President Donald Trump placed federal payments on the front line of his early policy battles. The immediate effects have been visible and obvious: canceled contracts, layoffs and victory laps by the administration and its allies at their triumph over alleged waste, fraud and abuse. The consequences could prove more existential. Senate Appropriations Chair Susan Collins (R-Maine) has already said that some of Elon Musk’s efforts to block Congress-approved spending violates Article I of the Constitution. After Musk’s DOGE affiliates cracked into Treasury’s sensitive payment system, former Treasury Secretary Jack Lew told POLITICO that potential political interference with payment rails could have negative implications for the U.S. dollar’s status as a global reserve currency. New York City, at the urging of Comptroller Brad Lander, is expected to file a lawsuit later today over DOGE’s unprecedented reversal of $80.5 million in FEMA funds that had been paid to the city earlier this week (h/t POLITICO New York’s Joe Anuta). “Some of the steps the administration has taken are going to be challenged in the courts,” Bill Dudley, the former Federal Reserve Bank of New York president, told MM. Historically, the courts haven’t looked favorably on executive branch attempts to unilaterally subvert Congress’s power to appropriate, said Dudley, who recently published a paper in his capacity as chair of the Bretton Woods Committee calling for major changes to the federal payments system. He expects any claims over canceled or clawed-back federal payments to eventually get appealed to the Supreme Court. “If the Supreme Court says ‘you can't do this,’ then the ball will be back in the administration's court to decide whether they’ll abide,” he said. “If you get into a situation where the Supreme Court says you have to do ‘X’ — and the administration does ‘Y’ — then I think you would start to undermine confidence in the regime.” (Trump has said he’ll abide by any court order.) But the “confidence in the regime” that Dudley is referring to is the rule of law and faith in the dollar; concepts that are paramount to U.S. markets and a functional financial system. For now, that specific circumstance is “a long time off [from now] and very speculative,” Dudley said. Depending on how Lander’s complaint is ultimately received by the courts, it may not be for long. Pro Subscribers can read more about Dudley’s comments about the payment system, dollar supremacy and potential reforms in a Q&A with your MM host here. IT'S FRIDAY — You made it to the weekend. If you have tips, suggestions, economic policy thoughts or Robert Altman deep cuts to recommend, email Sam at ssutton@politico.com.
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