Supreme Court Hesitates to Allow Trump to Remove Fed’s Lisa Cook

By Andrew Chung, John Kruzel, and David Lawder

WASHINGTON, Jan 21 () – On Wednesday, both conservative and liberal justices on the U.S. Supreme Court expressed doubt about President Donald Trump’s attempt to remove Federal Reserve Governor Lisa Cook, highlighting concerns over the central bank’s autonomy.

For roughly two hours during the case’s debates, the justices suggested they were unlikely to approve the Trump administration’s effort to overturn a judge’s ruling that prevents the Republican president from immediately dismissing Cook as her legal dispute continues.

Several justices questioned D. John Sauer, the U.S. solicitor general representing Trump’s administration, on why Cook was not allowed to officially respond to the unsubstantiated mortgage fraud claims—which she has denied—that the president used as a reason to remove her. They also expressed worries about the impact on the economy of this unprecedented presidential dismissal from the central bank and the consequences for the Fed’s long-held independence from political interference.

The case marks the most recent conflict to reach the top U.S. judicial authority, concerning Trump’s broad interpretation of presidential authority since his return to power a year ago.

When the court, which holds a 6-3 conservative majority, decided in October to take on the case, they temporarily kept Cook in her position.

“This case involves whether the Federal Reserve will determine crucial interest rates based on data and impartial analysis or will give in to political influence,” Cook, who was present during the arguments, stated in a release after the event.

“Throughout my time at the Federal Reserve, I will maintain the principle of political independence in order to serve the American people,” Cook added.

‘DECEIT OR GROSS NEGLIGENCE’

Sauer informed the justices that the accusations against Cook call into question her “behavior, suitability, capability, or qualifications to act as a governor of the Federal Reserve.”

“The U.S. citizens should not have their interest rates set by someone who, at the very least, was seriously careless in securing good interest rates for herself,” Sauer stated.

“Fraud or serious negligence on the part of a financial regulator during financial dealings warrants removal,” Sauer stated, contending that the accusations necessitate swift action.

Cook has described the accusations directed at her as a way to justify her dismissal due to disagreements on financial policies, as Trump continues to exert pressure on the central bank to lower interest rates and criticizes Fed Chair Jerome Powell for not acting swiftly enough.

Conservative Chief Justice John Roberts requested Sauer to clarify if his argument for Cook’s immediate removal remains valid when the mortgage accusations—claiming she listed two different properties as her primary residence—are considered an “unintentional error that is refuted by other documents in the record.”

Sauer stated that, even if Cook erred on the mortgage document, “it’s a significant error.”

Roberts appeared doubtful, saying to Sauer, “we can discuss that.”

Paul Clement, the attorney representing Cook, informed the justices that the charges against Cook stem from “at most a careless error” on a mortgage form related to a second home.

Trump’s action against Cook is regarded as the most significant threat to the Federal Reserve’s autonomy since its establishment in 1913. Previously, no president had attempted to remove a Fed official.

A decision from the Supreme Court is anticipated by the end of June.

‘A MILLION HARD QUESTIONS’

Conservative Justice Samuel Alito voiced worry that the administration had managed the case “in a very brief fashion.” Although the case relates to Trump’s claimed reason for dismissing Cook, Alito stated, “No court has ever examined those details. Are the mortgage applications actually part of the records in this case?”

“There are a million challenging questions in this case,” Alito stated.

When establishing the Federal Reserve, Congress enacted the Federal Reserve Act, which contained clauses designed to protect the central bank from political influence, mandating that governors can only be removed by the president “for cause,” even though the law does not clarify this term or outline specific removal processes.

Clement informed the judges that Trump’s stance would change the job security for Federal Reserve governors into “employment at will.”

That doesn’t make sense,” Clement stated. “There’s no logical justification for going to all the effort of establishing this distinct, semi-private organization that is free from everything including the (congressional) funding procedures and civil service regulations, just to impose a removal clause that is as ineffective as the president believes.

Roberts questioned Sauer’s claims that the president’s stated reason is not subject to review, or that judges are unable to rehire a dismissed officer.

Conservative Justice Brett Kavanaugh raised questions regarding the practical impacts of the administration’s claims.

Your stance,” Kavanaugh said to Sauer, “that there is no judicial review, no procedure needed, no solution available, and a very minimal standard for cause that the president alone decides — I mean, that would undermine, if not destroy, the independence of the Federal Reserve.

