Can Trump fire Fed’s Lisa Cook? Supreme Court seems doubtful

WASHINGTON – President Donald Trump’s attempt to control the Federal Reserve met with skepticism from the U.S. Supreme Court, including conservative jurists Wednesday as the justices debated a case that could have major consequences for the nation’s economy.

The court’s conservatives – three of whom were appointed by Trump during his first term – repeatedly pressed Solicitor General John Sauer on why he is in a rush to remove Lisa Cook from the Fed board without a full review of the allegations he’s made against her.

“What’s the fear of more process here?” Justice Brett Kavanaugh asked.

Kavanaugh said the president’s position that he alone determines when a Fed governor can be removed for misconduct would “weaken, if not shatter, the independence of the Federal Reserve.”

Cook’s lawyer also got tough questions

A ruling against Trump would be a rare loss for the president at the Supreme Court, which has been overwhelmingly supportive of his expansive view of presidential power.

And Paul Clement, Cook’s attorney, also fielded tough questions from the court’s conservative majority during the approximately two hours of debate.

Justice Clarence Thomas, for example, asked why the law was not clearer on what process Cook is entitled to if Congress was concerned about the Fed’s independence when creating the removal restriction.

Clement told the court that Trump’s interpretation of the law would make the removal protections meaningless.

“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,” Clement said.

Could Powell be next?

If the court sides with the president, he could take similar action against other board members, including Federal Reserve Chair Jerome Powell. In a separate action, the Justice Department is investigating whether Powell misled Congress about a building renovation project at the Fed’s headquarters.

Powell planned to be at the high court to attend the arguments, according to a source familiar with his schedule.

Powell and Cook argue that the allegations against them are manufactured to give Trump a pretext to get rid of them because they have resisted his pressure to lower interests deeper and faster.

“This case is about whether the Federal Reserve will set key interest rates guided by evidence and independent judgment or will succumb to political pressure,” Cook said in a statement after the arguments.

Trump administration dismisses concerns from ‘elites’

Cutting rates could goose the economy, giving Republicans a boost in this year’s midterm elections. But short-term economic gains can jeopardize long-term financial stability, leading to persistently higher inflation.

Every living former Federal Reserve chair, along with many former economic officials and economists, has emphasized to the Supreme Court the importance of maintaining the independence of the top policymaking body for the U.S. economy, which is also a cornerstone of the world financial system.

Solicitor General John Sauer dismissed those “elite” opinions, telling the justices that Trump’s firing speaks to the concerns of average Americans.

“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,” Sauer said.

Chief Justice John Roberts sounded skeptical that any mistakes Cook made on mortgage paperwork is sufficient cause for removal.

“I suppose we can debate that,” he said.

Can Trump merely say ‘You’re fired?’

Justice Samuel Alito, one of the court’s most conservative members, asked Sauer why Cook’s case has to be handled “in such a hurried manner.”

“You began by laying out what you claim to be the factual basis for the for-cause removal, but no court has ever explored those facts,” he said of Trump’s claim that Cook committed mortgage fraud.

Justice Neil Gorsuch, who was appointed to the court by Trump, asked whether “just a meeting across a conference table finished with ‘You’re fired,’” would be sufficient.

Sauer said Cook only had to be informed of the reason for the dismissal, and she had five days to publicly rebut the charges after Trump’s initial social media post.

Law allows removals ‘for cause’

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 declared more than one home as her primary residence in an effort to get a more favorable interest rate for a second home.

Cook denies the charges. And she argues that the “for cause” removal protections are meaningless and will erode the independence of the Fed if Trump can remove her without the opportunity to defend herself.

“Congress did not mean for the Nation’s monetary policy to turn on that game of find-an-alleged-crime,” Cook’s attorneys wrote in a filing.

The administration argues that the real damage to the Fed’s reputation would come from letting Cook remain on the board.

Supreme Court previously signaled support for Fed independence

The court signaled early skepticism about Trump’s stance when the justices said in October that Cook could stay on the board at least until after the oral arguments.

By contrast, the court has allowed Trump to temporarily remove leaders at other independent agencies before their cases were fully litigated.

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.

Although it’s not unheard-of for presidents to pressure the Federal Reserve over monetary policy, Trump is the first president to try to remove a member of the central bank’s board since its founding in 1913.