Live from Music Row, Wednesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – host Leahy welcomed the founder of CapWealth Management, Tim Pagliara in studio to explain how Silicon Valley Bank failed.
Leahy: Right now we are joined in studio by our very good friend, Tim Pagliara, the founder of CapWealth Management. I think Tim, you’re what the number one rated wealth management company in Tennessee for five years running. Is that right?
Pagliara: I’ve been there a few times.
Leahy: You’ve been there more than once! That’s true. Look, my eyes glaze over—a little bit when we look at all this financial stuff because I’m a media guy. I’m a political guy. I report on it and sometimes the financial stuff gets a little bit in the weeds. However, this thing I can’t avoid.
Silicon Valley Bank is the 16th largest bank by assets in the country and the second largest bank failure that happened on Friday, then Signature Bank, where our good friend Barney Frank’s on the board of directors, failed too! What’s going on and what happened? Why did Silicon Valley Bank fail?
Pagliara: It’s great to be with you, Michael.
Leahy: It’s great to have you here.
Pagliara: Let’s try and unpack this in a simple way. First, this was only the very first bank failure in the history of the country that had nothing to do with credit losses. This was about asset management. Banks make money off of interest float, they make money off of loans, and then they make money off of the treasury bills and the treasury that they can buy, and they have to keep those in two different counts.
One’s available for sale, and the other one’s held to maturity. And so they didn’t respond quickly enough to the problems associated with the rapid rise in interest rates with the Federal Reserve, and they didn’t pay their depositors enough.
And so when six-month treasury bills hit percent, they started to experience a tremendous outflow much faster than anything ever experienced. Deposits are usually very sticky. They lose no more than one percent at a time in a year. That’s called deposit beta. They went up to over 30 percent. Silicon Valley Bank lost $42 billion in deposits over a two-day period of the $160 million that they had.
Leahy: That’s what you call a bank run, right?
Pagliara: It was a run, and it was accelerated by fears associated with the run. So one of these things have an avalanche effect to them. I have this vision of Jimmy Stewart in A Wonderful Life.
Pagliara: Exactly.
Leahy: Accept Silicon Valley Bank guys, not exactly Jimmy Stewart, right?
Pagliara: No, they’re not. But they didn’t manage the bank. That’s what is common. Silicon Valley Bank and Signature Bank were poorly run. In fact, at Silicon Valley Bank, the position of risk officer had been vacant for over a year, which is gonna be a chief part of the investigation.
Leahy: Why was the chief risk officer position vacant for over a year?
Pagliara: It’s a great question, and that’s one of the things the regulators look at.
Leahy: That’s a little suspicious, isn’t it?
Pagliara: It is. Because a lot of times risk officers leave over controversy related to the performance of their duties. And so when they had to sell that available-for-sale account of $22 billion, they lost over 10 percent of it.
Leahy: A couple of billion bucks.
Pagliara: Those losses, then they were losing deposits and it just collapsed on top of it.
Leahy: So here’s how I look at this. Joe Biden gets elected president. At that time, what long-term interest rates on 10-year treasury bills were half a percent?
Pagliara: Three quarters.
Leahy: Okay, so Biden gets elected. It’s a Democrat Congress, and a fifth grader could figure this out. These guys are gonna spend a lot of money. Inflation’s gonna go up, and the fed’s gonna raise interest rates. Was that an obvious thing to think about as a bank risk officer at that time?
Pagliara: Absolutely. And so this term duration that you hear, they needed to shorten their maturities every time a rate increase occurred.
Leahy: They were stuck with these long-term bills and what you’re saying is they need to get out of those quicker than they did.
Pagliara: That’s right. And long terms is two years. This unprecedented increase in interest rates, the two year went from somewhere under half a percent to almost five percent.
Leahy: Very quickly.
Pagliara: Very quickly.
Leahy: Thank you, Joe Biden.
Pagliara: And so they ended up losing a lot of money.
Leahy: Boy, did they.
Listen to today’s show highlights, including this interview:
– – –
Tune in weekdays from 5:00 – 8:00 a.m. to The Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.
Photo “Silicon Valley Bank” by Tony Webster. CC BY 2.0.
