WASHINGTON – The Supreme Court on June 29 rebuffed President Donald Trump’s effort to exert unprecedented control over the economy, ruling he can’t fire Lisa Cook from the Federal Reserve.
The court said in a 5-4 decision Cook can remain on the central bank’s board of governors while she challenges Trump’s ability to dismiss her, a big loss for the president that follows the court’s rejection of the sweeping tariffs that were at the center of his economic policy.
The decision means lower courts will continue to debate whether Trump has sufficient cause for removing Cook. But it also means there are checks on the president’s ability to reshape the board through firings.
The case was a test of restrictions on a president’s ability to oust members of the Fed that were imposed by Congress decades ago to keep the central bank isolated from political pressure.
While the court, in a separate case also decided on June 29, made it easier for Trump to fire leaders of other independent agencies, Chief Justice John Roberts wrote that Congress limited the president’s power to remove Federal Reserve governors “for good reason.”
Accepting Trump’s argument, Roberts wrote, would mean allowing presidents to fire governors “for any reason, without any notice before, and without any judicial check after.”
“That would turn for-cause protection into little more than at-will employment,” he wrote.
The ultimate question of whether Trump has a good enough reason to fire Cook, he said, will depend in part on the underlying facts that the court did not address.
“Rather, we have simply addressed the parties’ arguments about the appropriate legal standards under which the facts must be evaluated,” he wrote.
Four of the court’s six conservative justices dissented, although they did so for different reasons.
Trump, in a social media post, said the justices sent the case back to the lower courts “on a strictly procedural basis.”
“We will take appropriate action immediately to make sure that someone who has committed wrongdoing will not be making vital decisions concerning the Welfare of the United States of America!” Trump wrote.
The Fed has broad influence over the economy through its interest rate decisions.
Lower interest rates can goose the economy, increase employment and make the federal debt less expensive. For consumers, lower rates make mortgages, auto loans and credit card debt less expensive.
That could help Trump politically in this year’s midterm elections. Polls show voters are unhappy with his handling of the economy.
But lowering rates too quickly can jeopardize long-term economic stability, leading to persistently higher inflation.
Cook has been part of the Fed’s cautious approach to lowering rates that Trump has criticized.
“I currently believe that the right course of action is to hold rates steady,” Cook said in May remarks at Stanford’s Institute for Economic Policy Research.
Every living former Federal Reserve chair, along with many economists, had emphasized to the Supreme Court the importance of maintaining the central bank’s independence.
Although it’s not unheard-of for presidents to pressure the Fed over monetary policy, Trump is the first president to try to remove a member of the central bank’s board.
The court’s consideration of Cook’s case came amid the revelations that the Justice Department was investigating whether to bring criminal charges against then-Federal Reserve Chair Jerome Powell.
Both Powell and Cook argued that the allegations against them were manufactured to give Trump a pretext to fire them because they’ve resisted his pressure to lower interests deeper and faster.
“This was never about mortgage documents signed years before I became a Federal Reserve governor,” Cook said in a statement after the decision. “It was an attempt to remove me on a manufactured pretext because I refused to bow to political pressure and continued to set interest rates based only on what would best serve the American people.”
Federal law allows presidents to remove a member of the Fed board, but only “for cause.”
The law doesn’t elaborate on what would qualify as a cause, nor does it specify a procedure for proving someone has committed a disqualifying act.
Trump claimed, in a letter he posted on social media in August, that Cook previously declared more than one home as her primary residence in an effort to get a more favorable interest rate for a second home.
Cook denied the charges. And she argued that the “for cause” removal protections would be meaningless and erode the independence of the Fed if Trump could remove her without a legitimate opportunity to defend herself.
“There’s no rational reason to go through all the trouble of creating this unique quasi-private entity that is exempt from everything from the appropriations process to the civil service laws just to give it a removal restriction that is as toothless as the president imagines,” Paul Clement, a lawyer representing Cook, said during the January oral arguments.
The administration countered that the real damage to the Fed’s reputation would come from letting Cook remain on the board.
“The American people should not have their interest rates determined by someone who was at best grossly negligent in obtaining favorable interest rates for herself,” Solicitor General John Sauer told the court.
He asked the justices to block a lower court order that Cook could stay at the Fed while she disputes Trump’s allegations.
The court signaled early skepticism about Trump’s stance when the justices said in October that they would hear oral arguments before deciding whether to intervene.
By contrast, the court had allowed Trump to temporarily remove leaders at other independent agencies before their cases were fully litigated.
But in a May decision about removing members of the Merit Systems Protection Board and the National Labor Relations Board, the court went out of its way to portray the Fed as a different type of agency from those it has indicated should be directly under a president’s control.
“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 opinion said.
Trump has been probing the limits of his executive power, including over agencies designed to be insulated from political influence.
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