Supreme Court Denies Trump's Immediate Bid to Remove Fed Governor Cook

Supreme Court Denial Hinders Trump's Efforts to Control the Fed

The U.S. Supreme Court's denial of former President Donald Trump's request to immediately remove Federal Reserve Governor Michelle Cook represents a significant setback to his efforts to exert control over the central bank. Cook is fighting a legal battle to retain her position, claiming her dismissal is unlawful. The order issued on Wednesday means Cook will remain in her position at least until next January, as judges are scheduled to hear arguments in the case before making a decision. The economist has insisted on staying in office since Trump dismissed her in late August over mortgage fraud allegations she denies. The Court stated that it would delay action on Trump's request to remove Cook while the Justice Department considers an appeal of a lower court ruling that she is likely to win a lawsuit over her dismissal. No judge dissented from the order. Throughout this year, the Supreme Court has largely sided with Trump in cases where he sought to remove officials from various federal agencies. But Cook's case carries particularly high stakes, as the Federal Reserve's independence has historically been viewed as critical to its role in maintaining economic stability. In a statement, White House spokesperson Kush Desai said, "President Trump has removed Cook from office for cause and according to law. We look forward to achieving a final victory after presenting our oral arguments to the Supreme Court in January." Abbe Lowell, Cook's lead attorney from Lowell & Associates, and Norm Eisen, executive chairman of the Democracy Defender Fund, said in a statement, "The Court's decision rightly allows Governor Cook to continue to perform her duties at the Federal Reserve Board, and we look forward to further proceedings in accordance with the Court's order." The Federal Reserve declined to comment on the matter. The Federal Reserve has a legal office independent of the Department of Justice, and it has not taken sides in this dispute and has informed the judges that it will respect any final decision. The Federal Reserve is scheduled to hold its next meeting on October 28-29 to vote on whether to lower interest rates further. Tim Mahedy, a former senior advisor at the Federal Reserve Bank of San Francisco, said, "This is far from over, but for now, this is a victory for the independence of the Federal Reserve. It's kind of like kicking the can down the road, and we still need to address this issue in January." The court battle over Cook's position at the Federal Reserve unfolded rapidly before the Fed's September monetary policy meeting. A lower court allowed Cook to attend the meeting, where she voted to lower interest rates by 25 basis points. After the meeting, the Justice Department asked the Supreme Court to intervene. Trump's desire to quickly reshape the Federal Reserve is the reason a group of former Federal Reserve and Treasury officials recently appealed to the judges in an "amicus brief," urging them to allow Cook to remain in office, noting that a large number of studies have shown that countries with independent central banks consistently achieve better economic outcomes.

FTC Commissioner Dismissal Case

Earlier in September, the Supreme Court announced that it would hear a case challenging Trump's dismissal of Federal Trade Commission (FTC) member Rebecca Kelly Slaughter, which has potential implications for Cook's case because the judges stated that one of the questions they would consider is whether a federal judge has the right to prevent a public official from being removed. The court will hear arguments in the case in early December. The timeline for Cook's case indicates that the judges want to carefully consider the FTC case before turning their attention to Trump's request to remove the Federal Reserve governor. Trump announced Cook's dismissal in August after Federal Housing Finance Agency Director Bill Pulte accused her of fraudulently listing homes in Michigan and Georgia as her "primary residence" in 2021 to obtain more favorable loan terms. Cook's lawyers have denied that she committed mortgage fraud. Some media outlets previously reported that loan documents for Cook's Georgia home appeared to contradict Pulte's claims, as the documents showed that she told the lender that the property was a vacation home.

Dismissal "For Cause"

Cook filed a lawsuit in August, making two main claims. First, Trump failed to give her formal notice of the charges against her and an opportunity to defend herself before being dismissed, violating her due process rights. Second, Trump's basis for dismissing her—the fraud allegations—violates the Federal Reserve Act, which states that governors can only be removed "for cause." U.S. District Judge Jia Cobb supported Cook in an opinion issued in September, saying she was likely to win the case and granted a preliminary injunction preventing her dismissal while her case proceeded. The Justice Department asked the U.S. Court of Appeals for the District of Columbia Circuit to take swift action before the Federal Reserve policy meeting. A divided appeals panel voted 2-1 to reject the government's request one day before the meeting, a decision that meant Cook could attend the meeting. The day after the meeting, U.S. Deputy Attorney General D. John Sauer filed an emergency petition to the judges. He wrote that Cobb's injunction represented "another case of inappropriate judicial interference in the President's power to remove." He also argued that as long as the President's basis for removing a Federal Reserve governor is not clearly a "policy disagreement," the judges do not have the right to review the President's decision to remove a Federal Reserve governor. Cook claims that Trump's attempt to dismiss her is part of a pattern of politically motivated moves. Trump had previously considered dismissing Federal Reserve Chairman Powell for not lowering interest rates quickly enough. Her lawyers argued in a Supreme Court brief that even temporarily changing the status quo could "cause serious damage to the U.S. economy." This case was not just about the future of Michelle Cook, but also a crucial test of the independence of the Federal Reserve system, a fundamental institution for financial and economic stability in the United States. This ongoing conflict reminds us of the importance of maintaining the separation of politics and monetary policy. Economists often debate the appropriate level of independence for central banks, weighing the benefits of insulating monetary policy decisions from political influence against the need for democratic accountability. The specific circumstances of Cook's case raise questions about the extent to which a president can remove a Fed governor based on allegations of misconduct, and what constitutes sufficient 'cause' for such a removal.