Is the Fed Really That Independent?

Summary

Podcast Summary: "Is the Fed Really That Independent?"

Podcast: Everybody's Business, Bloomberg and iHeartPodcasts
Date: September 19, 2025
Hosts: Max Chafkin and Stacey Vanek Smith
Main Guest: Rohit Chopra (former CFPB Director, FTC Commissioner)

Episode Overview

This episode dives into one of the most debated questions in economics and politics: How independent is the Federal Reserve, really? Max Chafkin and Stacey Vanek Smith are joined by Rohit Chopra, former Director of the Consumer Financial Protection Bureau, to unpack recent rate cuts, political pressures, and the Fed’s evolving role in American life. Additional conversations cover salary cap controversies in sports and some lighter, offbeat business news.

---

Key Discussion Points and Insights

1. The State of the Federal Reserve: Rate Cuts and Political Pressure

[02:02–06:55]

• The episode begins by contextualizing major news: for the first time in 2025, the Fed cut interest rates by a quarter of a percentage point—an expected but still dramatic move amid ongoing economic woes.
• Hosts discuss ordinary Americans' feelings about “stagflation”—rising prices amid a slowing economy.
  • Stacey: "There is something that, like, if you had more money or felt better about the economy, something that you would buy?" [04:36]
  • Max: "Prices going up, economic opportunity stagnating. There's a word for that, Stacey… stagflation." [04:50]
• The hosts link the Fed’s actions with increased political scrutiny and reference political pressure allegedly being put on the institution from the White House.

2. Is the Fed Really Independent? Rohit Chopra Interview

[06:55–21:00]

Chopra on Political Pressure Inside the Fed

• Chopra describes recent unprecedented direct presidential attempts to influence or remove governors. Notably, Governor Lisa Cook attended the meeting after successfully fighting off a firing attempt by the president. [07:44]
• He outlines the oddity of Stephen Myron, simultaneously serving as a White House adviser and a Fed Governor, dissenting from the majority in line with presidential preferences. [09:07]

Structural Flaws, Accountability, and Capture

• Chopra draws a line between independence and accountability:
  • Chopra: "Even if an agency is independent, it can't be unaccountable. And I think there is [a] question about whether the Fed has always been accountable to the public or if it's often serving the interests of a narrow set of financial stakeholders." [10:10]
• He critiques the Fed’s historical deference to financial interests—failing, for instance, to crack down on subprime mortgage proliferation prior to the 2008 crash.
• Chopra stresses the complexity of the Fed: it's not just the governors in Washington, but also 12 regional Federal Reserve Banks. He calls for reconsidering what powers reside where and suggests the Fed has inappropriately expanded its influence in global markets at the expense of smaller, local ones. [11:51–12:54]

Debate: Reform vs. Fantasy

• Max questions whether any real reform is possible amid such entrenched interests and the current political landscape. Chopra counters that large, personality- and politics-driven changes happen quietly, without the need for new laws:
  • Chopra: "The Fed has changed dramatically over the years without any legal change. It happens because of those governors and chairs who sit in those seats." [16:00]
• Chopra warns that “independence” is a recent, fragile tradition, and if those in power choose to prioritize politics or placate the President, this could fundamentally reshape the system—even without statute changes.

Chopra’s Vision for the Fed's Future

• He advocates for curtailing the Fed’s discretion to bail out or subsidize particular financial actors, and focusing on “core mandates” like monetary stability and being a lender of last resort to local banks.
  • Chopra: “I think there should be quite less power when it comes to bailouts and backdoor bailouts especially.” [18:05]
• He calls for broader representation, voicing nostalgia for when Fed governors might come from farming backgrounds, not just elite economics circles.
  • Chopra: “Back in the day there was actually a Fed governor who was a hog farmer. They really represented a broader swath of America and I don't think that’s a bad thing.” [19:49]
• Both hosts and Chopra agree there should be more real debate and dissent at the Fed, rather than scripted, unanimous decisions.

Notable Quotes

• Chopra on Independence vs. Accountability:
  "I just don’t think independence should ever mean unaccountable." [17:45]
• Chopra on Change and Agency:
  "Donald Trump has not changed a lot of laws in this country, but he has changed a lot of agencies pretty dramatically." [17:00]

3. Sports Business: Salary Caps and Workarounds

[23:43–34:32]

The Kawhi Leonard Controversy

• The show shifts to the NBA’s current investigation into LA Clippers’ owner Steve Ballmer possibly circumventing salary caps by routing off-the-books payments to star player Kawhi Leonard through a tech startup, Aspiration.
  • Randall Williams (Guest): "What Ballmer is accused of doing is going outside [the salary cap] through this company… and then paying Kawhi Leonard even more than what he's already paid." [24:57]
• The discussion unpacks why salary caps exist: to maintain competitive fairness between big- and small-market teams, as opposed to baseball where no cap exists and wealthier teams often dominate.
  • Randall: "If you are able to pay someone outside of the salary cap, then… an owner could persuade a player, 'Hey, don't go play here, because… I'll get you a deal on the side.'" [25:50]
• It's revealed that the Leonard/Aspiration deal may have included little-to-no actual endorsement work—prompting debate over endorsement norms, athlete value, and systemic loopholes.
  • Max: "My reaction was actually like, I guess Kawhi Leonard is underpaid… the salary cap should be a lot higher if there’s just $28 million sloshing around and probably lots more." [32:10]
• Randall’s take: creative circumventions—or outright cheating—are always present in high-stakes capitalism:
  • Randall: “There’s always going to be money under the table. Always, whether it be at the high school level, the college level and at the pro sports level.” [33:38]