Live from Music Row, Wednesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – host Leahy welcomed the founder of CapWealth Management, Tim Pagliara in studio to discuss how the Silicon Valley Bank crisis revealed flaws in the Federal Deposit Insurance Corporation structure.
Leahy: In studio, our guest, our good friend, Tim Pagliara, founder of CapWealth Management. Often the number one-rated wealth management company here in Tennessee. I think you’re this year again, too, right?
Pagliara: We’re waiting to see.
Leahy: Waiting to see. I think my prediction, my predictions, by the way, are better than Jim Kramer’s predictions. (Laughter) My classmate who a month before said you should buy Silicon Valley Bank.
Pagliara: Two days before.
Leahy: Two days before, buy Silicon Valley Bank at $260. And what’s the value of it today, Tim?
Pagliara: It’s a goose egg. Zero.
Leahy: Zero. Okay, so I just have to talk about this. Supposedly the top government official who handles financial matters is the Secretary of Treasury Janet Yellen. I noticed that as Silicon Valley Bank was starting to melt down, she decided it’d be a good time to go to Kyiv, Ukraine. (Laughs) I don’t know. You can’t make this stuff up. Was she able to help any of the banks there?
Pagliara: I don’t think so.
Leahy: I don’t think so either. Now let’s talk about Silicon Valley Bank and how our listeners have their demand deposit money. This is like if you go to a bank and you have a checking or a savings account, that’s what you call a demand deposit, right?
Pagliara: Yes.
Leahy: Which means you can demand that deposit back and you get it, you’re supposed to get it right then. If you’re an FDIC-insured bank, the demand deposits are insured up to $250,000, is that right?
Pagliara: That’s correct.
Leahy: So if you’re at a bank that fails and you had $250,000 in your bank account, you could get that money ultimately from the FDIC insurance mechanism. But if you had $260,000, in theory, you could get $250,000 back, but you’d lose $10,000 bucks. But that’s not gonna happen here, is it?
Pagliara: No, they’ve guaranteed the deposits. And what this has revealed is a structural flaw in the FDIC system. It’s going to have to be revamped because part of those demand deposits that you were talking about payroll falls into that category. And so the biggest problem that they had closing on Friday and reopening on Monday was there were companies that were not going to be able to meet payroll.
Leahy: That would not have been good.
Pagliara: No. And that’s why you think of $250,000 as a great savings account, but it really doesn’t match what flows through a bank with payroll.
Leahy: If you’ve got a company of the business side, a business account in order to be able to meet payroll, sometimes you need to have what, a million bucks? Two million bucks? Five million bucks depending on the size of the company.
Pagliara: The estimates to the people that I talked to in New York that they will have to extend insurance on payroll accounts when they revamp this $100 million.
Leahy: That high?
Pagliara: That high because you’ve got just tremendous amounts of money that flow through banks, and we have to have the confidence. That when we put it in there and we need it for payroll, for rent, or whatever, is a small business, it’s going to be there.
Leahy: The governing body is a federal deposit insurance corporation, FDIC that was founded in 1933 in the midst of the Great Depression after a whole bunch of banks failed and people lost their demand deposits. But right now, how is that money funded? In other words, where do you get the money to cover the $250,000 or more? Where does that come from?
Pagliara: It’s a tax on banks. And so they pay a percentage of their deposits and their profitability, et cetera.
Leahy: There’s a little fund that the FDIC has?
Pagliara: Yes.
Leahy: And when the bank fails, they go to that fund. And that fund is then used to cover all those demand deposits. Is that right?
Pagliara: That’s correct.
Leahy: I’m told that fund doesn’t have enough money right now to cover all the demand deposits at Silicon Valley Bank. Is that true?
Pagliara: That’s true.
Leahy: Uh, oh.
Pagliara: This is what Warren Buffet always says. Now we know who’s been swimming naked because the tide’s gone out.
Leahy: Is that what he says?
Pagliara: Oh, yeah.
Leahy: That’s funny.
Pagliara: It is. Especially this time in the morning. So it’s a structural flaw in the system that’s been revealed by this massive rapid increase in interest rates and then the policies.
Leahy: So this fund is not gonna have enough money to cover all the demand deposits et cetera in Silicon Valley Bank. What’s gonna happen to cover them, then?
Pagliara: You’ve gotta focus on how much money was really lost. And I don’t think there’s going to be a lot of money lost unless they get into the loan portfolio. That’s where the big losses occur.
