Trump Planning Taxpayer-Funded, $1.7 Billion Slush Fund for Political Allies | Receipts Live

Summary

Bulwark Takes Podcast Summary
Episode: Trump Planning Taxpayer-Funded, $1.7 Billion Slush Fund for Political Allies | Receipts Live
Date: May 15, 2026
Host: JVL (The Bulwark)
Guest: Catherine Rampell (Author, Receipts Newsletter)

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Episode Overview

This episode dives into explosive reporting about a $1.7 billion taxpayer-funded slush fund the Trump administration is allegedly planning for political allies. Hosts JVL and Catherine Rampell dissect the implications of this unprecedented fund, discuss its legality and potential for codified self-dealing, and examine related issues of corruption, economic efficiency, and the health of American institutions. The conversation transitions into recent news from the Federal Reserve and the consequences of rising bond yields, ending with pointed reflections on political loyalty, corruption, and institutional decay in the US.

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Key Discussion Points & Insights

1. Overview of the $1.7 Billion Slush Fund ([01:20]–[04:24])

• Context & Mechanism:
  • Trump administration is reportedly near settling a $10B lawsuit against the US government—with the settlement creating a $1.7B compensation fund for supposed "victims of the Biden regime," including those arrested for January 6th crimes.
  • The fund would be governed in total secrecy, with board appointments made and replaced at Trump’s discretion, deliberations and payouts hidden from the public.
  • Potential beneficiaries include convicted individuals like Michael Flynn and January 6 defendants.
  • If unused when Trump leaves office, the fund dissolves to prevent access by Democrats.

“We have a $1.7 billion fund...to compensate victims of the Biden regime, including people convicted following January 6th. The board’s deliberations are secret. They can be replaced at Trump’s discretion...and the list of recipients and amounts are secret.”
— JVL ([01:20]–[02:32])

2. The Legality and Self-Dealing Problem ([03:58]–[06:31])

• Troubling Legality: Rampell underscores that while the legality is unclear, the reported structure is unprecedented and deeply troubling—essentially legalizing executive branch self-dealing and state-sponsored corruption.
• Secret Process: Not only is the process secret, but the fund is potentially open to Trump allies and organizations.
• Historical Parallels: Wry comparisons to banana republics and feudal societies reinforce the alarming nature of these developments.

"It feels like a different level in that...this will be in secret. Taxpayers have no way of knowing who the money is going to."
— Catherine Rampell ([05:08])

3. Satirical Take on the Process ([06:31]–[07:08])

• The hosts joke about the fund being administered by literally handing out cash in "brown paper bags," mocking its overt corruption.

"I could get behind this, if all payments are in cash and come in brown paper bags. So when you get your money, somebody hands you a brown paper bag filled with hundreds.”
— JVL ([06:31])

4. Institutional Trust and Corruption ([07:11]–[09:28])

• Discuss whether future legislation can close corruption loopholes, or if a “low trust society” dynamic will become permanent in the US.
• Noting how such behaviors are typically seen in less developed or “banana republic” states.

"Once society demonstrates a willingness to tolerate these things...you're always going to be behind the next Donald Trump. This is what happens in low trust societies.”
— JVL ([08:26])

5. Declining Enforcement of Anti-Corruption Laws ([09:28]–[14:08])

• Foreign Corrupt Practices Act and Hatch Act no longer enforced; the problem is not legislative but executive branch willingness to enforce the law.
• Rampell mentions that some executives (e.g., Jamie Dimon/JPMorgan Chase) are wary of engaging in transactions that could later be prosecuted when administrations change.

“The reason I mention the Foreign Corrupt Practices Act is that it is still a law on the books...these are things that are no longer enforced, not because Congress has repealed them, but because we have an executive branch that is unwilling to enforce them.”
— Catherine Rampell ([11:02])

6. Economic Impact of Corruption ([18:28]–[23:11])

• Corruption as Economic Drag: Ramping self-dealing not only enriches insiders, but reduces overall economic efficiency, turns markets toward nepotism, and repels investment.
• Asymmetrical information and lack of rule of law lead to insiders profiting at the expense of ordinary investors, pension funds, and society at large.

“In Trump's economy either you're an insider or a chump. If you’re trading and don't have inside information, you lose...it degrades the trust in the ability of any transaction to be fair."
— Catherine Rampell ([18:51]–[19:36])

7. Real-World Consequences—The Russia Example ([23:11]–[23:48])

• JVL points to Russia’s failed defense industry as a case study—when contracts are awarded based on personal loyalty rather than merit, entire sectors fail.