4. Underrated Stories: Elon Musk, SpaceX, and Cocaine Branding

[35:48–39:53]

• The episode closes with an unusual story: drug traffickers in Brazil shipping cocaine bricks stamped with the SpaceX logo.
• While the hosts quickly clarify that there’s no evidence tying Elon Musk or his companies to drug gangs, they riff on the strangeness of illegal drugs appropriating tech branding as a mark of status or “cool.”
  • Max: "I think it’s actually kind of a… to see how cool your tech company is… if drug dealers are like, this thing is so cool, I'm gonna stick it on that." [37:07]
  • Stacey: "I thought cocaine kind of sold itself." [37:33]
• The conversation lands on a wider point about branding and cultural cachet—even in the black market.

---

Timestamps for Major Segments

• [01:07] Episode Start and Teaser Headlines
• [02:02] Fed Rate Cut and Political Pressure Discussion Begins
• [06:55] Introduction of Rohit Chopra
• [07:44] Inside the Fed: Drama Over Board Members and Presidential Interference
• [11:30] Chopra Critiques Fed Structure, Independence, and Accountability
• [15:12] Can the Fed (or CFPB) Actually Change?
• [17:45] Chopra’s Closing Arguments: The Path Forward for the Fed
• [23:43] Shift to NBA/Clippers–Kawhi Leonard Salary Cap Controversy
• [35:48] Underrated Stories: Cocaine with SpaceX Branding

---

Memorable Moments and Quotes

• Chopra: "Independence should never mean unaccountable." [17:45]
• Stacey: "There is something of [an] ecclesiastical vibe around the Fed. That is true." [19:44]
• Randall (on workarounds): "Capitalism finds a way." [33:49]
• Max (on drug branding): "It’s an achievement. If drug dealers are like, this thing is so cool, I'm gonna stick it on that." [37:21]

---

Takeaways

• The Fed’s independence is more fragile and politically malleable than it’s often portrayed, with real, recent attempts by politicians to influence outcomes or even oust governors.
• Actual and perceived accountability of the Fed—both to the broader public and to economic elites—remains a contentious issue, one ripe for debate as economic conditions grow more precarious.
• Salary cap enforcement in sports, much like financial regulation, is subject to circumvention—and the relentless creativity of people who find the rules inconvenient.
• Even the strangest branding stories (like SpaceX-labeled cocaine) reveal something about cultural status and the shifting landscape of what counts as valuable or cool—even in illicit markets.

---

This summary covers all essential content from the episode, with clear attribution and timestamps for easy reference, so you can grasp the full scope of the discussion without listening in.

Transcript

[A]

These days, AI can help you adopt better time management, but it can't stop colleagues booking meetings during lunch. But how about being able to easily adopt industrial AI to streamline your business? Siemens Xcelerator helps you find the right AI providers and easily understand what they offer so you can use modular solutions to quickly scale up and grow your business. That's AI for real. From the global market leader in industrial AI, Siemens. Learn more on USA.Siemens.com AI your next.

[B]

Product launch is coming fast.

[C]

Don't let billing slow you down. Legacy systems can't handle usage based billing.

[B]

That means your team is stuck gluing code together, piecing through spreadsheets and running ad hoc queries just to figure out what to bill. With Metronome, you can roll out new pricing in minutes instead of months, whether it's usage based, seat based, or a hybrid model. Visit metronome.com to see how companies like.

[C]

OpenAI and Anthropic launch billing as fast.

[B]

As they launch products. That's metronome.com.

[A]

Bloomberg Audio Studios podcasts Radio.

[B]

News this is everybody's business from Bloomberg Businessweek. I'm Max Chavkin.

[D]

And I'm Stacey Vanek Smith And Stacey.

[B]

We have a big conversation coming up about your favorite topic, the Federal Reserve. Our guest is Rohit Chopra. He was a big deal guy in the Biden administration and he has some provocative things to say about Jerome Powell.

[D]

We're also talking about salary caps in professional sports leagues. Teams and players have been finding some pretty interesting ways around those limitations and our underrated story.

[B]

Stacy, I have a idea, a brand idea for Elon Musk. Warning may not be legal.

[D]

I will keep that in mind. Okay. Obviously the big economic news this week was the Federal Reserve. But we also got some pretty big business news last night. We're recording Thursday morning we should say.

[B]

Yeah, another late night host is down. Stacey Amid some political pressure from the Trump administration, Disney essentially pulled Jimmy Kimmel, who is the ABC late night host, a competitor to Stephen Colbert, off the air amid political pressure from the Trump administration. For me, this story really has echoes of the one that we talked about with Felix Gillette a couple weeks ago with Stephen Colbert with where you have a combination of factors. One is the threat of regulation of of not approving mergers and the other is like this format, the late night format is basically failing and all of these late night shows are not doing well. So Trump is giving these networks essentially an excuse to kill a product that is not working super well.

