Federal Reserve Board chair Jerome PowellDaniel Torok/White House/Zuma
On Wednesday, the Supreme Court sat for oral arguments over whether the all-powerful president the justices have created in recent years can control the Federal Reserve. The end of Federal Reserve independence would reset the global financial order, tank retirement accounts, and give the White House vast new powers. After a two hour hearing, the answer seems to be that the court will craft some carveout to protect Fed independence, but how robust and meaningful it will be remains to be seen.
The problem facing the court is its creation of an all-powerful president who can remove independent commissioners, like Fed governors, at will.
The case, Trump v. Cook, comes from President Donald Trump’s attempt to fire Fed governor Lisa Cook. Federal Reserve governors serve fixed 14-year terms and can only be removed by the president for cause. Trump’s attempted removal came amid his push to coerce the financial regulator into lowering interest rates, but the purported cause is mortgage fraud; in reality, Cook’s supposed misdeed looks like a clerical error at worst. Cook sued and a district court judge ordered that she remain in her job as her case plays out. The question before the justices was whether to let the ruling keeping her at work stand. This led to follow-on questions including: Does she need proper notice and a hearing to be fired? What does that look like? Can the courts even decide if there was sufficient cause? And if they can, can a judge order the president not to fire her?
But all these questions really boil down to just one: Will there be meaningful independence for the Fed? If a president can send a lackey to dig up dirt on a Fed governor and claim it shows sufficient cause, and the courts have no way to intervene, then Trump controls the Fed. That is an outcome that economists, most politicians, the rest of the world, and the justices don’t want.
The problem facing the Republican wing of the court is that they have spent the past several years creating the legal basis for an all-powerful president who can indeed remove independent agency commissioners, like Federal Reserve Board Governors, at will. In case after case, they have decreed that the president must control the entire executive branch, which must operate as an extension of his will. The Republican appointees have let Trump get away with illegal firings at other agencies on the theory that the president suffers an irreparable harm when he is blocked from wielding executive power as he sees fit. Beyond that, the court is currently deliberating a case, Trump v. Slaughter, over whether independent agencies are even constitutional—and the GOP appointees seem ready to rule them out, overturning a 90-year old precedent, Humphrey’s Executor, that blessed independent agencies, including the Fed.
The Roberts’ Court’s destruction of independent agencies, which are led by bipartisan commissions given for-cause removal protections, is a longtime Republican goal. Without any independence, the president can circumvent Congress and the laws it enacts and instead rule by fiat through administrative agencies that would act at his behest. To justify this reordering of American government, the GOP appointees have embraced the “unitary executive theory,” the idea that all executive power is vested in the president. This has animated decision after decision by the Roberts Court to grow the powers of the presidency.
Despite their zeal for presidential power, the justices, including the GOP-appointees, are clearly uncomfortable with handing the Fed over to Trump. In May, when the court allowed Trump to fire independent commissioners from two other agencies, it went out of its way to explain that its decision did not implicate the Fed, dubbing it a “uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” Legal experts quickly pointed out that this distinction was nonsense: the Fed is not uniquely structured, it’s not private in any sense, and rather than being a descendent of private banks, it’s a bank regulator. But on Monday, the justices continued their tortured attempts to exempt the Fed from the unitary executive mess they’ve made.
One of the most telling moments came when Justice Amy Coney Barrett explicitly asked Paul Clement, who represented Cook, whether the unitary executive theory simply might not apply to the Fed in the same way. Barrett wanted to know if the court could get out of its logic blessing Trump’s firings elsewhere in this case and keep Cook in office given that “the president doesn’t have the same control over the Fed.”
Clement happily helped her flesh this out: If the president doesn’t have the same power to remove a Fed governor over a policy disagreement as he would the head of a different agency, then he is not harmed in the same way by a court order keeping Cook in her job, at least temporarily. But that exact same logic would apply to other independent agencies, because there’s no way to make the Fed carveout Barrett discussed coherent.
Even as the justices tried to insulate the Fed from the worst effects of the unitary executive theory, the theory undermined them at every turn. When discussing what would count as sufficient notice and hearing under for-cause removal protection, Clement noted that such hearings should be adjudicated by someone who has not prejudged the facts. “How can it not be the president?” Gorsuch asked, since it is, after all, his removal power. To which Clement responded, “if you believe in the unitary executive theory, then anybody that makes the removal decision is acting on the president’s power.” The exchange shows how unitary executive theory undermines the very concept of an evidentiary hearing, replacing it with the equivalent of an exit interview.