“How do you get a defense contract in Russia? Be close to Vladimir Putin. It has no bearing on the quality of your product...and when they invaded Ukraine, none of their stuff worked. This is why.”
— JVL ([23:11])

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Memorable Quotes & Moments

• On Trump’s Innovations in Corruption
  “Donald Trump is an innovator...he legalized bribery...It is just like having an open air drug market—now it's five by five.”
  — JVL ([07:11])

• On Reconciliation
  “Turns out we are getting truth and reconciliation...but it’s against people on the side of the rule of law and democracy.”
  — JVL ([16:00])

• On Institutional Failure
  “The job of the Fed chair is to build consensus...But it would be really embarrassing if there was a consensus, a near-unanimous opinion of everyone except the boss.”
  — Catherine Rampell ([36:15])

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Important Segment Timestamps

• [01:20] — Breakdown of the slush fund mechanism and the settlers’ identities
• [03:41] — Comparisons to "Brewster’s Millions" and other forms of political corruption
• [05:08] — Secrecy and risks, referencing Michael Flynn and January 6th participants as potential recipients
• [09:28] — Discussion about lack of enforcement of anti-corruption laws
• [18:51] — Macro- and microeconomic impact of corruption
• [23:11] — Russian military-industrial complex failure as a macro warning
• [26:21] — Bond yields, inflation, and interest rates under the new Fed chair
• [32:38] — The disconnect between expectations for rate cuts and economic realities
• [36:15] — Potential for institutional embarrassment and failure at the Fed
• [41:19] — On political loyalty and the dangers of proximity to Trump

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Tone & Language

• The tone is critical, analytical, and darkly humorous, with incredulity at the scale of alleged corruption.
• Both hosts use sarcasm and vivid analogies (e.g., brown paper bags, banana republics, monkey’s paw) to underline the gravity and absurdity of the moment.
• Deep concern is evident for the rule of law, democracy, and economic vitality, with warnings that recent trends threaten the core of the American system.

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Final Takeaways

• The Trump administration’s alleged $1.7B slush fund for political allies could enshrine corruption, secrecy, and self-dealing at the highest levels of government.
• Declining enforcement of anti-corruption laws—and normalization of executive branch impunity—poses existential dangers not just for democracy, but for the functioning of markets and the broader economy.
• The erosion of institutional trust and rise of insider favoritism echo patterns typical of failing states, with dire real-world parallels.
• The Fed’s struggle to maintain independence and credibility under politicized leadership compounds risks to economic stability.
• Rampell and JVL end with a mixture of grim humor and real worry, signaling that these trends, if unchecked, could mark a lasting transformation into a lower-trust, more corrupt American society.

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For deeper coverage, listeners are encouraged to seek out Catherine Rampell’s Receipts newsletter and to follow The Bulwark team’s ongoing analysis.

Transcript

[A]

Dish has been connecting communities like yours for the last 45 years, providing the TV you love at a price you can trust. Watch live sports news and the latest movies, plus your favorite streaming apps, all in one place. Switch to Dish today and lock in the lowest price in satellite TV starting at $89.99 a month with our two year price guarantee. Call 888-add-D dish or visit dish.com today. Hello everyone. This is JVL here with my bulwark colleague Mike. I think I can just call her a good friend at this point. Catherine Rampel, author of the Receipts newsletter. And we have a lot of really interesting first world high trust society stuff to talk about today. The kind of things that you would see in Denmark, right? Or totally or another come not. Not a banana republic.

[B]

Denmark, maybe like a millennia, a millennium ago. You know, like if we're talking feudalism type. I don't know if Denmark was actually a feudalist, but I assume it was. Yeah, maybe then maybe it's an appropriate comparison.

[A]

If. If Macbeth taught me anything is that. No, Macbeth wasn't Hamlet. Hamlet is set in Denmark. Sorry. Okay, guys, let's go. Last night, word broke that the 10 billion dollar lawsuit which the President of the United States had filed against his own government. Just sit with that for a moment. Was close to settling and that the terms of the settlement were. Catherine, stop me if I get any of this wrong. The government will create and fund a $1.7 billion fund which will be used to compensate victims of the Biden regime, people who believe they were wronged by the Biden regime, including people who were arrested and convicted following.

[B]

Or pled guilty or pled guilty to

[A]

January 6th may come and apply for compensation. The board will be governed by five members whose deliberations will be in secret. These board members can be replaced at any time purely at the discretion of Donald Trump himself. They will do majority vote on who to give how much to the results of their deliberations. And the list of people who are given money will be secret, as will the amounts of money. Donald Trump himself, the person and individual will not be one of these people. However, other organizations or people affiliated with him may apply. And there is a sunset on this fund, which is the minute he leaves office. So if there's any money left in the fund, haha, before he's about to leave office, it will be given. It will be dissolved and given back to the government so that no Democratic president could have any access to such monies.

[B]

Did you ever see the movie Brewster's Millions? Oh, yeah, yeah, it's, it's, oh yeah, Richard Pryor. It's a little bit like the Banana Republic version of Brewster's Millions. Yeah, except I think that they will have fewer problems giving away all of that money.

[A]

So, Catherine, there's so much to talk about here, beginning with the fact that evidently all of this is legal.

[B]

I mean, it's.

[A]

Is it, I don't know, country where this sort of thing was just legal. Like you can be the president and you can sue, you can launch ridiculous lawsuits against people who have business before the government you had, and they just have to pay you.

