Tampering with the Federal Reserve’s independence proved to be a bridge too far.
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The U.S. Supreme Court ruled on Monday that President Donald Trump’s “purported” firing of Federal Reserve Board member Lisa Cook last summer was improper, in yet another blow to Trump’s yearslong effort to emasculate the world’s most important central bank.
Interestingly, the court also issued a ruling in a separate case upholding Trump’s ability to fire members of a different body: the Federal Trade Commission. That ruling overturned nearly a century-old legal precedent.
The U.S. Supreme Court ruled on Monday that President Donald Trump’s “purported” firing of Federal Reserve Board member Lisa Cook last summer was improper, in yet another blow to Trump’s yearslong effort to emasculate the world’s most important central bank.
Interestingly, the court also issued a ruling in a separate case upholding Trump’s ability to fire members of a different body: the Federal Trade Commission. That ruling overturned nearly a century-old legal precedent.
Yet the contrast between the two rulings is not an accident: It’s precisely because the U.S. Federal Reserve is, by statute and tradition, a very special creation. It also matters a lot in terms of the fate of the U.S. and global economies.
“Not only the fact of independence but also the appearance of independence is key to the Federal Reserve’s design,” wrote Chief Justice John Roberts in the majority opinion in the Cook case.
The backstory: Last August, Trump ramped up his war on the Federal Reserve after years of frustration that it wasn’t lowering interest rates like he wanted to goose economic growth. (They were not lower because inflation wasn’t either.) He unleashed lawfare against then-Federal Reserve Chair Jerome Powell and tried to get him to quit, but Powell saw out his term this spring, when he was replaced by a Trump appointee.
In the meantime, Trump wanted to further stack the deck by removing what he saw as troublesome Federal Reserve governors who were on Powell’s side. Bill Pulte, Trump’s housing administrator, found a way to allege that Cook, a Fed governor with a term guaranteed until 2038, had committed mortgage fraud. That tactic is a favorite of his—he also used it against Letitia James, the New York state attorney general who investigated Trump for some of his financial dealings. (Pulte is currently Trump’s nominee to oversee the entire U.S. intelligence community.)
Trump fired Cook, citing the mortgage fraud allegations. Cook denied the allegations and filed a lawsuit challenging the firing, and a lower federal court ruled that she could keep her job while that lawsuit played out in court. The Trump administration then asked the Supreme Court to stay that ruling and allow her firing to go through.
The Supreme Court rejected the request, ruling that the administration had overreached in firing her without due process, and that she was afforded those protections specifically because the Federal Reserve is different from other federal agencies and always has been. There were U.S. national banks in the old days, and in the early 20th century an actual one, after the Federal Reserve was created to bring U.S. financial stewardship up to the level that Europe achieved in the 17th century. They were all ring-fenced to shepherd the economy free from political interference.
“The protection from removal enjoyed by Governors of the Federal Reserve is consistent with the Constitution. The Founders knew from experience the calamities that could arise from even the ‘suspicion’ of political manipulation of monetary policy,” Roberts wrote in the majority opinion.
The opinion was surprisingly close, given the contentious oral arguments in January. The three liberal judges, joined by Justices Brett Kavanaugh and John Roberts, overcame the dissents of the conservative judges, led by Justice Clarence Thomas.
But it was Kavanaugh who put it most concisely, in his concurrence with the majority opinion.
“Even temporary uncertainty about the status of the Federal Reserve could spark political upheaval, including confusion about whether the President could immediately remove multiple Governors at will, as well as turmoil in the U. S. and world economies. I would not go down that road,” Kavanaugh wrote.
The dissenting judges had their say, but at the end of the day, the majority ruled that a special institution—the lighthouse guiding all the ships of the economic world—merits special treatment, because that was how it was born and what it was meant to be. Importantly, Roberts did write in a footnote that the ruling does not forbid Trump from trying again to fire Cook if he wants; however, if he did so, she would be entitled to seek judicial review according to the procedures laid out in the ruling.
“We see no reason to leave the public in limbo, or to sow doubt as to the status of one of our Nation’s (and the world’s) most important financial institutions. Although we appreciate that others may see matters differently, we would not so quickly unsettle this ‘special arrangement’ sanctioned by history,” Roberts wrote in the majority opinion.
Keith Johnson is a staff writer at Foreign Policy covering geoeconomics and energy. Bluesky: @kfj-fp.bsky.social X: @KFJ_FP
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