Trump’s firing of Fed’s Lisa Cook tests Supreme Court’s limits on presidential power
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President Donald Trump’s decision late Monday to dismiss Federal Reserve Governor Lisa Cook escalated his yearlong effort to consolidate executive power and could open a new high-stakes legal battle at the Supreme Court.
The 6-3 conservative court has repeatedly allowed Trump to fire the leadership at independent agencies, but it has in the past drawn a line around the Fed. In May, the court called the Federal Reserve a “uniquely structured” agency with a long history of insulation from political interference from the White House that shouldn’t be changed.
“Because the Constitution vests the executive power in the president,” the court wrote in its unsigned order at the time, “he may remove without cause executive officers who exercise that power on his behalf, subject to narrow exceptions recognized by our precedents.”
The president has blamed the Fed’s leadership for years for moving too slowly, in his view, to lower interest rates.
Trump fired Cook with a letter he posted Monday night on social media, accusing her of committing mortgage fraud. The Justice Department has said it plans to investigate those allegations first raised by Federal Housing Finance Agency Director Bill Pulte and prosecutor Ed Martin also said Cook should leave. Cook has not been charged with any wrongdoing and has vowed to fight her dismissal.
The dispute appears designed to give federal courts new legal questions to tackle, said Jennifer Nou, a law professor at the University of Chicago: What counts as “cause,” who decides and what process is required to remove someone from the Fed?
“Given the pretextual basis, what is clear is that Trump has violated a strong norm against firing Federal Reserve board members,” Nou said. “If the court can’t restore that norm, perhaps the markets will.”
Since retaking power in January, Trump has managed – with Supreme Court approval – to fire leaders at independent agencies who were seated by President Joe Biden. He has done so despite federal laws that bar presidents from dismissing those officials without cause, such as malfeasance.
In July, the Supreme Court allowed Trump to remove three members of the Consumer Product Safety Commission – over dissents from the court’s liberal justices. Months earlier, the court ruled that Trump didn’t have to reinstate officials from two independent federal labor agencies that enforce worker protections.
But the court specifically distinguished the Federal Reserve, even though the language of the law protecting Fed governors is similar to those in place for other agencies.
In its decision in May, the court rejected an argument raised by the labor officials that if Trump got his way in their case, the Fed leadership would be the next to fall.
“We disagree,” the court said, echoing an argument Trump’s attorneys had raised throughout the case. “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”
In a sharp dissent in that decision, liberal Justice Elena Kagan balked at the idea of a “bespoke Federal Reserve exception” to the court’s decisions allowing Trump to fire agency leaders.
Instead, she wrote, the court should have sided against Trump based on a decades-old Supreme Court precedent, Humphrey’s Executor v. US, that allowed Congress to require presidents to show cause – such as malfeasance – before dismissing board members overseeing independent agencies.
“If the idea is to reassure the markets, a simpler – and more judicial – approach would have been to deny the President’s application for a stay on the continued authority of Humphrey’s,” Kagan wrote.
The president’s letter steers around the Supreme Court’s earlier cases by asserting he is firing Cook because of the mortgage fraud allegations – in other words, for cause.
The law, Trump wrote in the letter, “provides that you may be removed, at my discretion, for cause.” The president wrote that he had “determined that there is sufficient cause to remove you from your position.”
“The firing of Lisa Cook ‘for cause’ may be pretextual but is not obviously illegal,” Jack Goldsmith, a law professor at Harvard University who regularly writes on administrative law issues, posted on social media. “The big question is how the markets react.”
For her part, Cook is arguing that Trump’s reliance on the allegations is a pretext to do what he has always wanted to do: Punish the Fed for not lowering interest rates.
“President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” Cook said in a statement her attorneys shared with CNN on Monday. “I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022.”