[B]

Well, to be clear, this is ABC's reporting with so far unnamed sources. Nothing to my knowledge, unless I missed something this morning. Nothing has been announced. So things very well could change and maybe this whole could all be different and maybe we'll be in a happier state of the world where this kind of self dealing going to orphans. Yes, exactly. Does not materialize. I don't know that I'm expecting that to happen. You know, as to the legality of this, I will leave it to an actual person with trained legal, whatever knowledge, legal skills which I do not possess. But it is certainly extremely troubling. I mean, it is a, it sounds like it would be effectively codifying self dealing. You know, it's, it's not just that Donald Trump is like giving away contracts to friends or, you know, no bid contracts to friends to pave or whatever, to redo the, the fountains that, the reflecting pool or the ballroom or whatnot. Like there are plenty of dodgy things that have already been happening. But this feels like it's a different level in that as you point out, if this thing materializes as ABC News suggests it may, this will be in secret. Taxpayers have no way of knowing who the money is going to. Although I guess we have a sense because some people have already sued for restitution along these lines, including January Sixers, including Michael Flynn. He was one of the people I was thinking of who actually pleaded guilty to various felonies, but now is claiming that those were political prosecutions and that he has been wronged. You know, so I guess we have some sense of who's going to be arriving hat in hand or like, you know, big kava bag in hand or whatever. I don't know what the.

[A]

I'm glad you say that. Here's a very, a very real thing I could actually get behind this if one of the provisions are that all payments are in cash and come in brown paper bags. So when you get Your money, you got to show up and somebody hands you a brown paper bag just filled with hundreds.

[B]

Will it have like the exploding ink? Will it have the exploding ink like they have in the movies, you know, when somebody tries to rob the bank?

[A]

I think, I think it's just pure drug deal. Let's just, let's just call it what it is.

[B]

I, yeah, I don't know. It's very disturbing.

[A]

Weird way. This is. I mean, Donald Trump is an innovator in many ways. No, I mean this sincerely. So what he did with CBS and ABC with his absolutely ludicrous lawsuits before he took office was a way of legalizing bribery, right? I mean, it was just, it's just extortion. But he was like, oh, we can do this legally. You just filed this dumbest fucking lawsuit you can come up with. And so long as they voluntarily settle with you, it, it is just like having an open air drug market, right? This is like, see, now it's all five by five.

[B]

Or I mean, or his meme coins for that matter.

[A]

Or his meme coins. Right here, I'm going to start a meme coin so that if you want to pay me off, I just, I'll see the, the blockchain ledger and I'll know that you, you saved me a bunch of money for these things and I got a taste of it. And, and that's right. Nobody had ever thought to do this with the presidency. And he, he did it. Good on him, I guess. And I hear this is not really normally a Catherine Rampel question, is more of a Sarah Longwell question, but I'm gonna ask anyway. Do you believe it is possible to put this genie back in the bottle through legislation? Because I do not. My tentative view is that it is impossible to fully legislate against this sort of thing. And once society demonstrates its willingness to tolerate these things, like you can, you can try closing loopholes, you could try making things illegal, but you're always going to be behind the next Donald Trump. This is what happens in low trust societies, right? In low trust societies, you, this is a whole branch of economics about trust and how that functions and what you have to do and the economic drag that being in a low trust society creates, et cetera, et cetera. So I don't know, can I put a quarter in the machine on this?

[B]

And we also used to enforce the Foreign Corrupt Practices act, which tried to discourage this kind of palm greasing in other countries. And we would hold American companies accountable, or at least companies that did business in America Accountable if in fact they participated in corruption, bribery, various kinds of quid pro quos, not very well disguised quid pro quos, which is what these are. We would hold companies accountable because we saw ourselves as upholding these kinds of standards for the world and we thought it was good for the business environment, for that matter, for selfish reasons to

[A]

helpful to our own businesses. Right. I mean, so American businesses which would go into foreign markets that were corrupt and would be shaken down would get to say, hey, I would love to pay you off to get access to this market, but I can't because we're not allowed to.

[B]

Exactly.

[A]

Right. I mean, this is. It was good for American businesses to have this sort of protection.

[B]

Yes. It was good for American businesses to basically be able to throw the US Government under the bus. Don't blame me for not, I would love to give you a bribe, but I just can't because I'm going to, you know, get fined or sent to prison or what have you in the United States. That was useful. It was useful for other companies around the world as well, you know, for, for having integrity of markets. If the winner of a market, the winner of a contract is the one that actually has the best goods or the most efficient, you know, operations, as opposed to the one that had given the biggest bribe. This was all, this was all constructive to economic growth, like to all these sort of abstract things. All of these things contributed to it. And to your point about, can you. Is it a legislative problem? I don't know if it's a legislative problem. Like, can you not legislate against this? I think probably you could. I think it's more of an executive branch problem because somebody has to enforce those laws. The reason I mentioned the Foreign Corrupt Practices act is that it is still a law on the books and it was enforced for many years. And the Hatch Act.

[A]

Sure.