[D]

I would argue the bigger story in a Certain way could be a potential threat to free speech. And news organizations feeling like if one of their hosts or commentators says something or does something that the administration disagrees with, they might end up facing the very real wrath of like governmental regulation.

[B]

Yeah, 100%. And we have another story related to political pressure that just so happens to be going on right now.

[D]

Have another story related to political pressure, which is the Federal Reserve. For the first time this year, the Federal Reserve cut interest rates, which we were all kind of expecting, but there was a.

[B]

Cut it by 300% right. As Donald Trump.

[D]

Yeah. A quarter of a percentage point. Which was like what was the expected.

[B]

But by economists.

[D]

Yes. Well, there were, there was a lot of drama around this. We will get into kind of what was going on behind the scenes with Rohit Chopra in just a minute. But the, the Fed chair did say something that I thought was kind of interesting for the rest of, for us, us in the economy, which is he, he started to talk about stagflation, how prices are going up, how the economy is slowing down. And this is a really dangerous combination. And so I thought I would like ask people how they were feeling about the economy right now. How do you feel about the economy right now? Not good.

[B]

All the prices are going up and.

[D]

Up, especially food shopping. Before you could just put everything in.

[B]

Your cart and now you have to.

[E]

Start cutting back on things.

[B]

It's a real have and have nots economy.

[D]

And you know, you look around, people are making a lot of money in some professions and the champagne's flowing and in others, you know, things are definitely a lot tighter.

[B]

I came here because this is the only thing I can afford right now.

[D]

The pizza. The $150 each slice.

[B]

Yeah. The dollar slice. Yeah. When I get the job, I think I'm going to go back to like chicken and eggs.

[D]

Eggs are like a luxury. A little bit.

[B]

Exactly.

[D]

Is there something that, like if you had more money or felt better about the economy, something that you would buy.

[B]

Yes.

[D]

A new car. What's your car like now? It's a terrible Nissan that keeps having 100 problems because it's almost at 90,000 miles.

[B]

Prices going up, economic opportunity stagnating. There's a word for that, Stacey.

[D]

There is that.

[B]

Stagflation.

[D]

Stagflation. It's the worst of all the Fleasians, I think. And it's like kind of a trap for the Federal Reserve because if they cut interest rates, it does help grow the economy, but it can also make inflation worse. So it puts everybody in Tough position.

[B]

Yeah. And it's not clear to me what the, what the fix is at this point. I mean, we are, we've got economic challenges that I don't know, you know, whatever you feel about Jerome Powell or whoever's running the Fed, like, I don't know how fixable it is at this point.

[D]

Well, I agree. And like, prices are going up and with tariffs, they're going to go up more, at least a little bit more. It could be a one time thing, but it is a really tough position. Like, it's not obvious what they should do, but the Federal Reserve yesterday said jobs right now are the most important. And I think most of us would probably agree, although if inflation gets out of control, that can be really bad foreign. So, Max, we talked earlier in the show about the big economic news of the week, which is the Federal Reserve and interest rate cuts. And somehow everyone in the country, like, knows about the Federal Reserve and interest rates now. It has become huge news.

[B]

Yeah. And we've also been talking about this question of like, Fed independence and the, and the sense that Trump and members of his administration are doing things to kind of attack the Fed or to, to push them in various directions. And I was excited about the conversation we're going to have because we've been sort of talking about the Fed. And I know this is kind of partly how you feel, but, but some of it has to do with conventional wisdom, whatever, like that there is this beautiful jewel of public policy that is the U.S. federal Reserve.

[D]

I am a huge fan of the central bank and like the structure of it and the system.

[B]

And I appreciate that. But I also thought it'd be fun to have a guest who would kind of challenge that a little bit.

[D]

Fair enough. Yes. I mean, I think it's, it's good to, to challenge these things. That's what they're there for.

[B]

All right, so we have Rohit Chopra, who was the director of the Consumer Financial Protection Bureau under Joe Biden. He served on the FTC under Trump. He helped actually set up the CFPB as its assistant director. Basically, he is a heavyweight on the kind of like, progressive left. And he has kind of an interesting perspective on these issues. And I thought it'd be fun to kind of hash it out here. Rohit, thanks for being here.

[F]

Thanks so much for having me.

[D]

So we got the rate cut that was the big headline. Quarter of a percentage point rate cut. But there was a lot of stuff going on behind the scenes that was also making news. Do you mind just kind of laying out some of the things happening in the Fed right now, which has always loomed very large in my world, but is somehow also looming large in the regular world now. Very strange.

[F]

Yes. Stacey, there had these sets of meetings to determine what to do with those interest rates. And it had to have been a really awkward meeting because one of the governors who was going to vote there, sitting, deliberating and voting, was actually the target of an attempted firing by President Trump. That's Lisa Cook, who is battling in court. She has won many rounds of that courtroom battle and cast a vote. Another person sitting in that room is newly confirmed Governor Stephen Myron, who is currently the chair of the Council of Economic Advisers and is in some ways dual hatting, taking both jobs on leave.

[B]

Which is unusual now anyway, just in general in the workforce.

[D]

It's for everybody now. Yeah.

