Washington: What to Watch Now

August is traditionally the quietest month in the nation's capital. Typically, Congress is in recess for the month, regulatory agencies usually take a breather from their busy agendas and federal workers book vacations in advance of things ramping up again after Labor Day.

August 2025, however, was an exception to the rule. The month saw several major developments that have potential repercussions both in Washington and in the markets. August began with President Donald Trump firing the head of the Bureau of Labor Statistics after a poor jobs report and ended with an unprecedented attempt to fire a sitting member of the Federal Reserve's Board of Governors. In between, a second Federal Reserve governor resigned, the government took a stake in tech giant Intel Corp., and the National Guard began patrolling Washington, D.C., streets. Now Congress is set to return to face a contentious Fed confirmation hearing, a looming government shutdown and more.

As September begins, here's what investors should keep an eye on.

Courts will determine whether the president can fire a Fed governor. Trump sent a letter to Fed Governor Lisa Cook on August 25th, removing her as one of the Fed's seven governors. Cook sued the president on August 28th, arguing he does not have the authority to fire her.

The Federal Reserve Act, which dates back to 1913, states that a member of the Board of Governors can only be removed "for cause." The president pointed to allegations that Cook may have committed mortgage fraud prior to joining the Fed as his reason for terminating her, though Cook has not been charged with a crime. The courts will now determine whether the allegations are sufficient cause to remove Cook from her position.

Earlier this year, in a case about whether the president could fire heads of other independent agencies, the Supreme Court noted that "the Federal Reserve is a uniquely structured, quasi-private entity," a phrase that may indicate the court sees the Fed as a special situation. Previous Supreme Court decisions also have signaled that the Fed's independence is paramount. The current case, which is widely expected to ultimately be determined by the nation's highest court, will provide an answer to that question.

The reaction from both the equity and fixed income markets to the unprecedented challenge on the Fed's independence has been relatively sanguine, as investors seem willing to wait out the legal process. It's not clear how long that process will take, but courts are likely to be pressed for an initial decision on Cook's status prior to the next meeting of the Federal Open Market Committee (FOMC) on September 16th-17th.

Meanwhile, the confirmation process for the other Fed vacancy will begin this week. Fed Governor Adriana Kugler unexpectedly resigned on August 8th to return to teaching. Her term was set to expire January 31st, 2026. Trump has nominated Stephen Miran, the current chair of the White House Council of Economic Advisers, to fill the remainder of Kugler's term, making it likely that he will nominate someone else to fill the full 14-year term that begins on February 1st. The Senate Banking Committee has set Miran's confirmation hearing for September 4th—a process that was expected to be contentious before the attempt to fire Cook and is expected to be even more contentious now. If the committee votes to confirm Miran, then a full Senate vote would follow. The White House is pressing the Senate to confirm Miran before the September FOMC meeting. That timeline is not impossible, but it would be unusual for a high-profile confirmation to move that quickly through the Senate's deliberative process.

Drama over the next Fed chair has been pushed to the back burner. The attention paid to the Cook controversy and the Miran nomination has pushed the long-running feud between the president and Fed Chair Jerome Powell to the side for now. Trump has relentlessly criticized Powell for months for not lowering interest rates and has threatened numerous times to fire the chairman. But Powell's term as chair ends in May 2026, so the president will get to choose his successor. Treasury Secretary Scott Bessent is overseeing the process, which reportedly has nearly a dozen candidates under consideration. One of those candidates, Kevin Hassett, the director of the National Economic Council, recently said that it could take a "few months" before the president selects a nominee.

Congress returns to Washington facing a government shutdown deadline. Lawmakers return to Capitol Hill this week with a deadline looming at the end of the month to fund government operations. Congress is supposed to pass the 12 appropriations bills that fund every federal agency and program by September 30th, before the government's new fiscal year begins on October 1st. To date, none of the 12 bills has passed and Congress has virtually no chance of completing the funding process before the deadline. That raises the possibility of a government shutdown on October 1st, though it's more likely Congress will pass a "continuing resolution," a measure that extends government funding at current levels for a few weeks or months to allow more time for negotiations.

The highly charged partisan atmosphere on Capitol Hill is making it difficult for the two parties to agree on a path forward for the government funding process. Democrats are concerned that if they work with Republicans to pass appropriations bills, Republicans will just turn around and pass rescissions bills that undo funding they don't support. Congress passed a rescissions bill in July for the first time since 1999, clawing back about $9 billion in previously approved funding for foreign aid and the Corporation for Public Broadcasting. Appropriations bills require a supermajority of 60 votes to overcome a filibuster in the Senate. With Republicans currently holding 53 seats in the upper chamber, they will need Democrats to support an appropriations bill. But rescissions bills can be passed with a simple majority of 51 votes, leading to the Democrats' concerns about this scenario unfolding.

All of that makes a government shutdown sometime this fall a real possibility. But government shutdowns historically have not been big market movers. In fact, the S&P 500 index has risen during the past five shutdowns, including a 35-day partial shutdown during Trump's first presidency.

Appeals court ruled that some tariffs are unlawful. In a potential blow to the president's economic agenda, a divided U.S. Court of Appeals ruled on August 29th that many of Trump's "reciprocal" tariffs, as well as some of the other tariffs imposed earlier this year, have been implemented unlawfully. The court ruled that the tariffs could remain in place until October 14th to give the administration time to appeal to the Supreme Court, which it is expected to do soon. The appeals court ruling indicated that the president overstepped in his use of emergency authority to impose tariffs without the involvement of Congress. The decision creates additional uncertainty for businesses, which will now wait for a final decision from the Supreme Court. The president does have other mechanisms by which he can impose tariffs, though with significantly more limitations on the scope and timing.

A cryptocurrency bill could move forward in the Senate. Investors are taking note of the process of the Digital Asset Market Clarity Act of 2025, or CLARITY Act, which would create a broad regulatory framework for digital assets. Among other things, it would give primary oversight of the industry to the Commodity Futures Trading Commission (CFTC). The bill passed the House of Representatives in July with strong bipartisan support. Senate Banking Committee Chairman Tim Scott (R-S.C.) has said his committee will begin considering the legislation in September. The bill follows on the heels of Trump signing another cryptocurrency bill in July. That legislation, the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act, lays out regulatory rules of the road for stablecoins, a type of cryptocurrency that is pegged to the U.S. dollar.

The CFTC is down to just one commissioner. The CFTC, which is set to take on a much higher profile with a prominent role in overseeing the cryptocurrency industry, is itself in turmoil. Commissioner Kristin Johnson will step down from her role on September 3rd, leaving just one of the commission's five seats occupied. Acting Chair Caroline Pham, who herself has announced her intention to step down when a chair is confirmed by the Senate, will be the sole remaining commissioner. Brian Quintenz, a cryptocurrency executive and former CFTC commissioner, has been nominated as the next chair, but a confirmation vote by the full Senate was twice postponed in July. A timetable for that vote has yet to be announced and the president has not made any nominations for the four vacant seats, leaving the agency in limbo for the time being.

Federal government takes a stake in Intel Corp. Finally, investors are keeping a close eye on the White House's recent announcement that it would take a nearly 10% stake in the tech giant. The deal, announced on August 27th, converts more than $11 billion in federal grants and other funding into a 9.9% stake in the company, ushering in a new era of government involvement in private industry. White House officials have said that other similar deals could be coming, with Commerce Secretary Howard Lutnick specifically citing defense companies as potential targets for a government stake. The expanded role of the government in private companies has sparked concerns across the political spectrum, as well as on Wall Street, though it will take some time for the ramifications of this new direction in industrial policy to play out.