Trump’s Lawyer Faces Skeptical Supreme Court Response on Firing Fed’s Lisa Cook

By Andrew Chung and John Kruzel

WASHINGTON, Jan 21 () – A legal representative from Donald Trump’s administration encountered questioning from both conservative and liberal U.S. Supreme Court justices on Wednesday while defending the president’s unusual attempt to dismiss Federal Reserve Governor Lisa Cook, a case that may jeopardize the central bank’s autonomy.

Several justices questioned D. John Sauer, the U.S. solicitor general representing Trump’s administration, on why Cook was not allowed to formally address the unproven mortgage fraud claims—claims 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 executive powers since he resumed his role a year ago.

The administration of Trump has requested the Supreme Court, which holds a 6-3 conservative majority, to overturn a judge’s ruling that prevents the Republican president from dismissing Cook while her legal dispute continues. When the justices agreed to consider the case in October, they temporarily kept Cook in her position.

The arguments were ongoing.

‘DECEIT OR GROSS NEGLIGENCE’

Sauer informed the justices that the accusations directed at 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 demand swift action.

Cook has stated that the accusations directed at her are a way to justify her dismissal due to disagreements on financial policies, as Trump applies 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 holds true if the mortgage accusations—specifically that 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 judges that the accusations 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.

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 evidence 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 the definition or outline processes for such removal.

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

That doesn’t make sense,” Clement stated. “There’s no logical explanation 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 rule 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 questioned the practical impact 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—this 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 chance to defend herself, stating that it “wouldn’t have been a major 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 this type of case?” Barrett questioned, then said, “If there’s 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 breached her constitutional right to due process as outlined in the Fifth Amendment of the U.S. Constitution. Cobb further concluded that the allegations of mortgage fraud were likely not a valid legal basis for removing a Federal Reserve governor, pointing out that the alleged actions took place before she assumed her position at the Fed.

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 asked 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 conference 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 merely private actions. Nevertheless, Congress has, over time, effectively granted the Federal Reserve traditional executive powers,” Sauer responded.

As a member of the Federal Reserve, Cook plays a role in shaping U.S. monetary policy alongside the other seven members of the central bank’s board and the leaders of the 12 regional Fed banks. She will continue 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 position.

Liberal Justice Ketanji Brown Jackson urged Sauer to resolve 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 accomplish in terms of the law’s objectives?” Jackson questioned.

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 and more severe hypothetical situations.

“What if, once the individual takes office, videos emerge 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 previously indicated 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, addressing issues such as immigration, large-scale federal job cuts, reducing international assistance, dissolving the Department of Education, and various other topics.

The Cook case has implications for the Federal Reserve’s capacity to determine interest rates independently of political preferences, which is generally considered essential for a central bank to effectively manage responsibilities like controlling inflation.

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

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

In Davos, Switzerland, Trump stated on Wednesday that all the individuals he has interviewed for the position of Federal Reserve chair to succeed Powell are outstanding, but he noted that the issue arises when nominees change once they take the role. Trump mentioned he will reveal his selection shortly.

(Contributed by Andrew Chung; further contributions from Jan Wolfe, John Kruzel, and David Lawder in Washington and Ann Saphir in San Francisco; edited by Will Dunham)