along with FED Chair Jpwell explain.
18:16
Speaker 2: Why timing might be important for Trump here.
18:19
Speaker 1: In the near term. You have an SOMC meeting in
18:21
Speaker 1: mid September, right where everyone's expecting some sort of rate cuts.
18:25
Speaker 1: It seems I actually don't think that's the most important
18:27
Speaker 1: date because for that date, Lisa Cook is just one
18:31
Speaker 1: seat on the FMC out of twelve. In July when
18:34
Speaker 1: they met, and they did at lower rates. You only
18:37
Speaker 1: had two dissenting votes, so I don't think her vote
18:39
Speaker 1: is necessarily going to sway anything in September. But to me,
18:43
Speaker 1: the more important dates to keep in mind are the
18:46
Speaker 1: end of February, when the Federal Reserve Board gets to
18:50
Speaker 1: reappoint or block reappointment of the regional Federal Reserve Bank
18:55
Speaker 1: presidents who rotate onto the FMC. The President can elst
19:02
Speaker 1: least a cook. By February, he essentially on the Federal
19:06
Speaker 1: Reserve Board will have three sympathetic votes. You'll have Waller
19:11
Speaker 1: Bowman and presumably Stephen Merron, who is probably going to
19:17
Speaker 1: start his confirmation process next week to replace the Adrianna
19:20
Speaker 1: Kugler who resigned earlier in August. And on the other side,
19:23
Speaker 1: you'd have three votes you know that probably don't align
19:28
Speaker 1: with the President Powell, Michael Barr, and Vice Jared Jefferson,
19:32
Speaker 1: And you wouldn't have all these other Regional Reserve Bank
19:35
Speaker 1: presidents who for the most part have been voting consistently
19:38
Speaker 1: with Jay Powell against lowering rates. So you know, FEDRUAR
19:43
Speaker 1: is important because it starts to potentially change the composition
19:48
Speaker 1: of the FOMC in a direction that's more favorable to
19:51
Speaker 1: President Trump, and.
19:52
Speaker 2: Trump is continuing to fire board members. We learned that
19:56
Speaker 2: Trump has fired one of two Democratic members of the
20:00
Speaker 2: US Service Transportation Board to break a two to two
20:03
Speaker 2: tie before the board considers the largest railroad merger ever.
20:08
Speaker 2: Proposed Board member Roger E. Primus was the only board
20:12
Speaker 2: member to oppose Canada Pacific's acquisition of Kansas City's Southern
20:17
Speaker 2: Railroad when it was approved two years ago.
20:20
Speaker 1: You know, I think the hallmark of this investigation when
20:23
Speaker 1: the history books are written, is its efforts to expand
20:27
Speaker 1: executive authority over almost every aspect of the government. You know,
20:32
Speaker 1: we do have this Supreme Court decision in May that
20:34
Speaker 1: suggested the Federal Reserve is a little different. We'll sort
20:37
Speaker 1: of see how that plays out.
20:39
Speaker 2: We'll certainly be watching this closely. Thanks so much, Elliott.
20:43
Speaker 2: That's Bloomberg Intelligence Senior litigation analyst Elliott Stein coming up
20:48
Speaker 2: next on the Bloomberg Law Show. President Trump wants to
20:51
Speaker 2: get rid of cashless bail and I'm June Grosso. When
20:55
Speaker 2: you're listening to Bloomberg, President Trump has signed an executive
21:00
Speaker 2: order threatening to revoke federal funding to local and state
21:04
Speaker 2: governments that allow cashless bail, arguing that it's a threat
21:08
Speaker 2: to public safety cashless bail.
21:11
Speaker 3: They thought it was discriminatory to make people put up
21:14
Speaker 3: money because they just killed three people lying on the street.
21:18
Speaker 3: Any street all over the country. Cashless bail. We're ending it,
21:23
Speaker 3: but we're starting by ending it in DC.
21:25
Speaker 2: But defense attorneys and criminal justice advocates say ending cashless
21:30
Speaker 2: bail will negatively impact lower income defendants who could be
21:35
Speaker 2: behind bars unlawfully, and Washington DC Mayor Muriel Bowser points
21:40
Speaker 2: out that this is not a new policy for many
21:43
Speaker 2: of these cities.
21:44
Speaker 1: Cashless bail is not a new phenomenon in the district.
21:48
Speaker 4: I think it's been in place since the mid nineties.