[F]

And this comes after, of course, months and months of the President targeting Jay Powell, essentially trolling him online, and infamously showing up in hard hats to do a site inspection of a construction project. So right now there is a lot of debate about what's the right role for the President and Congress in the Federal Reserve. And a lot of people are fiercely defending the status quo. But I think the story is, is sometimes trickier than that.

[D]

Well, also, we should say that Stephen Myron, who was in, in his new role, this is his first time voting on interest rates, was the loan dissenter and very much in line with what the President has said he wanted. Myron said he wanted like a bigger cut. Bigger.

[F]

Yeah.

[D]

Yes, bigger cut.

[B]

So, Rohit, you have thoughts about the Fed and we've talked, you know, off, off this podcast about this a little bit, but I'd love for you to just explain when you say like they're sort of assuming everything's great or whatever, like what, what you mean, or like at a high level, like what, what is wrong with the Fed today? Yeah.

[F]

Well, I would put it this way. There's lots of reasons why in a democratic society we create some anti democratic features in certain parts of our government. For example, we make sure the judges are confirmed for life. The idea being they shouldn't stand for election all the time, be subjected to the political process. And we also cordon off some of our regulators to make sure that they're not put in the middle of a total political slugfest. That's some of the agencies I've served at, the cfpb, the ftc, others. And then you really have the Federal Reserve System, which has in many ways an enormous amount of power. We talk about it as a central bank, but another way to put it, it's a price control agency. It sets the price and supply of money that has so much effect throughout the entire economy. And one of the things that is important to me is that even if an agency is independent, it can't be unaccountable. And I think there is questions about whether the Fed has always been accountable to the public or if it's often serving the interests of a narrow set of financial stakeholders. And really prime among those examples is the Fed's lack of preparation when it came to an epidemic of subprime mortgage lending for which the Federal Reserve had an enormous amount of authority to crack down on, chose not to, and the results were really catastrophic.

[D]

So what would your vision be for a Fed going forward? If it's not a politicized Fed, but it's not the Fed, it is now. Like, what if you were designing it and the CFPB is part of the Fed funded.

[F]

That's right.

[D]

Is it technically part of the Fed or. Okay, yeah. So you've, you've been in the. I don't want to say belly of the beast, but I'll just say it. Belly of the beast.

[F]

How would I want it? I actually do think it's really important for us to think, what is the role of these Federal Reserve banks? Remember, it's not just a Federal Reserve Board appointed by the President. There are also Federal Reserve banks. We're sitting 12 of them all over the country.

[D]

That's right.

[F]

We're sitting uptown from an extremely powerful one at the Federal Reserve Board of New York. I think we also have to make sure that do we have the right structure in terms of allocating what powers the Fed should use as to what powers should be located elsewhere? I think there are some legitimate criticisms about the Fed's expansive view of its interpretation of law, including its interventions in money markets and other actions that have moved the flow of credit away from local banks toward the global money markets. That has a real impact on our economy.

[B]

I mean, one thing that I find really interesting is on some level, Stephen Myron, the new governor, is like a total. He's like a Trump guy, right? He, he's a White House economic adviser. He seems like a loyalist. On the other hand, he, in addition to being those things, he has advocated for some of the very things that you're talking about right now and, like, read. There was an Elizabeth Warren op ed that you pointed me to back in August, essentially bringing up some of these issues that you're talking about. Right now. And there was an op ed by Scott Besant in, in the Journal just a couple weeks later that has kind of a very similar, a very different words. Like Besson is using kind of conservative buzzwords. He accuses the Fed of, like, gain of function, monetary policy, little, Little Covid hat tip there, but, but kind of ultimately pointing in the same direction.

[F]

Right. Yeah. I think what you're seeing is not a political debate about it, but what's the right place for this institution. When the financial crisis occurred, there was a lot of discussion about whether core consumer regulation should ever be at the Fed. Every Fed governor I have spoken to you likes to say, I'm glad the Fed's powers were stripped and a CFPB was created, because that was last on our list of attention.

[D]

Well, yeah, you've got inflation, you've got unemployment numbers. Like, those are two big.

[F]

I mean, the dual mandates, totally, it's a big deal. And I think that there's a. There we gotta ask ourselves, what do we want them doing? I think what we want them doing is stewarding the money supply in ways that create stability, that still create the conditions for growth. And I would also argue trying to ensure that the United States has a currency, that a payment system that is working. But there's a lot of things that they do, including on the regulatory front, where there's long been concern that they are captured by big Wall street interests rather than representing the borrowers and the business owners that are really affected by their decisions.

[B]

It feels like what you're saying partly is like, hey, there's, there's a lot at play right now. It's kind of an opportunity to think about where, where should the Fed go? Like, what, what, what, what should the Fed look like? And part of me wonders if, like, we're just sort of playing fantasy politics here because, like, the CFPB's gone, basically. I mean, the CFPB still technically exists. It's there, but it's not doing anything. And, and Trump, you know, maybe, like, there are, there are a bunch of these, like, populist ideas that are floating around the Trump administration, but he's actually doing is like, goosing the stock market. And it's like this conversation we're having feels very far away from what's actually happening. And I was wondering, like, do you see opportunities for, for change that, that could actually happen in this direction during, you know, the next, whatever, three years?

