The Supreme Court is considering the case of Trump trying to take control of the Federal Reserve

Jeff Bennett:

The US Supreme Court today heard arguments in a landmark legal battle centered on President Trump’s efforts to shape the Federal Reserve in his image.

Our issues correspondent Ali Rogin has more on the case that could threaten the independence of the country’s central bank – Ali.

Ali Rogin:

Jeff, you may remember that was a crucial moment in the confrontation between the president and the Fed. Last August, President Trump posted on his social media platform that he was firing one of the central bank governors, Lisa Cook, for allegedly committing mortgage fraud.

But Cook, who was appointed by President Biden, sued Trump to block her firing, claiming her firing was illegal, and lower courts had blocked her firing. The majority of the justices had tough questions today for District Attorney John Sawyer, expressing doubts about the rushed nature of the case and Cook’s lack of recourse.

Samuel Alito, Associate Justice of the US Supreme Court:

Is there any reason why everyone should be treating this whole matter, by the executive branch, by the district court, by the D.C. Circuit, in such a hasty manner?

Ketanji Brown Jackson, Associate Justice of the US Supreme Court:

Did Ms Cook have the opportunity in some sort of formal proceeding to challenge or explain this evidence?

D. John Sawyer, Attorney General of the United States:

It is not a formal procedure. She had the opportunity to go public because she was notified.

Ketanji Brown Jackson:

In the world?

D. John Sawyer:

Yes.

Ketanji Brown Jackson:

Like, she was supposed to post about this, and this was an opportunity to be heard?

Ali Rogin:

The case comes as the Trump administration has moved to exert greater control over the Federal Reserve. This month, the Justice Department opened a criminal investigation into Chairman Jerome Powell over comments he made to Congress about a construction project.

To dissect today’s argument, we’re joined now by News Hour Supreme Court analyst and SCOTUS Blog co-founder Amy Howe, and David Wessel, director of the Hutchins Center for Fiscal and Monetary Policy at the Brookings Institution.

Thank you both very much for being here.

Amy, this case has enormous implications for the independence of the Federal Reserve. What are the main questions considered today and what are the most important points you have reached?

Amy Howe:

So the key questions — I mean, as a really technical matter, the questions before the justices were simply whether an order by a federal judge in Washington, D.C., that Lisa Cook should remain in office should be maintained.

This case reached the Supreme Court on its emergency docket. The Trump administration has been seeking permission to fire Cook and is asking judges to put that order on hold by U.S. District Judge Jia Cobb. After nearly two hours of oral arguments today, the justices appeared inclined to leave Cook in office, denying the Trump administration’s request to temporarily halt Cobb’s order.

The real question is how they will do it. Will they send the case back to the lower courts and leave the lawsuit there? Or will they try to resolve some of the thorny issues at hand, such as what it means for a president to fire someone for a cause? Can the courts review the president’s decision that he fired the governor of the Federal Reserve Board for cause?

What type of procedure does a person have the right to take before being fired? And the judges actually weren’t sure. Many of them seemed inclined to send the case back to the lower courts. On the other hand, Chief Justice John Roberts seems to suggest that perhaps the court should go ahead and decide the case now.

Ali Rogin:

Yes, it was interesting, David. It seems that some of the conservative justices are engaged in some of those thorny questions that Amy was talking about.

Justice Kavanaugh raised concerns about what this attempted dismissal law would mean for the Fed’s independence. He said that if the president alone could determine whether someone could be removed for cause and what that reason was, that could — I quote — “weaken, if not destroy, the independence of the Fed.”

Why is the independence of this body important?

David Wessel, Brookings Institution:

So the argument is that if politicians decide to set interest rates, they will tend to hold them at very low levels so that they can achieve more growth now at the expense of more inflation later.

So the United States and other major capitalist democracies decided that it would be better to have an independent central bank insulated from those political pressures. The Fed has a mandate set by Congress, which is maximum employment and price stability. And Congress said, you guys decide what the best interest rate is to achieve this goal.

Ali Rogin:

We heard from a number of bankers, economists wrote briefs for Lisa Cook today, saying why this might be a bad idea.

Why is there so much concern now about the removal of just this person on the Board of Governors?

David Wessel:

If President Trump gets his way, he will be able to fire any Federal Reserve governor for whatever reason he considers. The administration says the courts can’t even review that.

So, for example, his attacks on Jay Powell, the Chairman of the Federal Reserve, on top of the building, and the way the Fed handled the building, by the way, not his finest hour, might become grounds for firing him for cause. If the president can get rid of all seven members of the Federal Reserve Board, he will be in control.

In fact, one of the questions posed to the lawyers today was: If we allow Trump to do this, will his successor do the same and get rid of all the Trump appointees?

Ali Rogin:

The Supreme Court, Amy, has had to consider a number of these existential questions this term. They looked at the different ways in which the president tried to exercise control. They heard a case just this month, last month, regarding Rebecca Slaughter, the FTC staffer who was fired by Trump.

How does the court grapple with Trump’s efforts to reshape the federal government in such a major way?

Amy Howe:

So, until the Lisa Cook case, the Supreme Court gave the green light to Trump’s efforts to remove the heads of independent, multi-member agencies. Most of this occurred on the Court’s emergency docket.

The Supreme Court granted the Trump administration approval to remove members of the National Labor Relations Board, the Merit Systems Protection Board, the Federal Trade Commission, and the Consumer Product Safety Commission, despite similar laws that only allow the president to remove officials at those agencies for cause.

Then the Supreme Court heard oral arguments, as I said in December, in the case of Rebecca Slaughter, the FTC commissioner who was fired by Trump. They seemed inclined to rule in favor of the Trump administration.

So, in one of the orders on the emergency docket, the Supreme Court rejected the argument made by members of the NLRB and MSPB that, if you’re allowed to — if Trump is allowed to fire us, what happens to the Fed? Because the laws are similar.

The Supreme Court said in that case that the Fed is essentially a private bank, and there is no need to worry about the Fed. Thus today’s Lisa Cook case indicates that the Supreme Court views the Fed as a private bank.

Ali Rogin:

Yes, we are now worried about the Fed.

David, last question for you.

Today’s arguments were, of course, part of longer-standing arguments — just the latest in President Trump’s long effort to confront the Fed. We mentioned the investigation into Jerome Powell. It’s hard not to look at all of these things together. Are they all one piece, or should we look at them separately?

David Wessel:

They are definitely one piece.

I mean, as Amy pointed out, the court has a hard time here explaining why the Fed is special. I can argue why the Fed is special, but I don’t have to make a legal argument. Jerome Powell was in the courtroom today, and I think that was a reminder to the justices that this is not about the Fed governor possibly making a mistake or cheating on her mortgage application.

This has to do with the same concept that people are appointed to the Fed for up to 14 years, can only be removed for cause, and most judges seem to think that whatever she did about her mortgages wouldn’t qualify.

Ali Rogin:

Amy Howe from the SCOTUS blog, and David Wessel from the Brookings Institution, thank you very much.

David Wessel:

You’re welcome.

Amy Howe:

Thank you.