[B]

And these are things that are no longer enforced, not because Congress has repealed them, but because we have an executive branch that is unwilling to enforce them in it. And in fact, I'm. Correct me if I'm wrong, but I'm pretty sure Trump even like issued an executive order at some point. He certainly talked about wanting to relax enforcement of the Foreign Corrupt Practices Act. So the real question is, for the next administration that comes in, if it is a Democratic presidency, how will they deal with a lot of these kinds of, at best, unsavory transactions? And I don't know, but I am heartened by the fact that there are at least some CEOs that are thinking about this like, I think it was Jamie Dimon who a few months ago said that JP Morgan was not going to be giving money as a donation to Trump's Ballroom because he was not sure, the bank was not sure about how those kinds of transactions or donations would be seen by future Justice Departments. And I thought that was a good thing, that there is still some concern that maybe someone down the line will enforce the law. You know, and again, I don't know exactly what statute would be relevant here because I am not a lawyer, but certainly we have dealt with the problem of corruption, even the most creative forms of corruption before. We've had movies made about sting operations and everything else. It's not always like, here, I write you a check and in exchange you give me this contract or you give me this whatever. You pass this law, you change this regulation. I think that's the simplest version of it. But there are a lot of other permutations of bribery that we have seen before. Maybe not quite as creative as what Donald Trump is doing, but there's a gradation here, and we've been able to prosecute those before. So the real question is, will future executive branch, will future DOJs actually enforce the laws we already have without needing to pass new laws? And do today's, you know, C Suite executives, among others, January sixers, for that matter, do they believe that we will at some point revert back to rule of law? And that's the part that I am more dubious of.

[A]

Yeah. I mean, my view on this is that the answer is, is a supply side problem and that. So I find it hard to see why we would ever have another Republican led executive branch in which the Department of Justice is independent. Okay. I mean, they've just seen that there's no price to be paid, really, for just having the DOJ be a wholly owned subsidiary. So that'll be just sort of baked in for all future Republican presidents. And so the only way to combat that is that when you do have an independent doj, it has to attack all of the business side people for any potential breaches of law that happened prior in prior administrations. Because you have to establish some deterrence for future executives who look at that and say, I understand that, you know, J.D. vance's Department of Justice won't prosecute me for, for participating in this, but, you know, Democrat X might down the line. And J.D. vance ain't gonna pardon me. J.D. vance will pardon the people inside his administration. He's not gonna pardon me.

[B]

Yeah. This is why I, I'm very interested to know what's going to happen in some place like Hungary. And I'd love to talk with an expert on the political system there, like how, how difficult will it be to reconstitute democratic norms? How much of it will be done through these, through the legal system, through holding people accountable? I don't know. I don't know enough about that country and how it works and what, what's his name, Magyar is likely to do. But I would love to know more about how this has worked in other countries. You know, what, what kind of truth and reconciliation process.

[A]

So I'm glad you.

[B]

Possible and necessary.

[A]

I'm glad you brought up that phrase because I've been saying for a decade that when and if we succeed in pushing back this, this authoritarian attempt and we get past this moment, America will require a truth and reconciliation moment in order to put this to bed. Otherwise, it'll come back. And because the monkey's paw is real, it turns out we are getting truth and reconciliation. Because in the ABC News piece, I don't know if you caught this, but a source inside the administration says that this slush fund is basically a truth and reconciliation commission. So we're getting the truth and reconciliation, but it's against the people who are on the side of the rule of law and democracy. Thank you, monkeys. Paul, I appreciate it. I appreciate it. Just an amazing, amazing thing. It almost is like minuscule compared to this. But the other thing we, we got in the last 24 hours is reporting that Donald Trump traded a whole lot of stocks up in advance of making decisions about government contracts. So this is, I think from notice, Trump purchased 1 million, between 1 million and $5 million worth of Nvidia stock on February 10, a week before Nvidia announced a major computer processing power deal with Meta. Sure.

[B]

I don't know why this is so funny to you. This is.

[A]

Previously, Trump had purchased between 500,000 and a million dollars worth of Nvidia stock on January 6, the week before the Commerce Department. Commerce Department approved the sale of Nvidia chips to China. Sure, why not? There's more. There's stuff with Palantir. There's stuff with stuff. Who else amd. I mean, Catherine, I guess. I mean, part of this. So part of this is the, the legal side, which I know is, is not what you are, are most predisposed to talk about. But if you go and sit around with a bunch of econ professors, they will tell you that corruption like this is a tax on economic efficiency.

[B]

Oh, absolutely, absolutely.

[A]

Can you Talk a little bit about this and explain why people should care. Because it does. It isn't just that like, oh, so Trump gets a little bit rich. This stuff dragged down the entire macro economy.

[B]

Yeah.

[A]

Moved to from high trust to low trust. It, it makes everything go slower and cost more and it's very bad. Can you explain to the people why?

[B]