[F]

So, max, I would, I would push back a little on that, which is that, of course, it's idiotic. To, to defund and defang the cfpb. That's just stupid. And I agree with that. But the truth is, is that the Fed has changed dramatically over the years without any legal change. It happens because of those governors and chairs who sit in those seats. The concept of Federal Reserve independence actually is relatively new. It's from the last generation where there was acceptance around the world that some insulation from politics was beneficial to achieving a stable, stable prices. But you'll start seeing with people who are now sitting in those seats, many of them who want to salute the President rather than really focus on their mandate. That's going to change this Fed. There are going to also be people who really are thinking differently about what those tools are. And I think we have to pay attention to that. There's already, you know, rumblings what's going to be the Fed's role in stablecoin and crypto? Would the Fed potentially not just target one interest rate, but intervene in the market with their balance sheet in other ways? I don't think you need a law change on some of this to witness that change occurring. And frankly, a great example is that Donald Trump has not changed a lot of laws in this country, but he has changed a lot of agencies pretty dramatically. And we need to really think and debate what is it that we want our Fed to be doing. Because again, I just don't think independence should ever mean unaccountable.

[D]

I mean, obviously things are changing a lot right now. If you kind of project forward looking at some of the changes that are possibly gonna happen and some of the changes that have already happened, like what does the Federal Reserve look like in, in five years?

[F]

I think there should be quite less power when it comes to bailouts and backdoor bailouts especially. Congress did was very angry about the Fed's backdoor bailouts and frankly, front door bailouts during the financial crisis curtailed that. I do think it is important to really limit the power to backstop and pick and choose winners and losers in the financial sector. I think we have to do things that give them less ability to subsidize certain types of activities. Borrowing by hedge funds, borrowing by some other financial institutions and get them focused on their core mandate, especially when it comes to making sure that they are a lender of last resort for local banks running a stable monetary policy and not being seen by presidents as a cure all to enact their agendas with no consent from the governed.

[B]

Have you converted?

[D]

I mean, I still am. This is quite a look I'm getting.

[B]

I'm sorry, I was just.

[D]

I mean, I don't. I'm not sure, like, totally. I'm not sure.

[F]

I really think a good central bank is like, really good for democracy and really good for people. But I think it has to also change with the time so that it is responsive and that it is not seen as a group of priests and priestesses who make determinations about our lives without really understanding how the economy is working on the ground.

[D]

There is something of an like, ecclesiastical vibe around the Fed. That is true.

[F]

Yeah. I worry about this, actually. I worry about that many of them spend their time traveling around the world to economics conferences. In reality, Stacey, back in the day there was actually a Fed governor who was a hog farmer. They really represented a broader swath of America and I don't think that's a bad thing.

[B]

See, I think if they're going to be so above the fray, they should wear cool outfits like the Catholic Church wigs too. They should have robes and ceremonies and just either really lean into it or bring back the hog.

[D]

It would make the press conferences a lot more exciting to come if Powell.

[B]

Like a purple gown that he had to wear like whenever.

[D]

Instead of just the tie, he went full gown.

[F]

And by the way, you know, I'm not sure that we should be happy that usually they take unanimous votes and usually that everything is scripted. We should probably want a degree of debate when it comes to issues that are so important to our economy.

[D]

Yeah, that's true. There should be dissent, especially at a moment like now when the path forward is really unclear and it seems like there are valid reasons to go in a bunch of directions.

[B]

Rohit Chopra, thank you for being here.

[F]

Thanks again.

[C]

In business, they say you can have better, cheaper or faster, but you only get to pick two. What if you could have all three at the same time? That's exactly what Cohere, Thomson Reuters and Specialized Bikes have since they upgraded to the next generation of the cloud. Oracle Cloud Infrastructure. OCI is the blazing fast platform for your infrastructure, database, application development and AI needs. Where you can run any workload in a high availability, consistently high performance environment and spend less than you would with other clouds. How is it faster? OCI's block storage gives you more operations per second cheaper. OCI costs up to 50% less for computing, 70% less for storage, and 80% less for networking better. In test after test, OCI customers report lower latency and higher bandwidth versus other clouds. This is the cloud built for AI and all your biggest workloads right now with zero commitment. Try OCI for free. Head to oracle.com strategic that's oracle.com strategic.

[A]

Every business has an ambition. PayPal open is the platform designed to help you grow into yours with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide. And your customers can pay all the ways they want with PayPal, Venmo, pay later and all major cards so you can focus on scaling up when it's time to get growing. There's one platform for all business PayPal open grow today at paypalopen.com loans subject to approval in available locations. You can get the news whenever you.

[B]

Want it with Bloomberg News Now.

[D]

I'm Amy Morris. And I'm Karen Moscow, here to tell you about our new on Demand news report delivered right to your podcast feed. Bloomberg News now is a short 5 minute audio report on the day's top stories. Episodes are published throughout the day with the latest information and data to keep you informed. Yes, there are other products like this from a variety of news organizations, but.

[B]

They usually rerun their radio newscasts throughout the day.

[A]

That's not what we do.

[D]

We create customized episodes that can only.

[B]

Be heard on Bloomberg News now.

