There did not appear to be five votes among the justices to embrace Trump’s radical assertion of executive power over the nation’s central bank. The Fed’s political independence has been a cornerstone of American economic stability and foreign confidence in U.S. markets over the past century.
“It incentivizes a president to come up with what, as the Federal Reserve former governors say, [are] trivial or inconsequential or old allegations that are very difficult to disprove,” he told Sauer, referring to a friend-of-the-court brief filed by past Federal Reserve chairs. “It incentivizes kind of the search and destroy [to] find something and just put that on a piece of paper—no judicial review, no process, nothing, you’re done.”
Since his first term, Trump has frequently pushed the Fed to adopt a looser monetary policy with lower interest rates. At one point in 2019, Trump publicly suggested that Jerome Powell, the chairman of the Fed whom Trump had appointed two years earlier, might be a greater enemy of the United States than Chinese President Xi Jinping.
The Supreme Court, for its part, helped Trump seize control of those agencies through its embrace of the unitary executive theory, which generally holds that the president has untrammeled authority over the executive branch. To that end, the court has allowed Trump and his subordinates to make sweeping changes to federal agencies like USAID and the Department of Education. It also allowed him to overcome provisions in federal law that only allow certain officials to be removed for cause.
The NLRB plaintiffs warned the court in their briefs that ruling against them could imperil the Fed’s independence as well. “We disagree,” the court wrote in its unsigned order allowing the dismissals to take effect. “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” In other words, the court had signaled that it would not be as deferential if Trump targeted the Fed.
“In light of your deceitful and potentially criminal conduct in a financial matter, [the American people] cannot and I do not have such confidence in your integrity,” Trump said in his letter to Cook. “At a minimum, the conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator.”
There is good reason to believe that the allegations against Cook are pretextual. In addition to the obvious nature of Trump’s attacks, news outlets have reported that other bank documents contradict Trump’s allegations of fraud. Federal prosecutors brought criminal charges against Cook last fall, but a federal judge dismissed them after ruling that Lindsey Halligan, the acting U.S. attorney for eastern Virginia who was handpicked to pursue the case, had been unlawfully appointed.
Chief Justice John Roberts, who is normally a proponent of the unitary executive, tried to throw Sauer a lifeline of sorts in the first few minutes of Wednesday’s argument. “You began by talking about deceit,” he told the solicitor general. “Does what you said after that apply in the case of an inadvertent mistake contradicted by other documents in the record?” That would give the court an opening to rule in Cook’s favor without addressing the scope of executive power more directly.
Even Justice Samuel Alito, who otherwise seemed to lean towards the administration’s view, seemed to take issue with how it had handled the matter. “No court has ever explored those facts,” he told Sauer. “Are the mortgage applications even in the record in this case?” Sauer replied that the “text of the [Trump] social media post that screenshots the mortgage applications is in the record.” In response, Alito observed that the purported investigation into wrongdoing by Cook had been done in a “very cursory manner.”
“I think the Court has to weigh that risk against the risk that there will be a permanent damage to the Federal Reserve’s credibility from allowing an officer, a governor, to remain in office who’s engaged in this kind of behavior before she came in office,” Sauer eventually replied. But that only led Barrett to question whether the seriousness of the alleged offense should play a role as well. “If she were accused of murder or something like that,” she asked, “if we’re talking about something that was really an infamous crime, should we take the nature of the crime into account?”
Some justices questioned whether Cook had been afforded proper due process to respond to the allegations. “Was Ms. Cook given the opportunity in some sort of formal proceeding to contest that evidence or explain it?” Justice Ketanji Brown Jackson asked Sauer.
“Like, she was supposed to post about it and that was the oppourntiy to be heard?” Jackson asked. “Yeah,” Sauer confirmed, indicating that the legal mechanism for removing a central-bank governor was meant to be satisfied by a Twitter post.
By the end of Wednesday’s oral arguments, the court appeared to coalesce around rejecting Trump’s bid to remove Cook. It’s unclear how far the ruling will go to enshrine the Fed’s independence or what conditions it will require before removing one of its governors for cause in the future. For now, however, it appears that the court will deliver a significant blow to Trump’s campaign to seize control of the nation’s monetary policy—and with it, the basic health of the American economy.
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