Leahy: In other words, when you say the loan portfolio, it’s, I loan money to a business, and they’re not able to pay it back. That’s the risk. And then you lose all the money.
Pagliara: That’s a historical risk. That’s why I said this is unique. It’s the first time a bank has ever failed in this country that wasn’t credit risk related. It wasn’t because loans failed.
Leahy: It was, it’s because they made bad investment decisions.
Pagliara: They made bad investment decisions. They didn’t manage their investment portfolio correctly. They didn’t have a risk officer for over a year.
Leahy: Okay, so now it’s almost impossible for me to wrap my head around this idea, right? A fifth grader could have figured out, oh, interest rates are going up. I gotta get out of these low interest-rate treasury bonds.
Pagliara: That’s right.
Leahy: How hard is that to figure out?
Pagliara: It’s not, it’s something you would do every month, and on top of everything else, they were not paying their depositors. They weren’t ramping up payments to depositors. When is the last time you got a call from your banker, and he said, hey, why don’t you put your money in a six-month treasury bill at five percent instead of the one percent I’ve been paying you?
(Leahy laughs) So enough people got together on the golf course and over coffee and dinner, and they said, what are you getting at your bank? I just moved my money to treasury bills at five percent. I’m only getting one percent. What do you think happens?
Leahy: Boom. Money moves.
Pagliara: Now you start a behavioral move; money goes in motion. That’s why that deposit beta accelerated so fast beyond anything that they could have anticipated.
Leahy: So the investigators are gonna look at this and, oh, by the way, the CEO, Greg Becker, this guy. Do you see he sold like $3 million bucks of stock which is like a couple weeks ago, wasn’t it? He can read the balance sheet.
Pagliara: That’s gonna lead to some really interesting questions and depositions.
Leahy: Does he go to prison?
Pagliara: I don’t think so. Tell me the difference between stupid and unethical and I could send my brother-in-law to jail as that saying, went in The Big Short. (Leahy laughs)
Leahy: But he went to a top business school, Tim. I don’t know which one it was. Probably Stanford, probably the same one I went to. He’s stupid with a Stanford MBA or whatever the MBA was, right?
Pagliara: I guess. Yes.
Leahy: It seems to me it is just so obvious. This risk officer thing. If you’re running a big bank, the 16th largest bank in the country, why do you leave the risk officer position open for a year?
Pagliara: That’s gonna be a very interesting question that they’ll have.
Leahy: I can’t imagine that.
Pagliara: I know. Part of the responsibility for this is the regulators. How do the regulators allow a position, an important position like that to be vacant for a year?
Listen to today’s show highlights, including this interview:
– – –
Tune in weekdays from 5:00 – 8:00 a.m. to The Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.
Photo “Tim Pagliara” by Tim Pagliara. Background Photo “Federal Deposit Insurance Corporation” by Tony Webster. CC BY 2.0.
Live from Music Row Tuesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – host Leahy welcomed financial advisor with Cap Wealth Management Tim Pagliara to the studio to discuss to outline the purposes of Fannie Mae and Freddie Mac.
Leahy: Our good friend financial advisor at Cap Wealth Management here in Franklin, Tennessee. You’ve been like the number one rated financial advisor in Tennessee by Forbes and several other groups for some time, haven’t you?
Pagliara: Yeah, we’ve been really blessed.
Leahy: Real blessed. He’s modest, folks. He’s very good. He’s very good at what he does. Also, the author of Another Big Lie: How the Government Stole Billions from the American Dream of Homeownership and Got Caught. This is crazy. I’m going to tell everybody what we got here. On yesterday, March 22, Tim as a chairman and chief investment officer of Cap Wealth, sent this letter to the clerk of the Supreme Court. His name is Scott Harris. And this is regarding Collins versus Yellen, and Yellen versus Collins. These are two cases your entire books about, right?
Pagliara: Yes.
Leahy: So here’s the letter:
Dear Mr. Harris, (Laughter) on March 18, Acting Solicitor General Elizabeth Prelogar sent the court a letter setting forth the government’s position that the Collins case has not been rendered moot by the post-oral argument Collins letter agreement amendment to the PSPA.
What’s the PSPA?
