If there was possible harm in how the court proceeds, the justices suggested during the arguments on Wednesday, it would be in leaving the door open too wide for presidents – now or in the future – to remove monetary policymakers and in doing so disrupt more than a century of letting central bankers make judgments about interest rates free of political pressure.
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That concern was summarized most directly by conservative Justice Brett Kavanaugh during an exchange with Solicitor General D. John Sauer, tasked with arguing why Trump should be allowed to remove Cook over alleged misstatements made on mortgage applications before she was appointed to the Fed.
“Your position that there’s no judicial review, no process required, no remedy available, a very low bar for cause that the president alone determines – I mean, that would weaken, if not shatter, the independence of the Federal Reserve,” Kavanaugh said.
“We have to be aware of what we’re doing and the consequences of your position for the structure of the government,” Kavanaugh told Sauer.
Making the removal of a Fed governor too easy gives the president an incentive for a search-and-destroy mission to “find something and just put that on a piece of paper – no judicial review, no process, nothing. You’re done,” Kavanaugh said.
TRUMP’S PERSISTENT DEMANDS
Looming over the case are Trump’s persistent demands that the Fed cut interest rates faster and further than the central bank under the leadership of current Chair Jerome Powell has been willing to do in the face of lingering inflation. Trump has stated that he plans to install a like-minded new Fed chair when Powell’s term in the post expires in May.
Trump cited the unproven allegations of mortgage fraud as justification for firing Cook, who was appointed as a Fed governor in 2022 by Democratic former President Joe Biden with a term running until 2038. Cook has called this allegation a pretext to oust her over monetary policy differences.
Trump’s Justice Department this month launched a criminal investigation against Powell concerning a project to renovate two historical buildings at the Fed headquarters in Washington. Powell similarly has called this investigation a pretext for Trump to gain more influence over the Fed and monetary policy.
Justice Amy Coney Barrett, who like Kavanaugh was appointed to the Supreme Court by Trump, pressed Sauer on the economic consequences of allowing Cook’s removal to stand. Barrett noted that economists had filed briefs with the court saying doing so could trigger a recession.
“How should we think about the public interest in a case like this?” Barrett asked.
Sauer responded by saying the stock market’s rise after Trump announced his firing of Cook in August undercut predictions of doom.
“Well, I’ll interrupt you there to say that I don’t want to be in the business of predicting exactly what the market’s going to do,” Barrett said. “I don’t want to be responsible for quantifying that risk. I’m a judge, not an economist. But if there is a risk, doesn’t that counsel … caution on our part?”
LONG-TERM OUTCOMES
Economists regard it as a well-established principle that central banks that operate free from short-term political pressure make decisions producing better long-term economic outcomes, tempering inflation even if it means high interest rates that can slow economic growth, raise unemployment and make life uncomfortable for politicians seeking reelection.
Trump has taken an expansive view of presidential powers since returning to office 12 months ago. The justices in the Cook case are weighing the value of Fed independence against the Trump administration’s arguments that it is the president’s interests – and by extension the public’s – that would be damaged by leaving federal agency officials in place who he wants removed.
The Supreme Court has backed Trump in numerous cases over the past year decided on an emergency basis, including allowing him to remove various officials from federal agencies while their legal challenges to his actions play out.
But the Fed’s role as central to the U.S. and global financial system, as well as the fact that presidents as a matter of course do not directly decide monetary policy, put the Cook case on a somewhat different footing.
“It’s not as if keeping her is going to thwart any right he has to run the department – because he has none,” liberal Justice Sonia Sotomayor said.
The judge who blocked Trump from immediately firing Cook said that his action without notice or a hearing likely violated her right to due process under the U.S. Constitution’s Fifth Amendment. The Supreme Court is considering the Trump administration’s request to lift that judge’s order while Cook’s legal challenge to the president’s action continues to play out.
“We know that the independence of the agency is very important, and that that independence is harmed if we decide these issues too quickly and with not due consideration,” Sotomayor added.
Allowing the lower courts to thoroughly examine all the issues, Sotomayor said, makes “the most sense to the public’s confidence and to the world’s confidence about the due process of law.”
“Why shouldn’t we wait until the end of this case, where all the issues are clear and where we make a final decision as to whether she should have been removed or not?” Sotomayor asked.
A Supreme Court ruling is expected by the end of June but could come sooner.
Reporting by Howard Schneider;
Editing by Dan Burns and Will Dunham
Our Standards: The Thomson Reuters Trust Principles.