Yeah, because it's not a victimless crime. When Donald Trump is using his insider information to enrich himself by front running other trades, the other people on the other sides of those trades lose out. And you might say like, who cares? It might be your pension fund, you know, or, or some other, you know, some, some other institutional money that affects you. So you probably should care. Might be your 401k. But aside from the individual losers, you basically degrade the entire quality of the market. I wrote something actually maybe a month ago about how in Trump's economy either you're an insider or a chump. And that's really what this is about, that if you are trading on anything in the markets and you don't have inside information, you, you are losing, you are losing that bet because somebody else, because there's asymmetric information there and somebody else is going to take advantage of you. And what that means is degrades the trust in the ability of any transaction to be fair and for, for people to participate essentially in the marketplace in various ways. So, you know, just like a very small microcosm of this is prediction markets. Right. It's like, who. The prediction markets themselves are actually quite anxious. You know, Kalshi and Polymarket, they're quite anxious now about insider trading because it's like, it's a PR problem for them, but it's also a, a customer problem for them. Nobody wants to participate or fewer people will want to participate if they know that the system is rigged against them. And there's, that's, that's one like very small, easy thing to under, to wrap your head around. But this is true for the market writ large for anybody who's trading oil or investing in stocks or any other financial asset. And so what happens is you're not going to have capital flowing to the places it's going to flow. That's one problem which again, sounds abstract and maybe people don't care, but that's how you get economic growth is by, by having the people with the good ideas get the funding so they can execute those ideas. And the people with the bad ideas or the bad, the badly executed companies fall. And you know, it's sort of like survival of the fittest. But it all gets distorted if instead, capital is going to places where companies have the strongest connection to strongest political connections. There was a great story, maybe we talked about it at some point on our live chat in the past, I forget, but there was something in Bloomberg a few months ago about how all of these institutional investors were now taking into greater account when they make their investments, how close the leadership of a particular company is to this president, rather than, do they have a good product, are they reaching the right customer base and audience, are they well run, do they have the smartest people? You know, all of the things that you would normally think about as the core criteria for whether a place is whether a company or a project is a good thing to invest in. Instead, it's about nepotism, it's about corruption, it's about, you know, who. Who has the President's ear or who is least likely to get targeted, for that matter by the President in a fit of rage. So all of those things are bad for economic growth, they're bad for markets, they're bad for living standards in the end, because it means that, you know, we just don't have the same kinds of innovation and smartly run companies and products that you would have if you have rule of law. Rule of law and democracy are critical for thriving capitalism. It's not an afterthought. It's not like an orthogonal thing that we shouldn't care about. It drives me crazy to no end that we have so many executives in this country, so many actors in corporate America who act as if, you know, Donald Trump does all of these crazy things. And sure, he's corrupt and he says crazy shit or whatever, but that has nothing to do with me. No, it. For selfish reasons, you should care. Because rule of law, the degree degradation of rule of law is the thing that holds our entire economy or that will undermine our entire economy.

[A]

So Russia saw a version of this early in the Ukraine war, where the Russian defense industry famously, is just Putin cronies, right? And so there, you know, how do you get a defense contract in Russia? You. You be close to Vladimir Putin. It has no, no bearing on, you know, the quality of your product, right? Is your fifth generation fighter good or bad? Is your weapon system good or bad? None of that matters. And when they invaded Ukraine, it turned out like none of their stuff worked. And this is why. Right?

[B]

And yeah, it's the corruption tax.

[A]

Yeah, it is. It is the corruption tax. All right, on the other side of this, we're going to Have a scintillating conversation about bond markets. Catherine and I were joking about this before because what I really wanted to talk about today is the bond market. And she and I were like, does anybody care about that?

[B]

We will make you care. If you have a mortgage, if you have a car loan, if you have a credit card bill, you should care.

[A]

Stick around. We got to give you a message from this advertiser and then we're gonna come back and do some hot bond talk.

[B]

Ah.

[C]

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[A]

okay, so you, you wrote about the new chair of the Fed, Kevin Marsh, who was was voted in this week. Guys, you should go. If you're not subscribed to Catherine's newsletter, please go do it. It's so good and what you had in it that I want people to focus on was a little chart on the 30 year yield for Treasuries. So it is as high as it has been since 2000. 8 or so.

[B]

2007.

[A]

2007. I seem to remember something bad happening back then. It's hard to. It's hard. I mean, who can say?

[B]

Who can say?

[A]

So I want to see, I want to start by. I want to back all the way up, and I would like to have you teach a little class about how these things happen. So what a Treasury is how the treasury auctions work. Right. So when we talk about, oh, well, the yield is going up, well, how does that, how does that happen? And the answer is that a bunch of people are bidding as the U.S. treasury Department auctions office bonds. So you just give people, like, the 92nd tour of how we get to this chart and then tell us what it means.

[B]

Yeah, I mean, you, you basically set it up. So the government issues debt because we spend a lot more money than we bring in in the United States. I know that's a huge surprise. And the government issues debt to pay its bills to make up the difference. And it issues debt in different increments. There are different kinds of Treasuries. There are bonds, bills, and notes. But for the sake of simplicity, I'll just say they're different Treasuries and they last a different amount of time. Market participants, bond investors, bid on them, as you said, and basically they will demand a higher interest rate, a higher yield, coupon, whatever, depending on how safe they think the asset in question is, depending on how much inflation they think there's going to be, and a bunch of other factors. So what's happening here is that investors are saying, okay, we're still going to lend the United States money. It's supposed to be the safest of safe places to lend to. But we're worried about inflation. And inflation has been ticking up. It's, it's, you know, sort of reignited last year after Liberation Day, the concerns about inflation and the actual.

[A]

Oh, once Trump became president.

[B]

Once Trump became president. Oh, it had, it had been ticking. Yeah, it had been sort of ticking

[A]

down, then down under Joe Biden. You say inflation was going down under Joe Biden.

[B]

It was very high under Joe Biden for a while. So I don't want to, you know, but only for a while on a memory home.

[A]

Then it started going down.