Pagliara: Preferred stock purchase agreement.
Leahy: Preferred stock purchase agreement.
(Continues reading letter) I won’t speculate about what the Solicitor General’s motives were in sending the letter to the court. However, as a private citizen, I would like to avail myself of the same courtesy extended to the Solicitor General. I’ve included nine copies of my recently published book, Another Big Lie: How the Government Stole Billions From the American Dream of Homeownership and Got Caught. I would appreciate you distributing them to the members of the court. With kindness. Personal regards, Timothy J. Pagliara. Chairman, Chief Investment Officer of Cap Wealth.
Well, now that’s a little bit of moxy there, my friend.
Pagliara: Isn’t this country great?
Leahy: Okay, so layout the story. Another Big Lie: How the Government Stole a Billion From the American Dream of Homeownership and Got Caught. What’s the story here?
Pagliara: Fannie and Freddie Mac.
Leahy: Okay, just stop. What’s Fannie Mae; what’s Freddie Mac?
Pagliara: They are the two largest mortgage packages of mortgages in the country. So they buy mortgages from small banks, other banks. They package them together and they sell them to investors.
Leahy: And they are quasi-governmental?
Pagliara: Right. Fannie Mae was set up by Roosevelt in 1938 in the Depression. Banks had a lot of bad loans on their books. Mortgages were about five years in duration. The average home price was dropping 50 percent. You had 25 percent unemployment and people were being put out in the street. And so they created Fannie Mae to buy those mortgages from the banks. Then they negotiated the 30-year mortgage.
Leahy: Ah ha! That’s where the 30-year mortgage was born!
Pagliara: That’s where it was born.
Leahy: In 1920. Home mortgages were five years?
Pagliara: That’s right. And so that compounded the problem. And so, Fannie Mae and Freddie Mac, every financial system has a flaw. It’s like the Death Star in Star Wars, where they always looking for that spot. And the flaw in our financial system is that it’s pro-cyclical meaning when things get bad, the regulators say, don’t loan money, pull it back, clean up your balance sheet. And so credit actually tightens at a time when you need credit.
And so, Fannie Mae is counter-cyclical. They pull loans off the books of banks in order to keep the flow of money moving in the mortgage market. They’ve done it since 1938. No one’s ever done it better. And that’s where it all started. The financial crisis, they were blamed and it doesn’t hold water. I’ve got it all in the book. 91 percent of all the mortgages that went bad in the financial crisis were issued by big banks.
Leahy: Big banks. So Fannie Mae, what about Freddie Mac?
Pagliara: Freddie Mac was created in the 60s to meet the same purpose that Fannie Mae did but they were the outlet for the savings and loans. They bought mortgages off the books of savings loans.
Leahy: I’ve already learned something here.
Pagliara: There we go.
Leahy: That’s good – Fannie Mae, Freddie Mac. So it’s an easy way to kind of understand what their purpose was.
Pagliara: So there was a lot of jealousy about these institutions from the big banks. And so it became very convenient to blame them for the financial crisis.
Leahy: Of 2008.
Listen to the third hour here:
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Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.
Photo “Fannie Mae” by AgnosticPreachersKid. CC BY-SA 3.0.
Live from Music Row Tuesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – host Leahy welcomed Tim Pagliara CIO of Cap Wealth Management to the studio to discuss the Supreme Court case that will address violations of the Administrative Procedures Act and the two issues of constitutionality and whether it will go back to the trial court for damages that shareholders are entitled to.
Leahy: Our guest is Tim Pagliara, author of Another Big Lie: How the Government Stole Billions From The American Dream of Homeownership and Got Caught. By the way, Tim, thanks so much for coming down to our Studios on Music Row. It’s kind of fun, isn’t it?
Pagliara: It’s a blast.
Leahy: I know you love radio, t0o. Everybody loves the radio.
Pagliara: I got a face for radio.
Leahy: So do I. I mean, you know, I get here at 5:05 a.m. in the morning. I don’t look, you know, not ready for prime-time cameras. I’ll tell you that for sure. So we’re talking about this case. Your book fantastic book – doing very well. It’s on Amazon and is number one in banking and finance right now.
Pagliara: Yes.
Leahy: And by the way, go get the book right now at Amazon.com. Just check out Another Big Lie. You’ll be able to order it and have it in your house in a day or two.
