(AFP) – The US Supreme Court appeared likely on Wednesday to allow a Federal Reserve governor fired by President Donald Trump to remain in her post for now in a case with far-reaching consequences for the central bank’s independence. Trump sought in August to dismiss Fed governor Lisa Cook, a key official serving on the bank’s interest rate-setting committee, accusing her of mortgage fraud. She denies the allegations.
The conservative-dominated Supreme Court barred the Republican president in October from immediately removing Cook, allowing her to stay on the job until it could hear the case contesting her dismissal. During two hours of oral arguments, a majority of the nine justices on the top court — both conservatives and liberals — seemed skeptical that the president had shown sufficient cause to remove Cook or had provided her with appropriate due process.
Justice Brett Kavanaugh expressed concern that setting a “very low bar for cause” could allow presidents to dismiss Fed governors at will and “weaken, if not shatter, the independence of the Federal Reserve.” “All of the current president’s appointees would likely be removed for cause on January 20, 2029 if there’s a Democratic president,” Kavanaugh said, referring to the next inauguration day.
Justice Samuel Alito, another conservative, took issue with the “hurried manner” in which the court was being asked to decide the case while the facts remain in dispute. Solicitor General John Sauer pushed back, saying the allegations against Cook were serious and merited her dismissal. “Deceit or gross negligence by a financial regulator in financial transactions is cause for removal,” Sauer said. “The American people should not have their interest rates determined by someone who was, at best, grossly negligent in obtaining favorable interest rates for herself.”
Trump has accused Cook of making false statements on one or more mortgage agreements, allegedly claiming two primary residences, one in Michigan and another in Georgia. Paul Clement, Cook’s lawyer, said she had “at most” made an “inadvertent mistake” on her mortgage documents and noted that no previous president has ever tried to remove a Fed governor. “It’s less important that the president have full faith in every single governor, and it’s more important that the markets and the public have faith in the independence of the Fed from the president and from Congress,” Clement said.
In a sign of public support for Cook, Fed Chair Jerome Powell personally attended the hearing, which comes as the Trump administration intensifies its pressure on the central bank, including the opening of a criminal investigation into the Fed chief. Earlier this month, Powell revealed that US prosecutors had launched an inquiry into him over an ongoing renovation of the Fed’s headquarters. Powell has dismissed the investigation as a politically motivated attempt to influence the central bank’s interest rate setting.
Trump’s bid to fire Cook, the first Black woman to serve on the central bank’s board of governors, and the probe into Powell are a dramatic escalation of the president’s efforts to control the Fed. Trump has repeatedly criticized the Fed for spurning his demands to slash interest rates more aggressively. By ousting Cook, the Republican president could potentially add another voice to the Fed’s board to try and shift interest rates in his favored direction.
The Supreme Court has overwhelmingly sided with Trump since he returned to office and it recently allowed him to fire members of other independent government boards. But it created a carve-out for the Fed in its ruling. Cook became a Fed governor in 2022 and was reappointed to the board in 2023. In a statement released after the hearing, she said the case “is about whether the Federal Reserve will set key interest rates guided by evidence and independent judgment or will succumb to political pressure.” – Chris Lefkow
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