[D]

And we don't wait an hour to publish breaking news. When news breaks, we'll have an episode up in your podcast feed within minutes. So you're always getting the latest stories and developments. Get the reporting and the context from Bloomberg's 3,000 journalists and analysts.

[F]

We're all over the world.

[D]

Listen to the latest from Bloomberg News now on Apple, Spotify or anywhere you listen.

[B]

Stacey, I don't know if you've been following this, but there is a huge story in the world of sports happening right now, sports business in particular, involving one of the biggest stars in basketball, Kawhi Leonard, one of the richest people in the world, Steve Ballmer, the longtime executive of Microsoft. I think he's the seventh richest person in the world. And a massive tech company that the Justice Department described as a quote, $248 million scheme to defraud investors and lenders. In brief, the NBA is investigating whether Ballmer, the owner of the LA Clippers, funneled payments through this weird tech company, which is called aspiration, to Kawhi Leonard and in so doing circumvented the salary cap. I know it sounds like really complicated, but like I'm telling you, this is everyone is talking about this and so I thought we would have to talk about it. Okay. Okay. And to do that, we have Randall Williams here, Bloomberg Business Week sports columnist, everybody's business regular Randall how are you?

[E]

I'm doing all right. Doing all right. Thank you for having me.

[B]

So, Randall, what. Can you just give us the kind of, like, quick, the 101 on what this controversy is about? What is the accusation here?

[E]

Sure.

[B]

And, like, why. Why is it, like, causing people to sort of lose their minds?

[E]

It's a big deal because sports leagues like the NFL and the NBA have something called a salary cap. A salary cap is set up so that players are paid a specific amount, and teams can only play players a specific amount. And so what Ballmer is accused of doing is going outside of that through this company called Aspiration, and then paying Kawhi Leonard even more than what he's already paid. And I'm sure if we looked up Kawhi Leonard's earnings, he's probably made close to half a billion dollars. And he's making even more because of these accusations.

[B]

And this, we should say this was originally reported on a podcast. Pablo Torre finds out.

[E]

The great Pablo Torre.

[B]

Yeah. But the basic allegation is that Ballmer, a rich guy who, like, he has more money than he knows what he could do with, is, like, using his personal wealth to funnel money and essentially cheat. Right. Like, this is a. This is a. This would be like a cheating thing.

[E]

In some ways. Yes. I mean, that. That salary cap issue is very fundamental to all the leagues, because if you are able to pay someone outside of the salary cap, then. Then what could happen is that an owner could persuade a player, hey, don't go play here. Because on top of the money that I'm already going to be paying you through the salary cap system, I'll get you a deal on the side. And so why this is against the rules is that what happens is a sponsor can go to an owner and say, hey, I want to do a deal with, let's just say Smo Joe from California. And the owner is then supposed to be like, okay, that's fine. I'll connect you two. And the owner's supposed to move out of the way in this case. That's not what's happening. There's three parties involved. Allegedly, it's Ballmer, it's Aspiration, and Kawhi Leonard all working together to make sure that Kawhi Leonard gets paid. And that's against the rule. If Ballmer had said, hey, here is Aspiration. You two make a deal, I think this will be perfectly fine. But that's not what's being alleged.

[D]

So essentially, this player was hired by this company, Aspiration. Like, what. What is this company supposed to do.

[B]

You're saying like what was he paid $28 million to endorse? Yeah. What exactly was he endorsing?

[D]

What does the company do and what's he supposed to be endorsing?

[E]

So I'll read straight from ESPN because I think they, they summarize it the best. Okay, this is think of Aspiration as a digital bank, but environmentally conscious. The company's product includes savings accounts and debit cards with from a select number of businesses who were, quote, doing the right thing, plus an option to plant a tree with every purchase roundup. The company also offered access to investment funds that are 100% fossil fuel free.

[B]

So they were essentially, as I understand it, getting paid to plant trees for businesses that wanted to like. It's like an online bank do good or something.

[E]

Sounds good, right?

[B]

Oh yeah. And this is where I should say Ballmer has denied wrongdoing. Of course Kawhi has said nothing, but I don't think anyone. That's kind of his thing, right? Saying nothing, but I don't even know if anyone's accused him of wrongdoing in this case because he just signed a sweetheart deal. Also, Andre Cherney, who is the other co founder of Aspiration, has essentially disputed the story as well, saying this contract, which has been characterized as a no show job, was not in fact a no show job. Just getting all that stuff out of the way. Go ahead, Stacey.

[D]

So I guess my question is why is this such a big deal? First of all, why are there salary caps in place and why is it a, like, why is it a big deal that they're going over the salary?

[E]

Sure, salary caps are fairness. I mean, if you look at baseball in particular, there are baseball teams that just can afford to. Baseball does not have a salary cap. The MLB does not. And so Moneyball, right? Yes. I mean that's a good example. But if you look at the Yankees, if you look at the Dodgers, they're two of the highest spending teams in the mlb. Now do they always win? No, but they win a lot. And it, it is in some ways. Some people say it is an advantage. In the NFL and the NBA, not so much. There is a salary cap. So you. Everybody has the exact same money to spend. Now you'll have owners who some fans would argue are not in the business of winning because the leagues are naturally profitable. But at the same time, as it pertains to the salary cap, yes, the players are being paid a lot more. But for the owners who really want to win, who this is their Pride and joy. If you find out that someone is manipulating the system and you were in the running to sign Kawhi Leonard. And Kawhi Leonard went to the Clippers because of the fact that he was offered an extra $28 million to not show up. That's a problem.