[B]

Yeah, largely because of the Fed, among other things. In any event, stuff that Donald Trump did has made inflation worse, has made the inflation outlook worse. And inflation is bad for a bunch of reasons, including the people don't like paying more for the stuff that they buy. It sucks, it's stressful. Companies don't are worried about their, you know, their, their costs going up faster than they can raise their prices. And then if you're an investor, you're really worried that if inflation is higher than the interest rate you get on your bond that, that you bought, you're going to lose money. Right. So basically what's happening here is that investors are demanding a higher interest rate because they are anticipating higher inflation. If they thought inflation was going to be very low, then who cares, they might be willing to accept, I should say, a lower interest rate. So that's what's happening here. So interest rates on the 30 year bond have gone up because of concerns about inflation. They're at their highest level since 2007. They've been pretty low, they were pretty low for a very long time because we had the financial crisis and very low short term interest rates. And, and that, you know, we, you and I have talked before about the miraculous zero interest rate environment and what good and bad things that did for the economy. But we're now back in a situation where investors are really worried that they're going to lose money because of inflation. So they're demanding higher interest rates. And what that effectively means, it means a few different things. One is that it's much more expensive for our government to borrow money because it's not just this treasury, it's other things have also got, you know, are also requiring, you know, the government is being required essentially to pay more money for the privilege of borrowing. So it's going to increase our debt even more. And even before all of this, you know, we were paying more on, in interest for, you know, our government was paying more in interest than in its payments for Medicare, its payments for all defense spending. Although maybe that's different now that we're in a war and a bunch of other categories. So we already had a huge burden of debt. And then as I kind of teased before the commercial, this stuff also affects all of the other debt that's out there in the world. So the rate that you pay on your mortgage, on your car loan, on your credit card, on basically anything that gets financed, it is related to, it's benchmarked against what the government's interest rate is. And so that means it's going to be much more expensive for you to borrow, to buy a house, for example, is that useful?

[A]

Yes, all very useful. And the point of your piece by Kevin Warsh is that one of the signals, if you are watching the bond yields, this is a signal as to what the Fed will have to do in terms of setting its own interest rates. And this suggests that the Fed absolutely can't cut rates anytime soon, no matter how bad the economy gets. Yeah, Correct.

[B]

Yeah. Well, that's. I wouldn't quite put it that way.

[A]

Soon. Can't. Can't cut it soon.

[B]

Yeah. If you look at. If you look at where.

[A]

At least for a meeting or two.

[C]

Well.

[B]

Or probably for the next year and a half, markets don't think that the Fed is going to cut interest rates for at least through the end of 2027.

[A]

If anything, surprise for President Trump.

[B]

I mean, it should. It's not a surprise to anyone else, but it is definitely going to be a surprise for him. Yeah. If anything, market participants think that rates will be higher at the end of next year than they are today. And so the challenge for Kevin Warsh is that he also wished upon a monkey paw and he wanted to get this beautiful job as Fed chair, which is one of the most important jobs in the world. But the things that he had to do to get the job, I would say degraded the institution somewhat, maybe degraded his own dignity somewhat. Other people will disagree with me on that. But he's also put himself in this position where he is going to inevitably have to disappoint his benefactor, who is expecting lower interest rates that he cannot deliver. He absolutely cannot deliver interest rates. Based on the data that we have coming in now, look, if we have a major depression and, you know, recession slash depression and the economy craters, and the Fed is more worried about unemployment than they are about inflation. Yeah. Maybe they'll cut rates. Although based on his track record, Kevin Warsh's track record, he's not likely to make that decision. He's not likely to ever see unemployment as a bigger problem than inflation, because you can look at what he did during the financial crisis when inflation was clearly not a problem. Unemployment clearly was a problem. We had like 10% unemployment at 1 point. And he was like, I'm worried about inflation. We should raise rates or we should tighten monetary policy. So he has promised Donald Trump that he would cut rates. The markets are saying, not going to happen. The other members of the Fed board saying, not going to happen. You can see how they voted at the last meeting before he came on board. You can see who's left on the board, including Warsh's predecessor, now predecessor, Jay Powell, who is sticking around. And they're all like, yeah, we're pretty worried about inflation. We're less worried about unemployment. So Warsh is in this situation where he has he first of all is unlikely to agree with the prescriptive policy that he himself has claimed he would implement, which is lower rates. Second of all, even if he did want to cut interest rates himself, even if he, like, is no longer an inflation hawk, all he wants to do is cut interest rates. He, he can't force the board to do it because he is one of 12 votes. Um, so what's he going to do? Is he going to like, you know, try to convince them and be like, sorry, Mr. Trump, sorry, Mr. President, I really tried, but like, they're not listening to me. Then he just looks into ineffective.

[A]

You're also mean to me.

[B]

They're also mean to me.

[A]

Bunch of mean girls.

[B]

It would be extremely embarrassing. I went back and I looked to see has had it ever been the case that the committee that sets interest rates did something without the support of the chair? You know, like was.

[A]

Yeah. Tell the chair what year that was.