21:52
Speaker 2: My guest is Vita Johnson, a professor at Georgetown Law
21:56
Speaker 2: and co director of the school's Criminal Justice Clinic, is
22:00
Speaker 2: formally a public defender in DC. Vita, will you explain
22:04
Speaker 2: what is cashless bail? Exactly?
22:07
Speaker 1: Sure.
22:08
Speaker 4: So, DC's bail system is identical to the federal bail statute,
22:15
Speaker 4: and what it does is it takes a person's ability
22:19
Speaker 4: to pay out of the equation in deciding whether someone
22:23
Speaker 4: should be held before trial or not. So DC's system,
22:30
Speaker 4: just like the federal one, is based on whether someone
22:33
Speaker 4: is a danger or risk of flight, and that helps
22:37
Speaker 4: a judge determine whether or not someone should be held
22:41
Speaker 4: rather than the amount of money in their bank account.
22:44
Speaker 4: So if the person is charged with a dangerous crime
22:48
Speaker 4: or a violent crime, the judge can hold them. So
22:53
Speaker 4: it's a way of helping the judge make a decision
22:57
Speaker 4: that is most closely related to public welfare while still
23:02
Speaker 4: preserving the accused person's presumption of innocence. There are other
23:07
Speaker 4: ways that a person can be held if they are
23:10
Speaker 4: on probation or parole or supervisor release for another matter,
23:14
Speaker 4: or if they have a pending case, they can be
23:17
Speaker 4: held without bond. So again, money is not part of
23:21
Speaker 4: the equation because in DC we've decided that it is
23:26
Speaker 4: important to make a determination about fail based on the
23:31
Speaker 4: accusations and the person's history and characteristics rather than their
23:36
Speaker 4: ability to pay.
23:38
Speaker 2: Was DC the model for other states and cities who
23:42
Speaker 2: have cashless bail.
23:44
Speaker 4: Yes, absolutely, and we've had this since the nineties, so
23:47
Speaker 4: it's not anything new and it has truly been the
23:50
Speaker 4: model for you know, criminal legal reform. Again, we don't
23:56
Speaker 4: want a system where rich people, you know, get to
24:00
Speaker 4: wait for their trial in the luxury of their homes,
24:03
Speaker 4: while poor people are held a taxpayer expense no less
24:09
Speaker 4: at the jail just because they don't have bail money.
24:12
Speaker 2: President Trump has talked a lot about cash list bail
24:15
Speaker 2: and how it's the problem leading to crime in the
24:18
Speaker 2: Democratic led cities. And he said, no cash come back
24:22
Speaker 2: in a couple of months, will give you a trial,
24:24
Speaker 2: you never see the person again.
24:26
Speaker 4: That's just not true. I mean, the bail system looks
24:32
Speaker 4: at whether someone has a history of failing to appear
24:35
Speaker 4: in deciding whether or not someone should be held before trial.
24:40
Speaker 4: Remember that someone who's accused of a crime is presumed innocent.
24:44
Speaker 4: That's something our whole criminal legal system is based on
24:47
Speaker 4: that premise, and so when you hold someone prior to trial,
24:53
Speaker 4: it really undermines that presumption. Normally that it can truly
24:58
Speaker 4: ruin a person. Let's say someone's falsely accused of a shoplifting,
25:04
Speaker 4: but they don't have a lot of money and so
25:07
Speaker 4: they can't pay the bail. Should that person lose their
25:11
Speaker 4: housing because they're not home to pay the rent. Should
25:15
Speaker 4: they lose their job because they're at the jail and
25:18
Speaker 4: can't work, Should they lose the custody of their children,
25:21
Speaker 4: based just solely on the government say so, I think
25:25
Speaker 4: most people would think absolutely not. And imagine the cost
25:30
Speaker 4: to the taxpayer of holding someone on a really low
25:33
Speaker 4: level offense like that at the jail. It's a tremendous expense.
25:38
Speaker 4: It costs, you know, hundreds of dollars every day to
25:41
Speaker 4: hold someone pre trial. And so DC, just like the
25:44
Speaker 4: federal system, has decided that for you know, for someone
25:47
Speaker 4: who with no record, who's accused of a non dangerous
25:51
Speaker 4: crime and has no history of not appearing in court,
25:55
Speaker 4: that they should be released pending trial.