So what I find interesting about this: September 2008 is when the government, George W. Bush made the bad decision, as you said, to place Freddie Mac and Fannie Mae the mortgage purchasing institutes of qualified governmental institutes into conservancy. Then in 2013, ’14, the Feds say, ‘Let’s keep it in the conservancy,’ and misrepresented really how well those organizations were doing.
Pagliara: Yes.
Leahy: The lawsuit doesn’t get filed until 2015 because the people that had their money basically taken away the investors.
Pagliara: Actually, the first lawsuit was filed in June of 2013, the Collins case.
Leahy: So there was a whole bunch of cases. Now, how much money do the plaintiffs, how much have they had to spend to get this case up to the Supreme Court? And how long is it? What’s the path been?
Pagliara: If you take all of the lawsuits collectively, my estimate is those plaintiffs have spent almost 100 million dollars.
Leahy: And just in legal fees.
Pagliara: Just in legal fees.
Leahy: How much of their money has been taken by the federal government, would you guess?
Pagliara: $350 billion?
Leahy: $350 billion?
Pagliara: Yes.
Leahy: Wow.
Pagliara: Big numbers.
Leahy: And going to, I don’t know, fund Obamacare? Things like that”
Pagliara: That’s one of the places that the money went. Treasury Secretary Mnuchin on Maria Bartiromo show admitted that. He wouldn’t pinpoint exactly where the money was spent. But it went for a variety of non-budget, appropriated purposes.
Leahy: Wherever they wanted to just have their little…fund not known to the public go.
Pagliara: That’s right. Exactly. And they were battling Grover Norquist. They were battling the constraints of the Budget Control Act, and they acted in their best interest in violation of the property rights of shareholders. This is a big case. They can take the assets of Fannie Mae and Freddie Mac. You can imagine what Elizabeth Warren can concoct with wealth taxes and just taxing individuals.
Leahy: That’s all in the works right now. These are the kinds of things that they’re contemplating, right?
Pagliara: Yes.
Leahy: So in this particular case, Collins versus Yellen. And Yellen versus Collins.
Pagliara: This case came to the United States Supreme Court after an en banc hearing in the Fifth Circuit.
Leahy: So the first step is to go to a district court.
Pagliara: That’s right.
Leahy: Then it goes to the Fifth Circuit court.
Pagliara: It went to the Court of Appeals. So the plaintiff lost at the district court level. They went to the court of appeals, and it was a split decision. The plaintiffs appealed to the entire circuit in an en banc hearing.
Leahy: So the way it works is in the Fifth Circuit, they would assign what, three judges to look at it?
Pagliara: Yes.
Leahy: And they lost there.
Pagliara: It was a mixed decision. So there was enough confusion between the three judges.
Leahy: So the Fifth Circuit, we have 11 circuits courts of appeal in the country, of course, the worst being the ninth out in California, where they’re all a bunch of lefties. It’s getting better. Tell us a little bit about the Fifth Circuit Court of Appeals here in our federal court system. Pretty good reputation?
Pagliara: Excellent reputation. They addressed civil rights in the 60s. They’ve had a reputation for taking on tough issues, being leaders, and thinking outside the box. And they decided to take this on in an En banc hearing.
Leahy: Now Let’s just stop and explain what an en banc hearing is for the Circuit Court of Appeals. What is that?
Pagliara: That’s when you take all of the justices and the different circuits, and they all come together collectively as a group, and they will hear additional arguments following a court hearing.
Leahy: So an en banc hearing of the Fifth Circuit would include 20 judges or something like that?
Pagliara: 16.
Leahy: 16 judges. And the Fifth Circuit covers Texas…
Pagliara: Parts of Louisiana.
Leahy: So here we go. There’s a sort of a split decision when the three-judge panel first reviews in the Fifth Circuit Court of Appeals, it goes en banc to all 16. What happens there?
Pagliara: Well, there are two issues before the court. One was whether or not the federal housing finance administrator, which was overseeing the conservatorship of Fannie Mae and Freddie Mac whether he was appointed constitutionally. Whether it was a constitutional appointment. And the Consumer Finance Protection Board case, which occurred earlier. The court found that that was unconstitutional.