The unitary executive theory also complicates how the president is supposed to determine cause—even though Cook’s alleged crime falls short of almost any definition of cause for removal. Under the court’s ruling in Trump v. United States, the infamous immunity decision that let Trump commit crimes in office with impunity, Trump can direct sham investigations against political rivals. Just to bring home how this power is already infecting Fed independence, Trump’s DOJ has launched a criminal investigation into Fed Chairman Jerome Powell, in what is a clear attempt to get him off of the board and take control of the Fed. Whereas a criminal probe might have once signaled sufficient cause, it may now appear pretextual. It’s just another way that the court has already created the circumstances for a Fed takeover and now must find a way to pare it back.
In other words, attempts to bring order and process to the Fed’s removal protections start to fall apart under the unitary executive theory. We’re seeing “the justices discovering just how dangerous and problematic this theory could potentially be,” warned Lev Menand, a Columbia law professor and former Treasury Department official, on a call with reporters prior to oral argument. “They’ve allowed the president to proceed with scores of illegal removals and effectively abrogated precedent on their emergency docket, biding themselves time in some sense, but also allowing the president to basically suspend much of American administrative law for the first year of his administration. And now the rubber is gonna meet the road.”
At the arguments on Wednesday, several conservative justices seemed to embrace the kind of consequentialist thinking that was completely lacking in the Slaughter case just last month. “We have amicus briefs from economists who tell us that if Governor Cook is—if we grant you your stay, that it could trigger a recession,” Barrett said to Solicitor General John Sauer. “How should we think about the public interest in a case like this?”
“ Now the rubber is gonna meet the road.”
Justice Brett Kavanaugh wanted to discuss the “real-world downstream effects” and the “big picture.” Sauer’s contention that Trump’s removal power is unreviewable by the courts would reduce the for-cause requirement to effectively at-will employment, Kavanaugh argued: “All of the current president’s appointees would likely be removed for cause on January 20th, 2029, if there’s a Democratic President, or January 20th, 2033. And then we’re really at at-will removal. So what are we doing here?”
The court’s Democratic appointees have written dissent after dissent standing up to the president over the last year, but have been overruled by the GOP-appointed majority, which has shown extraordinary deference to Trump—firing officials, ignoring various laws, withholding funds appropriated by Congress, gutting federal agencies, and blessing ICE’s racially-targeted terror. One way to understand the majority’s recent decisions is to view them as facilitating Trump’s power grabs so as to avoid a confrontation with a would-be authoritarian, while trying to maintain the appearance of normalcy that is critical to financial markets and the broader economy. After all, the justices are just as beholden to the capitalist billionaires who helped seat them on the bench as they are to the president. These dynamics help explain why they appear ready to cabin Trump’s chaotic and uninhibited tariff regime and wince at the idea of him controlling the Fed, but have still decided to go ahead and let him blow past numerous acts of Congress.
If this is the majority’s M.O., then the outcome in the Cook case—and the future of Fed independence more broadly—will depend on how far the justices are willing to go to defy Trump. The simplest way to resolve the case for now is to keep Cook in office while her challenge to her removal plays out in the lower courts. This would maintain the status quo and show that the justices are committed to treating the Fed differently—although how differently would remain unclear.
Another option Chief Justice John Roberts discussed Wednesday is to find that the alleged cause in this case—a possible paperwork error—does not rise to the level of cause required by law. That would certainly be more reassuring, but it may not insulate Powell from a removal effort unless their ruling was specific and forceful about what constituted sufficient cause.
It’s not obvious how the justices will outrun their unitary executive theory in the end, but after oral argument, it appears clear they are going to try—at least in some ways—to carve out the Fed. What’s unclear is whether it’s even possible to insulate the Fed, and how much power Trump could gain over the uber-powerful bank agency. Trump would surely use any leverage to lower interest rates—as he’s already been haranguing the Board to do for months—to juice the economy ahead of elections. But the more influence he has over the agency, the more dystopian his power grows. The Fed can print endless money, provide repayment-free loans, and essentially cut off access to the financial system to any individual, business, or organization. Its powers would allow Trump to enrich himself and his allies, punish critics, and circumvent Congress’ power of the purse by instead drawing on the Fed’s limitless coffers.
Trump is determined to seize these reins one way or another. The Supreme Court has boxed itself in when it comes to protecting the Fed. It remains to be seen how much they will stand up to Trump and how effectively they can wall off the Fed through rulings that are logically incoherent at best, and undermined by the rest of their judicial agenda at worst.