25:58
Speaker 2: One of the things that led to New York passing
26:01
Speaker 2: cashless bail was a Bronx High school student who was
26:05
Speaker 2: accused of stealing a backpack and was in prison for
26:09
Speaker 2: three years on Rikers Island awaiting trial because his family
26:13
Speaker 2: couldn't afford the bail, which was three thousand dollars, and
26:17
Speaker 2: he attempted suicide at Rikers and committed suicide after he
26:21
Speaker 2: was released.
26:22
Speaker 4: Yes, absolutely, and we just don't want those kinds of
26:25
Speaker 4: tragedies because someone just couldn't pay or their family couldn't
26:29
Speaker 4: afford to pay the bail.
26:31
Speaker 2: What's the other side, Why are people so determined to
26:35
Speaker 2: get rid of cashless bail.
26:37
Speaker 4: Well, the reason that prosecutors want people held before trial
26:44
Speaker 4: is because it coerces pleased from people. So a prosecutor
26:48
Speaker 4: would love for everyone to be held before trial if
26:53
Speaker 4: they don't want to have a trial. Right, So let's
26:57
Speaker 4: take that shoplifting. That innocent person accuse of a sh uplifting.
27:00
Speaker 4: If they're held at the jail at risk of losing
27:05
Speaker 4: everything in their life, their home, their children, their job,
27:09
Speaker 4: when the government offers them a plea to a time served,
27:12
Speaker 4: even if they're innocent, there's going to be a strong
27:17
Speaker 4: motive for that person to take that plea offer, right
27:20
Speaker 4: to accept that offer so that they can get out
27:22
Speaker 4: of jail. And that happens in New York all the time.
27:25
Speaker 4: In New York, often plea offers are extended at arrangments
27:29
Speaker 4: so the first day and people often especially for low
27:33
Speaker 4: level cases, or the government's request is for you know,
27:36
Speaker 4: time served, they often accept those deals as a way
27:40
Speaker 4: to get out of jail. So that's why you see
27:43
Speaker 4: folks that aren't necessarily concerned with the constitutional rights of
27:47
Speaker 4: poor people really pressing for pre trial's attention.
27:52
Speaker 2: According to data from DC's Pre Trial Services Agency, in
27:57
Speaker 2: twenty twenty five, ninety percent of individual Jewels on pre
28:00
Speaker 2: trial release remained a rest free while eighty nine percent
28:05
Speaker 2: of those awaiting trial made all their scheduled court appearances.
28:10
Speaker 2: And have there been studies done as to whether there's
28:13
Speaker 2: more crime in cities that have cashless bail as opposed
28:18
Speaker 2: to those that don't.
28:20
Speaker 4: I don't think so. I think we all know what
28:22
Speaker 4: causes crime, and it's not based on our bail systems.
28:26
Speaker 4: It's whether people have support, whether people have you know,
28:31
Speaker 4: ways to meet their basic needs, you know, whether they
28:33
Speaker 4: have access to health services and mental health services and
28:37
Speaker 4: substance abuse treatment. The bail regimen in a particular city
28:42
Speaker 4: or state is not the driver of crime.
28:46
Speaker 2: What is Trump trying to do with this executive order?
28:48
Speaker 2: Because DC is different from the rest of the country.
28:53
Speaker 4: Well, yes, DC, because you know, when our framers were
29:00
Speaker 4: dreaming of, you know, what they wanted the country to
29:03
Speaker 4: look like. They didn't want the center of federal government
29:07
Speaker 4: to be in any particular state. And so we are
29:11
Speaker 4: a city without a state and in many ways controlled
29:15
Speaker 4: by the federal government. But since the nineteen seventies and
29:20
Speaker 4: when the Home Rule Act was passed, DC has had
29:24
Speaker 4: a lot more autonomy. And we've enjoyed that autonomy for
29:26
Speaker 4: now fifty years. So we have our own DC council,
29:30
Speaker 4: we have a mayor. Now, you know, there's a lot
29:33
Speaker 4: of self governance. Didn't remember everyone it was in the
29:36
Speaker 4: district as a US citizen, So they should have the
29:38
Speaker 4: right to enjoy the same things that people who reside
29:41
Speaker 4: in states reside, right getting to pick their leaders and
29:45
Speaker 4: having those people be the ones who decide what the
29:47
Speaker 4: laws are and being accountable to the people who actually
29:50
Speaker 4: live in the district when Congress makes laws about the district.