Leahy: And by the way, it’s just for our listeners, the Consumer Financial Protection Board.
Pagliara: That’s a mouthful.
Leahy: It really was unconstitutional when passed in the Dodd-Frank Bill 2010 – the brainchild of wait for it – our favorite Native American Senator, Elizabeth Warren. That’s her brainchild. And so that key element of that particular law was found unconstitutional.
Pagliara: And so they did the same thing. The director of the Federal Housing Finance Administration, which was overseeing the conservatorship, was appointed in exactly the same way as the CFPB.
Leahy: Got it.
Pagliara: And this is where you get into that fourth branch of government. The issue there was they wanted to create an agency that the executive branch of government couldn’t remove the director. That’s what they did with the CFPB. That’s what they did with FHFA. And in the CFPB, the court ruled that that was unconstitutional. It had to be removable.
Pagliara: That’s right.
Leahy: And that’s why when Biden got elected, they got a new head of the CFPB.
Pagliara: So with the Fifth Circuit, the first issue is constitutionality. The Fifth Circuit already ruled that it was unconstitutional. They were split on the remedy. The issue before the Supreme Court is whether or not the plaintiffs are entitled to prospective or retroactive relief. If retroactive relief…
Leahy: It’s a lot of money.
Pagliara: It’s a lot of money.
Leahy: It’s like $350 billion.
Pagliara: Most legal scholars don’t believe that the plaintiffs, the shareholders, will get retroactive relief. They’ll get prospective relief and the President will be able to remove the Director immediately at will. It will be an at-will appointment like any other cabinet appointment.
Leahy: Too bad this case wasn’t decided before January of 2021, I think.
Pagliara: Well, President Trump honored the rule of law, and he waited for this to happen. And so he actually did a very good job with that. Now, the second issue before the court is called the Administrative Procedures Act [APA].
Leahy: 1950 act that sort of was the beginning of the decline of the legislative branch here in America because it’s been abused so much by the rulemaking procedures of various departments, cabinets, and agencies.
Pagliara: And so the violation of the APA, this is the governor that regulates the 10,000-pound gorilla being the federal government. the federal government tends to crush everybody that they get into litigation with. In fact, you can’t even get an injunction against it.
Leahy: So if the Department of Justice decided to go after somebody, for whatever reason, just even if you were totally innocent of any of these charges or claims, your legal fees would be, what? A half a million bucks, at least a million to defend?
Pagliara: Millions.
Leahy: Not exactly a fair deal.
Pagliara: It’s not a fair deal. So the court ruled that the government violated the APA, violated the very statute that they’re supposed to enforce that has been remanded to the trial court.
Leahy: Sent back.
Pagliara: And so the Supreme Court intervened, and they’re going to weigh in on this. So they got the two issues. They got constitutionality, and they have the whole issue of whether this goes back to the trial court for damages that the shareholders are entitled to.
Leahy: This will be fascinating to follow when we get back. I know you’re not in the land of being a predictor, but we’ll want to look at a couple of the possibilities that will come down in this very interesting Supreme Court decision.
Listen to the full third hour here:
Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.
Live from Music Row Tuesday morning on The Tennessee Star Report with Michael Patrick Leahy – broadcast on Nashville’s Talk Radio 98.3 and 1510 WLAC weekdays from 5:00 a.m. to 8:00 a.m. – host Leahy welcomed Tim Pagliara in studio to discuss the upcoming May Supreme Court decision regarding Collins v. Mnunchin.
Leahy: In studio, our good friend Tim Pagliara author of Another Big Lie: How the Government Stole Billions From the American Dream of Homeownership and Got Caught. So, Tim, the Supreme Court is going to hand down its decision sometime in what, May, you think?
Pagliara: Typically, what happens you can count it down 84 days after oral argument, which would put the decision sometime in May. So they’re in the deliberation phase right now. They’re reconciling the different opinions that the judges have towards this. The more difficult the decision, the longer it takes. But sometime around the first of May.
Leahy: So 84 days, have you studied this? And you know that over the course of the past decade, it’s about 84 days from oral argument.
Pagliara: That is it’s the number that’s the number. You leave nothing to chance Tim. That’s very interesting. Let’s speculate now, do you think the oral argument was in December?
Pagliara: December 9.
