Supreme Court rules Trump can't fire Federal Reserve governor Lisa Cook
The U.S. Supreme Court has rejected President Donald Trump’s legal rationale for removing Federal Reserve governor Lisa Cook from office, ruling she can stay on the job while her challenge to the firing plays out in court.
In a 5-4 vote, the high court said Trump does not have the constitutional authority to fire a Fed governor without cause. The landmark ruling limits a president’s authority over the central bank.
Chief Justice John Roberts wrote the opinion for the majority, which was joined by conservative justice Brett Kavanaugh, as well as the court’s three liberal members, Elena Kagan, Sonia Sotomayor and Ketanji Brown Jackson. The four other conservative justices, Clarence Thomas, Samuel Alito and Neil Gorsuch, dissented.
Allowing Cook to be ousted now, Roberts wrote, “would allow the President to remove a member of the Federal Reserve at any time, for any reason, without any notice before, and without any judicial check after. That would turn for-cause protection into little more than at-will employment.”
In August, Trump announced on social media that he was firing Cook, alleging she had committed mortgage fraud, which she denies. NBC News reported that Cook described her Atlanta condo on financial forms as a “vacation home,” which undermine’s Trump’s mortgage fraud allegations.
Cook sued and both a U.S. District Court and a federal appeals court in Washington, D.C., ruled the president’s effort to remove Cook likely violated the Federal Reserve Act. Under that law, designed to insulate the central bank from political interference, Fed governors can only be removed “for cause,” which is generally seen as some kind of malfeasance or dereliction of duty. Trump then issued an emergency appeal to the Supreme Court to overturn the lower court’s ruling.
No president has fired a sitting governor in the 112-year history of the Fed, which was structured to be independent of day-to-day politics. The case presented the court with one of the more extraordinary efforts by Trump to expand presidential power.
During oral arguments in January, the justices casted doubt on Trump’s bid to wrest control of the nation’s central bank. Allowing Cook’s firing to go forward “would weaken, if not shatter, the independence of the Federal Reserve,” said Justice Brett Kavanaugh, one of three Trump appointees on the nation’s highest court.
At least five other justices on the nine-member court also sounded skeptical about the effort to remove her from office.
The true motivation for trying to fire Cook, Trump’s critics say, is the Republican president’s desire to exert control over U.S. interest rate policy. If Trump succeeds in removing Cook, the first Black woman Federal Reserve governor, he could replace her with his own appointee and gain a majority on the Fed’s board.
Trump has been dismissive of worries that cutting rates too quickly could trigger higher inflation. He wants dramatic reductions so the government can borrow more cheaply and Americans can pay lower borrowing costs for new homes, cars or other large purchases, as worries about high costs have soured some voters on his economic management.
The Fed has left its key rate unchanged this year, but a growing chorus of policymakers is expressing concern about persistently high inflation and suggesting the central bank could raise its benchmark rate by the end of this year or leave it unchanged.
While Cook’s case was under review at the high court, Trump dramatically escalated his confrontation with the Fed. The Justice Department opened a criminal investigation of Jerome Powell and served the central bank with subpoenas.
The investigation ended in late April, the department said. The announcement cleared a major roadblock to the confirmation of Warsh as Powell’s successor.
The case against Cook stems from allegations she claimed two properties, in Michigan and Georgia, as “primary residences” in June and July 2021, before she joined the Fed board. Such claims can lead to a lower mortgage rate and smaller down payment than if one of them was declared as a rental property or second home.
Those applications, Solicitor General D. John Sauer said in January, are evidence of “gross negligence at best” and give Trump reason to fire her. In any event, he argued, courts shouldn’t be reviewing his decision and Cook has no right to a hearing.
Cook has denied any wrongdoing and has not been charged with a crime.
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