29:54
Speaker 4: You know, it's really unfair because the people who live
29:57
Speaker 4: here in Washington, d C. Have the opportunity to elect
30:01
Speaker 4: those people. And so by declaring that he wants there
30:06
Speaker 4: to be a changed in the DC bail statute, you know,
30:10
Speaker 4: it's a way to exert control over a city that
30:15
Speaker 4: didn't vote for Trump. I think it was about ninety
30:18
Speaker 4: percent of people voted for Harris in d C. And
30:21
Speaker 4: that you know, has a sizeable number of people of color.
30:25
Speaker 1: DC.
30:25
Speaker 4: You know used to be called Chocolate City, right, there's
30:28
Speaker 4: a sizeable black population here, and you know what we're
30:31
Speaker 4: seeing isn't you know, grounded in any reality, crime in
30:36
Speaker 4: DC is at a thirty year low. There are at
30:40
Speaker 4: least thirty cities with higher crime rates than Washington, d C.
30:46
Speaker 4: And so the fact that this is the city that
30:48
Speaker 4: he has focused his efforts on is you know, certainly
30:51
Speaker 4: because of DC's unique status, but it's not related to crime.
30:56
Speaker 2: But can he do it because of DC's unique status?
31:00
Speaker 2: Can he somehow eliminate cashless bail?
31:03
Speaker 4: There No, not through an executive order. A law would
31:06
Speaker 4: have to be passed. There's a statue that the judges
31:09
Speaker 4: in DC Superior Court follow and they are governed by
31:13
Speaker 4: the law. Now, if Congress changed the law that you know,
31:18
Speaker 4: could impact you know, the law that the judges must follow.
31:23
Speaker 4: But for now, we have the same bail statute we
31:26
Speaker 4: had before the executive order. Let me also say that,
31:30
Speaker 4: you know, one thing that we're seeing is because you know,
31:34
Speaker 4: it's the US Attorney's Office who prosecute's crime in DC,
31:37
Speaker 4: they're bringing a lot of cases in federal court. But
31:40
Speaker 4: it's important to remember that it's the exact same statue.
31:44
Speaker 4: There's cashless bail in federal court too, and in federal
31:46
Speaker 4: courts across the country in New York and California. All
31:50
Speaker 4: federal courts follow the same cashless bail scheme, and so
31:55
Speaker 4: it just you know, this move by the President doesn't
31:59
Speaker 4: seem in a lot of knowledge about the law.
32:03
Speaker 2: He also wants major criminal cases in DC to be
32:07
Speaker 2: moved to federal court.
32:10
Speaker 4: Yes, that's been playing out in the last few weeks
32:12
Speaker 4: since the federal occupation. Anything that can be brought in
32:16
Speaker 4: federal court is being run in federal court. Prosecutors are
32:20
Speaker 4: also charging the top charge that they can charge rather
32:23
Speaker 4: than the charge that is just and so we've been
32:27
Speaker 4: experiencing a really significant strain in our legal system, and
32:31
Speaker 4: it's something that the courts and the lawyers simply can't
32:33
Speaker 4: keep up with.
32:34
Speaker 2: I understand that the DCUs attorney, Janine Pireau, has been
32:39
Speaker 2: having some problems getting grand juries to indict.
32:42
Speaker 4: On some of these Yes, so because she's bringing them
32:45
Speaker 4: in federal court. She's been trying to bring these solim
32:49
Speaker 4: police officer cases and charge them as felonies, which requires
32:54
Speaker 4: the grand jury to make the charging decision. I think
32:57
Speaker 4: the grand jury in DC is made up byc residents.
33:01
Speaker 4: And you know, fortunately in our from a legal system,
33:05
Speaker 4: in felony cases, the people have the last day, and
33:08
Speaker 4: they have not been indicting in those cases.
33:11
Speaker 2: And the old saying is that a prosecutor can get
33:13
Speaker 2: a grand jury to indict a ham sandwich, but I
33:17
Speaker 2: guess not. Thanks so much, Vita. That's Professor Vita Johnson
33:21
Speaker 2: of Georgetown Law. And that's it for this edition of
33:24
Speaker 2: the Bloomberg Law Show. Remember you can always get the
33:27
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33:30
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Speaker 2: pm Wall Street Time. I'm June Grosso and you're listening
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