The High Court Sinks Trump’s Federal Reserve Ploy
The Supreme Court today signaled that it would not allow Trump to fire Federal Reserve governor Lisa Cook, as conservative justices sided with the Court’s three liberals. Allowing Trump to fire Cook based on flimsy evidence in the absence of a hearing, Justice Kavanaugh said, would “weaken, if not shatter, the independence of the Federal Reserve.”
“What goes around comes around,” Kavanaugh added, warning U.S. Solicitor General D. John Sauer that if the Court upheld Trump, a future president might fire Trump appointees based on “trivial or inconsequential or old allegations that are very difficult to disprove.”
Justice Amy Coney Barrett, another conservative, pointed to the economic risk of a politicized Fed. She took issue with the administration’s claim that Cook was not even entitled to a hearing to answer Trump’s allegations. “Why are you afraid of a hearing?” Barrett pressed Sauer.
The day’s arguments are a further setback to Trump’s efforts to control the central bank. Trump undermined his own case earlier this month when the Justice Department said that it was investigating Fed chair Jerome Powell for possible criminal prosecution.
Powell not only released a video explicitly declaring that he would not be intimidated by Trump but made it a point to be in court for today’s oral arguments. He appeared despite warnings by Treasury Secretary Scott Bessent that he should not come. The potential criminal case against Powell was not at issue today, but his presence was a vivid reminder of what the Cook dispute was really about—Trump’s clumsy efforts to control monetary policy.
The case against Cook began when Trump’s close ally Bill Pulte, who heads the Federal Housing Finance Agency, trolled mortgage records to try to find technical grounds for prosecuting Trump’s enemies. Pulte thought he had struck gold when he discovered that in a preliminary description, Cook had described a condo that she bought in 2021 as a primary residence. But in the actual mortgage application, Cook described the property accurately as a vacation home.
Trump nonetheless claimed fraud, and in August announced on social media that he was firing Cook. But Cook refused to leave, and she was backed by Powell.
The court case turns on three issues. First, does a president have the right to fire a Federal Reserve governor with a term appointment?
The Roberts Court has already made clear, in an earlier decision, that it considers the Fed in a different category from other regulatory agencies where it might permit a president to remove term appointees. “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” the Court wrote.
Second, since the Federal Reserve Act does allow appointees to be removed for cause, normally a very high bar, what is cause and who gets to define it? Lawyers for Trump contended that only the president gets to define cause. The justices seemed very skeptical of that claim.
And third, since Cook has not been charged with any crime, is she entitled to anything like due process before being removed from office? In a preliminary ruling on September 30, the Court allowed Cook to keep her job pending today’s full hearing. So there must have been at least five votes even then to block her summary firing. In the meantime, several lower courts have sided with Cook.
Because of the Court’s use of the shadow docket and its routine of accepting or denying “emergency” requests, instead of a normal process of oral argument leading to a definitive ruling, cases bounce back and forth between the Supreme Court and lower courts. While Cook keeps her job, etc., the Supreme Court is likely to remand the case back to lower courts to review the charges and the evidence. But lower courts have already found for Cook.
The immediate impact is a further setback to Trump’s effort to control the Fed. Powell, indignant at Trump’s high-handed tactics, is likely to keep his seat even after his term as chair expires in May. Powell can stay through 2028. Cook is also likely to remain. And Powell, always wary of Trump, has already taken steps to ensure the independence of regional Fed Bank presidents, five of whom serve on the policymaking Federal Open Market Committee. So Trump is further away from hijacking the Fed than ever.
Powell is a species that is all too rare in Trump’s Washington: an old-fashioned Wall Street Republican with either a strong sense of ethics or at least of turf. Nearly all of Trump’s Republican enablers have neither.
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