Conservative and liberal United States Supreme Court justices have expressed skepticism about US President Donald Trump’s attempt to remove US Federal Reserve Governor Lisa Cook in a case that threatens the central bank’s independence.
During nearly two hours of arguments in the case on Wednesday, the justices indicated they were unlikely to grant the Trump administration’s request. The judge’s ruling prevented the Republican president from immediately firing Cook As her legal challenge continues.
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Some of the justices pressed U.S. Solicitor General D. John Sauer, who argued for the Trump administration, about why Cook was not given a chance to formally respond to the unsubstantiated mortgage fraud allegations — which she denied — that the president cited as justification for firing Cook.
He expressed concern about the impact such a first-ever presidential firing from a central bank would have on the economy and the Fed’s independence from political influence.
The case represents the latest controversy to come to the top US judicial body involving Trump’s broad view of presidential powers since he returned to office 12 months ago.
Cook was fired when the court, with a 6-3 conservative majority, agreed to hear the case in October.
“It is a matter of whether the Federal Reserve will decide the key interest rate based on evidence and independent judgment or succumb to political pressure,” Cook, who attended the arguments, said later in a statement.
“As long as I serve at the Federal Reserve, I will uphold the principle of political independence in service to the American people,” Cook added.
Chairman of the Federal Reserve Jerome Powell A nearly two-hour argument was also held in a packed courtroom.
‘reason for removal’
Sauer told the justices that the allegations against Cook contradicted her “conduct, fitness, ability or fitness to serve as governor of the Federal Reserve.”
“The American people should not have their interest rates set by someone who has been extremely negligent in getting himself a favorable interest rate,” Sauer said.
“Fraud or gross negligence by a financial regulator in financial transactions is grounds for removal,” Sauer said, adding that the charges must be removed immediately.
Cook called the charges against her a pretext to dismiss over economic policy differences as Trump pressured the central bank to cut interest rates and slammed Fed Chair Powell for not doing so more quickly.
Conservative Chief Justice John Roberts asked Sauer to clarify whether her argument that Cook should be evicted immediately applies if the mortgage charge — she cites two different properties as her principal residence — is an “inadvertent mistake contradicted by other documents in the record.”
Sauer replied that, even if Cook made a mistake on the mortgage paper, “it’s a big mistake”.
Roberts seemed skeptical and told Sauer, “We can discuss that.”
Attorney Paul Clement, who argued for Cook, told the judge that the charges against her stem from “at most an inadvertent error” on a mortgage application related to the vacation property.
Trump’s move against Cook is seen as the most consequential challenge to the Fed’s independence since its founding in 1913. Until now, no president had attempted to impeach a Fed official.
The Supreme Court verdict is expected by the end of June.
Pressure on Fed independence
Conservative Justice Samuel Alito expressed concern that the administration had handled the case “in a very cursory manner.” Although the case involved Trump’s stated reason for firing Cook, Alito said, “No court has addressed those facts. Are the mortgage applications even in the record in this case?”
“There are a million difficult questions in this case,” Alito said.
In creating the Fed, Congress passed a law called the Federal Reserve Act that included provisions to insulate the central bank from political interference, requiring governors to be removed by the president only “for cause,” although the law did not define the term or establish a removal procedure.
Clement told the justices that Trump’s position would turn tenure protections for Fed governors into “employment at will.”
“It makes no sense,” Clement said. “There is no rational reason for (Congress) to go through all the trouble of creating this unique, quasi-private agency, free from everything from the appropriations process to civil service laws, only to impose a removal restriction that is as toothless as the president envisions it.”
Roberts questioned Sauer’s argument that the president’s claim for cause is not reviewable or that a judge cannot reinstate a fired official.
Conservative Justice Brett Kavanaugh cast doubt on the real-world implications of the administration’s arguments.
“Your position,” Cavanaugh told Sauer, “that there is no judicial review, no due process, no remedy available, very low bar for reasons decided by the President alone—that is, would weaken the independence of the Federal Reserve.
Conservative Justice Amy Coney Barrett also questioned why the Trump administration denied Cook a hearing to defend herself, saying it “wouldn’t have been such a big deal” for Trump to sit down with Cook and present alleged evidence against her.
Barrett also asked Sauer about the practical implications of allowing Trump to fire Fed governors.
“We have amicus (friends of the court) briefs from economists telling us that if Governor Cook is (fired), it will cause a recession. How do you think about the public interest in a case like that?” Barrett asked, adding: “If there is any danger (at this preliminary stage of the case), doesn’t that advice call for caution on our part?”
Sauer said Cook was notified of her termination in August and it did not affect the market. In briefs Sauer submitted to the justices in the “jaundiced-eyed” case in support of Cook, economists urged economists to weigh in on predictions of the demise of the US economy.
US District Judge Gia Cobb ruled in September that Trump’s attempt to fire Cook without notice or a hearing violated his right to due process under the Fifth Amendment to the US Constitution. Cobb also found that the mortgage fraud allegations were not legally sufficient grounds to fire a Fed governor under the law, noting that the alleged conduct occurred before she held a Fed position.
The US Court of Appeals for the District of Columbia Circuit denied Trump’s request to put Cobb’s order on hold.
‘You’re fired’
Both conservative and liberal justices questioned Sauer about his claim that Cook was not entitled to formal notice and a hearing before being fired by the president.
Conservative Justice Neil Gorsuch asked Sauer what such a hearing would look like and whether Cook would have a right to legal counsel.
Sauer replied that the court in the past has been very reluctant to “tell the president how to operate” and that it will be up to Trump.
“To call Ms. Cook into the (White House) Roosevelt Room, sit down at the conference table, listen, I don’t know how long, how much evidence the attorneys need, and then make a decision? Is that enough?” Gorsuch asked, adding: “Just a meeting at a conference table that ends with ‘you’re fired’?”
Conservative Justice Clarence Thomas asked Sauer on what basis the justices should conclude that the Fed is an executive branch agency and therefore the president has the authority to make decisions.
“There is an academic debate about whether the Federal Reserve’s open market operations constitute executive power, essentially private conduct. However, Congress has for years packed on traditional executive authority over the Federal Reserve,” Sauer replied.
As Fed governor, Cook helps set US monetary policy along with the rest of the central bank’s seven-member board and the heads of 12 regional Fed banks. Her tenure is till 2038. Cook was appointed by former Democratic Party President Joe Biden in 2022 and is the first black woman to hold the position.
Liberal Justice Ketanji Brown Jackson pressed Sauer to reconcile two conflicting positions: his claim that the president has broad discretion to remove Fed governors, and his claim that Congress included tenure protections for Fed governors to protect the Fed’s independence from interference by the White House.
“How does that advance the purpose of the law?” Jackson asked.
Alito cast doubt on Clement’s argument that a Fed governor’s conduct before taking office could not be grounds for removal by the president, asking Cook’s attorney to consider a series of increasingly serious hypothetical scenarios.
“What if, after the person takes office, videos are released of the office holder expressing heartfelt admiration for Hitler or the Klan?” Alito asked.
The president sought to fire Cook by posting a termination letter on social media on August 25, citing allegations of mortgage fraud uncovered by Federal Housing Finance Agency Director Bill Pulte, a Trump appointee.
The administration this month Powell’s criminal investigation His criticism of the Fed building project last year to Congress, a move he called an excuse aimed at gaining influence over monetary policy.