Leahy: So are they in that big room right now just deliberating or are they writing their own separate opinions on it? What’s the likelihood? We are at March 23 today?
Pagliara: My understanding is they go through a series of caucuses and depending upon how hot the issue is and how divided the court is, they will try and come together and reconcile. That’s how you get 5-4 opinions, 7-2. I think one of the most recent opinions was 8-1.
Leahy: And John Roberts being the only dissenter. Don’t even get me started on John Roberts. So based upon my read of how the more liberal members of the court weighed in on this, I would not be surprised at a 9-0 opinion, which would be incredible.
Leahy: In favor of the prentice.
Pagliara: Or 7-2 or something along those lines and on the two counts. I think the constitutional claim is a slam dunk, but I don’t think the plaintiffs are going to get backward relief. I think they’ll get forward relief.
Leahy: The backward relief, is that just a matter of just the scale of the amount of money involved, or is it the legal principle?
Pagliara: It’s both. But also it has rippling implications for a lot of other federal agencies where you have appointed and you’ve got acting directors, you’ve got different issues related, and typically the court will take an easier route out. And I don’t think they’ll address that difficult issue because it opens up a Pandora’s box. Now, for the same reason, I think they will come down with a very, very strong opinion on the APA claim and theft.
Leahy: The Administrative Procedures Act claims to be unconstitutional the way it’s being implemented.
Pagliara: Usurps their authority.
Leahy: Usurps their authority. That’s a common phrase for the federal government, and they
Pagliara: I think there’ll be some teeth, because, as we were talking about in the previous segment, there’s not just one. This is not just one case. This is the one that hit the Supreme Court. There are other cases. For example, Judge Lamberth in the D.C. Circuit. He’s got a case that’s going to go to trial. And this is the one that will put a dagger through the Justice Department’s heart.
They filed a false AFFE affidavit in a lawsuit and they lied to a federal judge. They said that these companies were in a death spiral, and they had just been briefed by the chief financial officer and the outside auditor. It’s on the record. It’s indisputable that they were entering a golden age of profitability.
Leahy: See, here’s the thing, though, there was an FBI agent lawyer who filed the false affidavit with the FISA court got a slap on the wrist.
Pagliara: Well, here’s how this is different. Tell me you remember that commercial, ‘It’s not nice to fool with Mother Nature,’ you know? Well, it’s not nice to fool with a federal judge. They lied to a federal judge. Different than a FISA court judge, to some degree. And this federal judge now controls these proceedings.
And when the case was remanded back to him, he was embarrassed because his ruling where he dismissed the case in 2014, he was a domino. People respected him for his opinion, and a lot of them just fell back on their good friend Royce Lamberth’s judicial prowess. So when they came back to him and he knew they had lied to him he had to set the stage for what the government was going to have to be tried for. The government has to answer in front of a jury whether they complied with the covenant of good faith and fair dealing that’s embedded in every contract.
Leahy: Very interesting.
Pagliara: They cannot win. And so the judge set the government up to fail. And he’s just sitting back, watching now. He’s intently curious as to who’s going to certify a trial record with a perjurious affidavit that they’re taking discovery. So they want to end this because it is not going to end well for them.
Leahy: On the Supreme Court case when they rendered their decisions are the attorneys and the plaintiffs like every day in May when they get up, do they file at 10 am in the morning and just hit the refresh button every day?
Pagliara: Every day.
Leahy: Is that what happens?
Pagliara: That’s what happens. And I know all the attorneys. I’ve worked with every one of them. David Thompson, who did the oral argument, he and I’ve become good friends.
Leahy: He’s got a little blurb on your book that he talks about how this was the largest and most brazen expropriation of private property in the nation’s history. David Thompson, managing partner of Cooper and Kirk.
Pagliara: You remember Charles Cooper? Charles Cooper represented. He was one of the attorneys in Bush versus Gore.
Leahy: It’s a very high-powered law firm. But all the clerks, the young associates are there hitting refresh. But every day in May, right?
Pagliara: It’s like waiting for your wife to have a baby.
Listen to the full third hour here:
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Tune in weekdays from 5:00 – 8:00 a.m. to the Tennessee Star Report with Michael Patrick Leahy on Talk Radio 98.3 FM WLAC 1510. Listen online at iHeart Radio.