[B]

1939 was the last time it happened. It was with Mariner Echols, who was the Fed chair. He dissented three times. And it was on. Not exactly this kind of thing, but something. I don't remember exactly what it was, but it wasn't on interest rates per se, I believe. So it's not completely unheard of, but it is very, very rare, especially since in the modern era, in recent decades, the job of the Fed chair is basically to build consensus. Right. They're not there to play devil's advocate and to like, provide some intellectual balance. No, they're there to basically like, pre negotiate what the, what the Fed is going to do before they officially announce it, before they have their meeting. So there's a lot of, like, massaging behind the scenes and, and talking through, like, how are we going to get everybody on the same page? Because we kind of want to act as one, you know, one voice. And Warsha said he wants regime change. Those are his words. And he thinks that they should have more robust battles at the Fed. So maybe that was never going to be his approach anyway. Maybe he was never going to try to operate by consensus. But it would be really embarrassing if there was a consensus. A near unanimous opinion of everyone except the boss. It's crazy. It's totally cuckoo that the Fed would evolve that way and it would be a sign of institutional failure, basically. The Fed is.

[A]

Why not?

[B]

Yeah.

[A]

If it was ever going to happen, wouldn't it happen under this president, in this moment?

[B]

Well, I think, I think you would see markets flip out if they were concerned about whether the Fed could continue to exist. As, you know, a competent and politically independent body. So anyway, so one option is that he can do that, right? He can be like, I tried to convince them, they won't listen to me, I'm going to dissent. I don't think that's going to happen. He could vote alongside everybody else, which is where I think his heart is, that either they should keep rates where they are or even raise them in the year ahead as again, that's what. But that's the problem. You know, then he's going to, he is going to have to face the exact same potential rage and retribution that his predecessor, Jay Powell has absorbed. Right. Powell has been smeared, he's been threatened with illegal termination. He's been threatened with, in, with in various ways, you know, criminal investigation. Criminal investigation. So Powell has, has gone through this gantlet where. And he, and again, Powell was chosen by Trump too. Powell was chosen by Trump because Trump thought Powell was going to cut interest rates. And Powell did cut interest rates for a while when he thought it was appropriate and then stopped when he did not think it was appropriate. Then the rest of the board or the rest of the committee again, you know, supported him.

[A]

Powell was elected in a time of plenty. That's the other thing. Right. I mean there was, there was nothing. There was, those were good times.

[B]

They were good times.

[A]

Not because of Donald Trump. Like this was, you know, that Barack Obama's recovery was slower than everybody wanted it to be. It took longer probably than it should have. But on the other hand, like it was basically a seven year slog of a recovery and Trump comes in as the recovery is finally really taken hold.

[B]

Yeah, that's.

[A]

And this is the first time reality catches up.

[B]

Yes. So in Powell's case, you know, he was like, no, I'm not going to do what you say. You know, if he, I don't know what his initial interview with, with Trump was like in. I guess it probably would have been 2017ish. I don't know what it was like. I don't know what he said. But I having talked with Powell before and seen him out in the world, I believe that he said what he thought was right rather than what Donald Trump wanted, what he thought Donald Trump wanted to hear. It just may have been coincidentally things that Trump wanted to hear and that he liked them, you know, that he was rel. That Powell was relatively dovish. Then when it turned out to be the case that they thought that, you know, further rate cuts were not necessary, he changed his mind. And Trump was like, wait, I'm betrayed. I was. I thought this guy was going to cut interest rates forever. And you can see how Trump reacted then. You can see how he has reacted during his second term. And I don't understand how Powell, excuse me, how Warsh thinks he is going to wriggle out of the same confrontation because Warsh has more explicitly said that he would cut interest rates. And Donald Trump has now explicitly said it was his litmus test for Powell's replacement, that it be someone who would immediately. Yeah, it's all he wants.

[A]

All I want in life is to see people who made promises, people who, who wrote checks they couldn't cash, be caught up and called to account for. That's all I want.

[B]

And, and you know, in Warsh's case, he's a very politically adept guy. He's very well connected, you know, well liked in the Republican.

[A]

Jane Louder. Right. His wife is his, yeah. Ron Louder's daughter.

[B]

And Ron Louder, for those who may not recall, cosmetics magnate. He's also the guy who planted the idea in Donald Trump's head that we should go after Greenland. So this guy has some purchase, so to speak, with the president. And maybe Warsh thinks that that is going to shield him. But there have certainly been other people who had closer ties with this president and long. Corey Lewandowski, how that works, Corey Lewandowski, Paul Manafort, Michael Cohen, you know, there are plenty of people who.

[A]

Loyalty goes one way.

[B]

Exactly. And so I don't know if Warsh thinks he can manage his way out of it. I don't know if he thinks he's going to have Besant on side and Besant's going to be able to help him manage his way out of it. Bessant has kind of said publicly in the last month or so something to the effect of, I kind, I understand if the Fed wants to wait and see for a little bit, but I'm confident that they will eventually come around to realizing that we need to cut rates. So, but maybe, you know, that was a, there was a little bit of daylight between those comments and the kinds of things that he and Trump and others had, you know, Lutnick and others had said previously, which is that, no, we have to cut rates dramatically today, so maybe they think they can manage their way out of it. But I don't know. I mean, the fact that Warsh also has, it's not only that he's been in denial, I think, about the political retribution. I think he has, you know, the, the threat of political retribution, I think he has to some extent enabled it because he has been asked in the past about what does he think about Donald Trump's persecution, prosecution of Jay Powell. What does he think about Trump's efforts to fire Lisa Cook, a Fed board member. That's a case that's still sitting before the Supreme Court. What does he think about the things that Trump has tweeted about Powell and other Fed members, you know, calling them enemies of the people and things like that. And he has either refused to answer the question or he has said, good job. I think that was a good idea.

