US Supreme Court Blocks Trump's Removal of Fed Governor, Shields Independence

The US Supreme Court has blocked President Donald Trump's removal of Federal Reserve Governor Lisa Cook. The court ruled that it is not lawful for the president to unilaterally dismiss a Fed official without just cause. As Trump has openly demanded that the Fed cut interest rates, shaking the central bank's independence, the ruling is seen as the court defending the Fed's independence. Some interpret the decision as widening the room for maneuver for new Fed Chairman Kevin Warsh.

According to Bloomberg and other outlets Monday, the court ruled 5-4 that Cook could remain in her position while litigation over her removal proceeds. The Supreme Court currently consists of six conservative-leaning justices and three liberal-leaning justices. Conservative-leaning Chief Justice John Roberts and Justice Brett Kavanaugh sided with the three liberal-leaning justices.

Earlier, in August last year, Trump unilaterally announced Cook's removal through Truth Social, alleging that she had committed fraud in a past mortgage process. Cook filed a lawsuit with the court, calling the move unjust. It was the first time since the Fed's establishment in 1913 that a US president had notified a Fed governor of removal.

The court ruled that because Cook was not properly given an opportunity to respond, she could retain her position until the lawsuit concludes. Regarding the removal notice sent via Truth Social, Chief Justice Roberts stressed that it "was not sufficient to ensure due process for Governor Cook," and that "at a minimum, Cook was entitled to know the evidence at issue, the means by which she could respond, and the deadline for submitting a response." He also explained that while "it is true that only the president can decide whether a Fed governor should be removed," that "does not mean the president can make such a decision for no reason."

Roberts added that the Fed has a "unique role." He stated that "there is no reason to leave the public in uncertainty or to sow doubt regarding the status of the Fed, one of the most important financial institutions in the United States (and the world)." This is interpreted to mean that while the power to remove a Fed governor does rest with the president, given the Fed's enormous influence over the entire economy, its independence must be respected and its members can only be removed for just cause.

In a statement, Cook said, "(President Trump) attempted to remove me because I made interest rate decisions considering only what is most beneficial to the American people, without succumbing to political pressure," and emphasized that the ruling "reaffirmed that the Fed must make policy decisions based on evidence and independent judgment." Trump, by contrast, said he would "immediately take appropriate measures to prevent a person who has committed misconduct from making key decisions concerning the welfare of Americans."

Nick Timiraos, the Fed-focused reporter at The Wall Street Journal (WSJ), assessed that "the biggest winner of this ruling is Fed Chairman Kevin Warsh," and that "Chairman Warsh now has room to act more independently, regardless of the president." Because the president can no longer fire Fed officials without just cause, Warsh can now run monetary policy looking only at objective economic indicators.

Meanwhile, the Supreme Court also issued a ruling broadly affirming the president's power to remove officials at independent agencies other than the Fed. The court ruled 6-3 that Trump's removal last year of Rebecca Kelly Slaughter, a Democratic-nominated commissioner of the Federal Trade Commission (FTC), was lawful. This effectively overturned a 1935 precedent that barred the president from removing officials at independent agencies over policy disagreements, absent just cause such as misconduct or neglect of duty.

The ruling is expected to significantly expand the removal power of US presidents, including Trump, over public officials. The New York Times (NYT) said the ruling's impact would extend to some 20 independent agencies—such as the Consumer Product Safety Commission and the Nuclear Regulatory Commission—that are under the executive branch but not subject to the direct and detailed control of the president as head of the executive.

Some pointed out a contradiction in the court broadly affirming the president's power to remove officials at independent agencies while carving out an exception only for the Fed. In an editorial, the NYT asked, "Is the law protecting the Fed from political interference worth protecting, while the law that established the FTC is not worth as much?"