Supreme Court Denies Trump’s Attempt To Fire Lisa Cook From Federal Reserve

The Supreme Court has blocked an attempt by President Donald Trump to remove Lisa Cook from the Federal Reserve board of governors.

In a 5-4 opinion, the court denied Trump's attempt to dismiss Cook, a Biden appointee, and one of the 12 members of the Federal Open Market Committee that sets the Fed's interest rate policy. Trump alleges Cook committed mortgage fraud. After he attempted to remove her, she sued for wrongful termination.

In January arguments before the high court, Trump's solicitor general argued the government was well within its rights to fire Cook over allegations that she committed mortgage fraud, asking the Supreme Court to overturn a lower court ruling temporarily blocking her removal.

But a majority of justices, in their June 29 opinion, allowed a lower court injunction to remain in place, halting Trump's firing of Cook while the investigation plays out. The opinion highlighted the Fed's historic independence from the White House in enacting monetary policy, which impacts mortgage rates.

"Whether a Governor should be removed, it is true, is a decision only the President can make (short of impeachment)," Chief Justice John Roberts wrote for the majority. "But that does not mean that he may make that decision for any reason, or no reason."

Justices Sonia Sotomayor, Elena Kagan, Brett Kavanaugh, and Ketanji Brown Jackson joined Roberts in the majority. 

The opinion doesn’t clear Cook of the mortgage fraud allegations. But it "confirms the longstanding historical practice and understanding that the Federal Reserve is an independent agency whose governors enjoy for-cause removal protection consistent with Article II of the Constitution,” Kavanaugh said in a concurring opinion.

Trump, in a post on his Truth Social, wrote that the court's decision in the Cook case was based on "a strictly procedural basis."

"We will take appropriate action immediately to make sure that someone who has committed wrongdoing will not be making vital decisions concerning the Welfare of the United States of America!," Trump said.

In a statement, Cook's lawyers, Abbe D. Lowell and Norm Eisen, called the investigation "unproven allegations of mortgage fraud to justify a power grab."

"The Fed must operate free from political interference," they said. "This decision is a victory for the rule of law and for every American who depends on a stable economy."

Court examines presidential powers

Trump's attempt to fire Cook last year came amid a pressure campaign from the president for lower interest rates, which would stoke the economy and reduce government borrowing costs.

That also included clashes with former Fed Chair Jerome Powell when the Fed held its policy rate steady last spring and summer, before initiating cuts in September. Trump later named Kevin Warsh to lead the Fed after Powell's term ended.

The White House argued Trump was well within his rights to fire Cook, but critics called the move another pressure tactic on the FOMC to secure lower interest rates.

Cook's firing marks the first time in the 111-year history of the Fed that a president has attempted to remove a member of the Fed’s board. 

By law and tradition, the Fed is structured to be independent from political whim and influence. History shows that keeping interest rates artificially low for political purposes can lead to runaway inflation and capital flight, wreaking havoc on the economy and ultimately driving up borrowing costs.

Instead, the Fed is supposed to set rates based on its dual mandate of price stability and maximum employment, using higher rates to fight inflation and lower rates to boost the job market. Even so, policymakers often have honest disagreements about what interest rate would be ideal for the economy.

A majority of justices said that the Fed's independence was important enough to halt Trump's effort to fire Cook.

“The public’s interest is not served if a President can intimidate members of the Federal Reserve into doing his bidding. Experience has taught that high inflation, price variability, and, ultimately, financial panic can result when the Federal Reserve is subjected to rank politicization,” Jackson said in a concurring opinion.

Court still expands presidential firing power

The strongest dissent in the Cook case came from Clarence Thomas, who said arguments about the Fed’s independence are “ultimately arguments against the Constitution.” He said the president holds the power to remove executive officers from a federal body.

Meanwhile, a separate Supreme Court decision released at the same time ultimately expands Trump’s power to fire federal officials. 

In a 6-3 opinion along idealogical lines, the justices determined Trump could fire acting Federal Trade Commission chair Rebecca Slaughter, a Biden appointee. That decision chips away at precedent set in prior legal cases involving the president's power to remove leaders of what are supposed to be independent agencies.

But the majority of justices determined in their opinion that the president has the power to appoint people to set his policies.

"Subordinates who exercise the President’s power are subject to removal by him," Roberts wrote. "Then, and only then, can they remain accountable to the President, and the President to the people."

On Truth Social, Trump hailed the Slaughter ruling as a "BIG WIN."