Back in May, the Supreme Court went out of its way to make clear that it wants to protect the Federal Reserve’s independence, at least to a greater degree than it has been protecting other federal agencies. While green-lighting President Donald Trump’s power to fire labor board members without cause, the high court’s majority said it wasn’t ruling on protections for the central bank’s board of governors, even though the Fed wasn’t at issue in the labor appeal.
In a blunt dissent for the court’s Democratic appointees, Justice Elena Kagan homed in on what she called the majority’s “out of the blue” Fed carve-out, suggesting that the Republican appointees were attempting to “reassure the markets.”
And that was before this month’s revelation that the Trump Justice Department was investigating Federal Reserve Chair Jerome Powell, over what Powell called pretextual reasons that he said were really about the Fed setting interest rates differently than Trump wants.
It’s against that backdrop that the justices will hear oral arguments Wednesday in Trump v. Cook, over the president’s bid to remove Lisa Cook from the Federal Reserve Board. While Powell isn’t directly at issue in the appeal, it’s hard to see how his investigation will help an administration that was already fighting a relatively uphill battle on this issue with the justices. Powell reportedly will attend the hearing.
Another sign that the administration could have a harder time here is that when the court agreed to review the Cook case, it let her stay in her role pending the outcome of the litigation. That doesn’t mean she will necessarily win in the end, but it’s worth noting that the court hasn’t extended even that temporary lifeline to members of many other agencies.
The appeal presents various legal questions that different justices may choose to focus on during Wednesday’s hearing. The Federal Reserve Act says the president can remove board members “for cause,” though the law doesn’t define what that means. Trump has said he has cause to fire Cook, a Biden appointee, because he says she may have committed mortgage fraud prior to her Senate confirmation to a board seat that isn’t set to expire until 2038.
Cook contests the fraud claim and the lack of process she received in Trump’s attempt to fire her. Among the administration’s arguments is that courts can’t even review Trump’s rationale for wanting her off the board.
After the hearing, we should have a better sense of whether the court is inclined to endorse that maximalist view of executive power, as it has in other areas benefiting Trump. But heading into the hearing, the president has some reason to worry — though the Powell probe suggests the administration isn’t prioritizing a cautious approach across the board, even when the justices have given it reason to tread lightly on this issue.
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