[D]

And so it's like a dummy job.

[E]

Exactly. And another thing about this is it is a no show job. I have never seen. And as Pablo Torre reported, there are no tweets from Kawhi Leonard about aspiration. There was anything.

[D]

What was his job supposed to be?

[E]

He was a no show job. Right. It was an endorsement, basically.

[B]

There are all these things that Kawhi could or could not do, depending on how he felt about it. So it was like some autographs. He could tweet, but there was no, there were no mechanisms in the contract essentially forcing him to do it. Whereas in, I think in most endorsement contracts you're required, you've got to do something.

[E]

So an example of this, like a big endorsement deal would be Nike with LeBron James. He's everywhere that they ask him to be. A smaller one is like nil deals in college, name, image and likeness deals in college, which often are just like post on Instagram a couple of times and then we'll pay you out and that's that. But Kawhi is not on social media. I mean, even in his New Balance advertisements he doesn't say a lot. And even in press conferences, like no one has heard from him because outside of his media obligations, he does not speak. To be clear, athletes are allowed to do endorsement deals. It's just that your owner cannot be paying them outright to you without counting.

[B]

It against the cap.

[E]

Right, without counting it against. Against the cap. And there are, there have been plenty of deals with teams, players and owners where again, an owner will introduce someone to a sponsor and they go and do a deal. And then there's a billboard outside of a stadium with said sponsor and an athlete. There's no NBA rules that prohibit that. It's just in what Pablo Torre reports is like, Ballmer has invested in this company. Some of his co owners have also invested in this company. And so the NBA has to do some due diligence. And they're taking this very seriously.

[D]

I mean, do, are caps a good idea or is it a better idea to just not have them, to not try to end up with like a baseball model?

[E]

Cap systems are great because they stabilize things. Like everyone can. A team can spend a certain amount of money and that's what it should be, in my opinion. I think that when you have different markets like New York, like Los Angeles, like let's say Houston, some of the bigger markets who have big billionaires who are ready to spend on this because this is their business, then that can create some sort of inequality. Now, at the same time, the players still have to get out on the field and perform all the same. But I think that it, it creates more, more stability when you have a cap system where this player is making this and this player is making that.

[B]

It's funny. Stacey's reaction to this, I think we were talking earlier is like, these are such big numbers, you know, and like, wow, like $7 million for a no show job or an alleged no show job. Like, that seems crazy. The whole thing seems crazy. My reaction was actually like, it, like, I guess Kawhi Leonard is underpaid and like, and, and like, didn't. This to me feels like evidence that the players negotiated a bad deal with the owners. Like that the salary cap should be a lot higher if there's just like $28 million sloshing around and probably lots more. Like, like the players should just get, be. Just get paid more money because clearly they're worth more money.

[E]

I hear you, but I think in what various outlets espn, the Athletic have reported over the years is that Kawhi Leonard was searching for money outside of the cap system. Even before this. When his free agency happened after he won the title in Toronto, there was reports that he was asking for private jet, private jet access and he was asking for deals outside of the salary.

[B]

I'm saying he's worth it.

[E]

I don't know. I would argue that he isn't because of the fact that he's been injured a lot, he doesn't play a lot. He's not the best brand ambassador. And when you have someone that you're spending not the best. I mean, look, that's putting it like I'm being kind here, I'm being kind. But when you have someone that you're paying, let's say $300 million to. You do want them on the billboards. You do want them to have some sort of a personality that isn't just a claw or they're not just going to be like showing up to the press conference and say five words and then go home and you don't hear from them. You want them to promote this brand.

[D]

So wait, Randall, if we back up from this particular amazing case a little bit, does this say anything? Do you think about the state of sports right now and pay and pay caps and I don't know like what is your takeaway from this?

[E]

I don't think there's anything that huge that I would take away. The only thing is that there's always gonna be money under the table. Always, whether it be at the high school level, the college level and at the pro sports level. That there are people who are.

[D]

Capitalism finds a way.

[E]

Exactly, exactly. There's always gonna be people who are willing to pay you more should you not show up for a job and you know, play 30% of the games that you're, you're required to. That's my biggest takeaway. If there was a player that was worth, there are players who might be worth a no show job. I just don't think Kawhi Leonard is the guy. So that's my main takeaway.

[D]

If you want to not do anything, you think the person should be more qualified.

[E]

Exactly, exactly. I don't. Look, Kawhi Leonard's tenure at the Clippers hasn't been great, but all seriousness, I think there's always going to be money under the table. And this allegedly is another example of that.

[A]

Every business has an ambition. PayPal open is the platform designed to help you grow into yours with business loans so you can expand and access to hundreds of millions of PayPal customers worldwide. And your customers can pay all the ways they want with PayPal, Venmo pay later and all major cards so you can focus on scaling up when it's time to get growing. There's one platform for all business PayPal open grow today at paypalopen.com loans subject to approval in available locations.

