Trump’s Push To Control Fed Meets Resistance In Supreme Court

President Donald Trump’s effort to remove a Federal Reserve governor faced scrutiny on Wednesday when Supreme Court justices questioned his authority to fire Governor Lisa Cook. 

The Supreme Court heard oral arguments on Wednesday morning in a lawsuit brought by the Trump administration. In it, the administration asked the court to allow the president to fire Cook from her spot on the independent central bank’s governing board.

The White House is asking the court to overturn a lower court order allowing Cook to remain on the job while courts settle the Trump Administration’s accusation that Cook falsified documents on a mortgage application before she was a Fed governor.

The case raises questions about the central bank’s independence. The Fed was established by Congress to be outside the White House’s direct control. Economists, former Fed chairs, and other experts have warned that greater White House control could lead to pressure to lower interest rates for political reasons.

In countries where the central bank lacks independence, studies have shown that politically motivated rate cuts boost the economy with easy money in the short run but damage it in the long run by stoking inflation.

Several justices seemed to grapple with whether the Fed could remain independent, as Congress intended, if the president could remove Fed governors simply by accusing them of misconduct.

“What goes around comes around,” Kavanaugh said while questioning Solicitor General John Sauer, who represented the administration. “All the current president’s appointees would likely be removed for cause on Jan. 20, 2029, if there’s a Democratic president on Jan. 20, 2029, and then we’re really at ‘at-will’ removal. So, what are we doing here?”

Kavanaugh, who Trump appointed during his first term, said allowing the firing could “weaken if not shatter” the Fed’s independence.

The law allows the president to remove a Fed official “for cause,” and much of the hearing revolved around the legal meaning of those two words, and whether the accusations against Cook were enough “cause” to fire her if the accusations are true.

Federal Housing Finance Agency Director Bill Pulte sent Cook a letter in August, described as a “criminal referral,” alleging she incorrectly identified a vacation home as a primary residence, potentially helping her secure a more favorable mortgage rate. Cook, through her lawyer, Abe Lowell, has denied any fraud, saying it was a simple paperwork error corrected in other documents.

Following the hearing, prediction markets reduced their expectations that Cook would be dismissed from her job. As of Wednesday, prediction site Kalshi was pricing in a 13% chance she would be removed before January 2027, down from around 30% last week.

Some critics have argued that the allegations against Cook are part of a broader push by the administration to exert greater control over the Fed and to sharply lower interest rates.

Trump’s pressure campaign against the central bank has included broadsides in speeches and on social media. Most recently, the Justice Department opened an investigation into Fed Chair Jerome Powell over cost overruns in a headquarters renovation project.