[A]

Yeah.

[B]

So again, maybe he, everybody thinks that they will be the one person who is, who, for whom the loyalty goes both ways and they can manage Trump

[A]

and Kevin Marsh is worth in the hundreds of millions.

[B]

Yeah. According to his financial disclosures.

[A]

Okay. I don't know about you, I don't know what your life experience is. I have never met a super rich person who approaches any aspect of life or the world and says, boy, that looks really hard. I don't think I could do that. I think that looks like an insolvable problem. And I've, I've seen what that does to everybody else. And I'm no different from everybody else. If I try to do that, I'm gonna get, I'm gonna get my, my ass caught. That is not how super rich people, super rich people walk through life going, well, I, I figured out how to sold, how to sell books on the Internet. So let me tell you how to fix, you know, protein analysis or something like that. They just, and I am never met him. That's not true. I think I did meet Kevin Warsh once upon a time back when he and Jane had just gotten married. Guys like him always think that they're special because otherwise, how, how else could they have ascended to this, this lofty position if they weren't special?

[B]

Okay, well.

[A]

And so they will be able to finesse it. They're like, you know, Donald Trump is just a stubby fingered Bulgarian. They're not, you know, he understands how to make it all work.

[B]

In fairness to Kevin Warsh, I've met him briefly. I know a lot of people who know him and like him and respect him. I think he is supposed to be very smart. And he did serve on the Fed before he served on the Fed board in from like 2006 to 2011. I mean, I would say that he did not have the most successful run because that's, that's what I was talking about before when he was warning about hyperinflation when unemployment was very, very high. And inflation itself was. Was not happening. We were, in fact, experiencing deflation for part of that period. So it's not like I think he had the best run, but he does have some experience here. I think the. I think in a different era, without a president who was overtly trying to politicize the Fed, he wouldn't be my first choice pick for Fed chair, but I think he would be fine. You know, I don't think it's like, you know, I don't think he's. He's beyond the norms of who would get that job. What is concerning to me is that you need superhuman powers today to get that job. To hold that job, you really, you need a superhuman spine. That's what's different here. It's not that I think, like, oh, he's too dumb to have the job or whatever, and, and he just got. He thinks he can do it because he's rich. No, I think he's a smart guy, and I think on paper, he would be a totally fine candidate. The challenge here is not, does he have the brain? It's, does he have the spine? And I don't know. I am hopeful.

[A]

What I'm saying is, I think not about doing the job. I think, yes. What I was talking about, I meant staying on the right side of Trump.

[B]

I see what you're saying.

[A]

I think he looks at that and says, oh, yeah, I'll be able to finesse this. Don't worry. I'm special.

[B]

Yeah. But, you know, a lot of people have thought that people who are rich and people who are not rich. So I don't think this is unique to people having massive resources and being diluted in their skills, which I think is often a problem. But I don't think that's what's happening here. I think it's like Donald Trump has this hold on people where he kind of charms them in some way and makes them feel like this friendship is real, this relationship is real. And, yeah, I threw everybody else under the bus, and I, I, you know, I, I stabbed everybody else in the back. But in this case, you know, we, we got something going, we got something real here, and I think people kind of buy into that, and it's some kind of. It's some Jedi, Jedi mind trick that.

[A]

I know this Guy's been married 15 times before, and I know he's cheating on his wife with me, but what we have is real love.

[B]

Yeah, it's a little bit like that. I don't get it, but people get suckered by it again and again and again and again. And sometimes there is not the fate of the world on their shoulders if that relationship does inevitably end. But sometimes there is a major consequence to global democracy or the global economy or all of these other lofty things. Like it's, it's a problem for us when people get suckered. I mean, it's, it's, it's not a problem for us when a lot of other, like Scaramucci when he fell out with Trump. Sucked for Scaramucci. But am I worried about rule of law or the global economy? Not really. If Kevin Warsh gets on the wrong side of Trump and cannot finesse that relationship, that could end up very, very badly. If Trump tries to fire him or prosecute him or if Warsh himself does things that compromise the independence of the Fed, then we definitely have skin in the game in that circumstance.

[A]

I'm kind of excited to see what happens.

[B]

I'm not.

[A]

If it's what you say it is, I love it. As a. It's a wise person once said. All right, Katherine, thank you for being with me to talk about all of this incredibly good news about how hot our country is. The country that was dead and was in decline is now back stronger than ever.

[B]

Golden age.

[A]

Amazing. And I imagine this golden age will still be continuing next Friday when we get to sit down to talk about even more wonderful things that are happening. Yay.

[B]

Yay, Katherine.

[A]

Have a good weekend. Everybody else, thanks for being with us. Hit like hit. Subscribe. Do me a solid here. Follow the channel. It helps us a lot. Everybody else, we will see you next week. And the channel will have more good stuff coming later today, including a secret podcast with me and Sarah Longwell. Good luck, America.