Court sees risks in Trump running roughshod over Fed
U.S. Supreme Court justices have raised issues with President Donald Trump’s bid to oust Federal Reserve Governor Lisa Cook and appear to embrace the idea that the independence of the central bank should be protected.
In arguments on Wednesday, the justices argued that agreeing with Trump’s stance would leave the door wide open for presidents to oust monetary policymakers — now or in the future — and that doing so would disrupt more than a century of allowing central bankers to make decisions on interest rates without political pressure.
This concern was most directly outlined by conservative Justice Brett Kavanaugh during a meeting with Attorney General D. John Sauer, who was tasked with arguing why Trump should be impeached over allegations that Trump made false statements on mortgage applications before his appointment to the Fed.
“Your position that there is no judicial review, that no process is necessary, that no remedy is available, that the bar for litigation is too low for the president to set alone, well, that undermines, if not dismantles, the independence of the Federal Reserve,” Kavanaugh said.
“We must be aware of what we are doing and the consequences of your position for the structure of government.”
Kavanaugh says making it too easy to remove a Fed chair encourages the president to “go on a search-and-destroy mission to find something and put it on paper”; No judicial review, no process, no nothing. You’re done,” Kavanaugh said.
Looming over the case are Trump’s persistent demands that the Fed lower interest rates faster and further than current Chairman Jerome Powell wants to do in the face of persistent inflation.
Trump has stated that he plans to appoint a new Fed chair with like-minded views when Powell’s term ends in May.
Trump cited unproven allegations of mortgage fraud as grounds for dismissing Cook, who was appointed as Fed governor by Democratic former President Joe Biden in 2022 and whose term will last until 2038.
Cook described the claim as an excuse to fire him over monetary policy differences.
Economists see it as a well-established principle that central banks, working free from short-term political pressure, should make decisions that produce better economic outcomes in the long run, reducing inflation—even if that means higher interest rates that could slow economic growth, increase unemployment and make life difficult for politicians seeking re-election.
The judge who blocked Trump from immediately firing Cook said the president’s action without notice or a hearing likely violated his right to a trial under the Fifth Amendment to the U.S. Constitution.
Cook’s legal challenge to the president’s decision continues as the Supreme Court considers the Trump administration’s request to overturn the judge’s decision.
The Supreme Court decision is expected by the end of June, but could come sooner.
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