[B]

Join Bloomberg in Houston or via livestream on November 4th for the future finding the opportunities this 2025 event series will examine how companies are investing in their businesses to create efficiency, innovating their products and services and improving the customer experience. This series is Presented by Invesco Q. Q. Q. [e-mail] FutureInvestorHouston that's Bloomberglive.com FutureInvestorHouston we are.

[D]

To the part of the show where we talk about underrated stories. Randall, thank you for sticking around because you don't know what the story is. I also do not know what it is. Apparently Max brought us something. I am also a little nervous. I don't know what is happen.

[B]

This is a story that gets at the future of technology, the future of branding and also the future of cocaine.

[E]

But not running shoes.

[D]

Future of cocaine.

[B]

Wait. All right, so there were some news Reports earlier this week about a plane crash in eastern Brazil. These are news reports that are coming to us by way of the UK's independent. By way of El Globo, the Brazilian newspaper. And essentially a plane, a small aircraft crashed in Brazil, killing the pilot. And authorities recovered 200 kilos of cocaine. And the cocaine had branding for space X. Elon Musk's rocket company.

[F]

Wow.

[B]

Now, okay, I want to say, first of all, it's not what you think. This does not prove that Elon Musk has, you know, put aside rockets and cars and brain implants and all the.

[D]

Other correlation is not to enter the.

[B]

Enter the drug business. Although, as we know, he's not like totally averse to recreational drugs.

[D]

I don't think I'm breaking news part of his story. Yes.

[B]

But what I will say is, what's interesting here is, and this came out of a report I read in Vice, you know, illicit drug sellers have basically branded drugs with tech companies for a really long time. Like, is that true?

[D]

Like cocaine?

[B]

Yeah. Or like Skype. The article I said that Skype had been used like, like maybe 10 years ago, I guess, back when Skype was cooler. I think it's actually kind of a. To see how cool your tech company is. It's like, you know, as if you.

[E]

Have a under the table cocaine deal.

[B]

If, like, drug dealers are like, this thing is so cool, I'm gonna stick it on that.

[D]

It makes cocaine even cooler than it already is.

[B]

That's what I'm saying. Yeah.

[D]

I thought cocaine kind of sold itself.

[B]

It's an achievement.

[D]

Are you gonna buy that?

[E]

You need SpaceX branding.

[D]

I mean, I mean, it's like, oh, I don't. I only snort SpaceX cocaine. I would never do.

[E]

I don't even feel comfortable if I first of all, never done cocaine ever.

[D]

No, me neither.

[E]

But if I were, I would not be doing Elon Musk branded cocaine.

[B]

Now, Randall, is that because you have questions about Elon Musk's capacity to like, achieve things, or is it because you have questions about the kind of person who would stamp a SpaceX logo?

[E]

Both. I think that any person who has the time to brand something like this, look, that's just not me look, as, as Elon Inc.

[B]

Listeners, if you've come over to the Everybody's business feed by now will know I am deep in the lore. And I will say, looking at the pictures of the cocaine that was stamped with the SpaceX branding, they didn't do like a very good job. The colors aren't quite right. Like it's kind of like a light blue. It just, it just looks a little grainy. It look, it really looks like someone took an inkjet printer that was like a little low on that.

[D]

Is this like a discerning clientele?

[B]

Is it cyan or whatever the blue color was and like the toner just, it doesn't quite look right.

[E]

I just don't. I think anyone who would be buying SpaceX cocaine should just go to rehab. That's just what I think. I don't think that branding something like this, it's not appealing to me if I was going to be doing it. Elon Musk.

[B]

No, it's also funny to me because, like, I don't even know the reason you do this. Like, is it because if the authorities like poking the plane, you're like, no, no, no. We got Space X stuff in the plane. Like, it's just like bricks of cocaine.

[D]

Got to be people trying to get a marketing edge. That's got to be what it is. People feel like their, their cocaine will stand out in the marketplace of cocaine.

[E]

I guess with SpaceX branding, but I just can't see someone being like, nah, man, I don't want the raw stuff. I need the SpaceX generic. Exactly. This, this is, this isn't what I'm looking for. This is great value versus a brand markup. Right?

[B]

I don't, I just think this is significant because we've been talking, I've been talking and writing stories about the way that Elon Musk has harmed his brand, his personal brand, as well as the brands of his companies. You know, Tesla sales are in the toilet, but in the marketplace, obviously some people still think that that brand is very strong.

[E]

He's winning somewhere.

[D]

This show is produced by Stacy Wong. Magnus Henriksen is our supervising producer and Amy Keen is our executive producer. Blake Maples is our engineer and Dave Purcell fact Checks Sage Bauman heads Bloomberg Podcast. Special thanks to Jeff Muskus, Julia Rubin and Maria Ling. If you have a minute, please rate and review the show. It means a lot to us. And if you have a story that should be our business, email us@everybody's bloomberg.net that is everybody's with an [e-mail] thank you for listening and see you next week.

[A]

On September 25, Bloomberg Green returns to New York to bring together leaders from business, finance and government during Climate Week nyc. Join us for a half day of timely insights and high impact networking backed by Bloomberg's global journalism and data expertise. Together we'll explore strategies for future proofing business and communities from the planet's most pressing climate challenges. Supporting Sponsor Susano. Learn [e-mail] greenny.