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Skeptical Supreme Court justices look poised to protect Fed independence
US Supreme Court justices expressed skepticism Wednesday of the Trump administration’s arguments for firing Federal Reserve governor Lisa Cook, cautioning that there are larger implications not just for the central bank and its independence but for government appointees more largely.
Through their questions, the justices signaled an intent to protect the Fed from political interference.
Trump fired Cook, the first Black woman to serve as a Fed governor, in August, claiming she committed mortgage fraud by making misrepresentations on loan documents. Cook, a Biden appointee, has denied any wrongdoing and sued the president. The technical matter before the justices Wednesday was whether Cook should be allowed to remain in her job while her lawsuit moves forward.
Read more: How much control does the president have over the Fed and interest rates?
But the justices also confronted the statutory question of whether the president can remove a member of the Federal Reserve for alleged wrongdoing before she came to office and without providing her an opportunity to respond to the allegations.
Section 10 of the Federal Reserve Act states that each member of the board shall hold office for 14 years unless sooner removed for cause by the president. The statute does not detail what constitutes “for cause.” That term has been interpreted in legal rulings to mean inefficiency, neglect of duty, or malfeasance. Those terms were dissected in numerous instances during Wednesday’s arguments.
Conservative Justice Brett Kavanaugh, who was nominated by President Trump during his first term, said that “a low bar ‘for cause’ would weaken if not shatter independence of the Fed.”
Kavanaugh took the notion of watering down “for cause” further, positing that it could set a new precedent that would have ripples not just for the Fed but for other appointees by future presidents.
“We have to be aware of what we’re doing and the consequences for the government,” Kavanaugh said.
Justice Amy Coney Barrett mentioned warnings from economists that removing Cook could trigger a recession.
“How should we think about the public interest in a case like this?” she asked the government’s lawyer, Solicitor General D. John Sauer.
Sauer said fears that removing Cook would tank markets were overblown, pointing to the three trading days in August directly after the president fired her.
Conservative Chief Justice John Roberts asked Sauer to explain whether his argument that Cook should be immediately removed applies if the basis of the mortgage allegations is an “inadvertent mistake contradicted by other documents in the record.”