Conservative Justice Amy Coney Barrett also raised concerns about why the Trump administration has refused to grant Cook a hearing to defend herself, stating that it “wouldn’t have been a significant issue” for Trump to meet with Cook and present the alleged evidence against her.

Barrett also inquired of Sauer regarding the real-world effects of permitting Trump to dismiss a Federal Reserve governor.

We have friend-of-the-court briefs from economists stating that if Governor Cook is dismissed, it could lead to a recession. How should we consider the public interest in such a case?” Barrett questioned, then added, “If there is a risk (at this early stage of the case), doesn’t that suggest we should proceed with care?

Sauer mentioned that Cook was informed in August about her dismissal, and this has not impacted the markets. Sauer encouraged the justices to view the dire economic forecasts from economists, which were included in legal documents supporting Cook, with a “skeptical perspective.”

U.S. District Judge Jia Cobb determined in September that Trump’s effort to dismiss Cook without prior notice or a hearing probably infringed on her due process rights as outlined in the Fifth Amendment of the U.S. Constitution. Cobb also concluded that the allegations of mortgage fraud were likely not a valid legal reason for removing a Federal Reserve governor, pointing out that the alleged actions took place before she held the Fed position.

The U.S. Court of Appeals for the District of Columbia Circuit rejected Trump’s attempt to suspend Cobb’s order.

‘YOU’RE FIRED’

Both conservative and liberal justices raised pointed questions to Sauer regarding his argument that Cook was not eligible for formal notice and a hearing prior to being removed by the president.

Conservative Justice Neil Gorsuch questioned Sauer about the nature of such a hearing and whether Cook would be entitled to legal representation. Sauer replied that the court has historically been hesitant to “dictate procedures to the president” and that it would be up to Trump to determine.

Bringing Ms. Cook into the (White House) Roosevelt Room, sitting across a conference table, listening for, I’m not sure how long, how much proof is needed for a lawyer, and then making a choice? Would that be enough?” Gorsuch questioned, continuing, “Just a meeting across a table ending with, ‘You’re fired’?

Conservative Justice Clarence Thomas questioned Sauer about the grounds upon which the justices should determine that the Federal Reserve is “an executive branch agency, and therefore that the president does have the authority to remove officials.”

“There is an academic debate regarding whether the Federal Reserve’s Open Market operations are considered executive power or something else, essentially private actions. However, over the years, Congress has gradually added traditional executive powers to the Federal Reserve,” Sauer responded.

As a member of the Federal Reserve, Cook plays a role in shaping U.S. monetary policy alongside the other six members of the central bank’s board and the leaders of the 12 regional Fed banks. She will remain in this position until 2038. Cook was named in 2022 by former President Joe Biden, a Democrat, becoming the first Black woman to hold this role.

Liberal Justice Ketanji Brown Jackson urged Sauer to address two apparent contradictions: his assertion that the president holds significant authority to dismiss a Federal Reserve governor and his acknowledgment that Congress established term protections for Fed governors to ensure the central bank’s independence from presidential influence.

“What does that contribute to the purpose of the law?” Jackson inquired.

Alito expressed doubt about Clement’s claim that a Federal Reserve governor’s actions prior to assuming office cannot serve as a reason for the president to remove them, and he requested Cook’s lawyer to consider a series of more severe hypothetical situations.

“What if, after someone takes office, videos are released showing the official expressing strong admiration for Hitler or the Klan?” Alito questioned.

AGENCY INDEPENDENCE

In previous instances, the Supreme Court has gradually reduced the autonomy of different federal agencies in relation to presidential authority, and may soon overturn a significant ruling that has protected the leaders of independent agencies from being removed since 1935.

However, the court indicated last year that it might consider the central bank as an exception, mentioning in a May decision that allowed Trump to dismiss two Democratic members of federal labor boards that the Fed has a distinct structure and historical background.

The Supreme Court has supported Trump through multiple urgent decisions since he resumed his presidency, covering issues such as immigration, large-scale federal job cuts, reducing international assistance, dissolving the Department of Education, and various other topics.

The president attempted to dismiss Cook on August 25 by sharing a termination letter on social media, referencing mortgage fraud accusations revealed by Bill Pulte, the Federal Housing Finance Agency director and a Trump nominee.

This month, the administration initiated a criminal investigation into Powell regarding statements he provided to Congress last year concerning a Federal Reserve building project, a step he previously characterized as a tactic meant to exert control over monetary policy.

(Produced by Andrew Chung; Additional reporting by Jan Wolfe, John Kruzel, and David Lawder in Washington and Ann Saphir in San Francisco; Edited by Will Dunham)