Supreme Court victory for Fed still leaves it vulnerable to Trump
- The San Juan Daily Star
- 24 minutes ago
- 4 min read
By COLBY SMITH and TONY ROMM
Shortly after the Supreme Court blocked President Donald Trump from immediately ousting a sitting governor from the Federal Reserve, the president struck a defiant note, signaling he would not surrender his long-running fight to gain more sway over one of the most important stewards of the U.S. economy.
In the eyes of Trump, the 5-4 decision reached by the justices Monday amounted only to a legal setback, not an insurmountable defeat. Even as the court acknowledged the century-old tradition of political independence at the nation’s central bank, it did not totally foreclose on the president’s ability to try to dismiss its officials in the future.
On one hand, the court concluded that Trump had erred when he first tried to oust Lisa D. Cook, a Fed governor, over unsubstantiated allegations of mortgage fraud last year. Siding with a lower court, which had allowed Cook to remain in her role while the case played out, a majority of the justices said the Trump administration should have afforded Cook the formal ability to contest the accusations against her.
But the Supreme Court left much unresolved. The justices did not clearly articulate the full legal criteria that would allow Trump to fire Cook, who denies any wrongdoing and has never been charged with a crime. Nor did they wager an opinion on the exact allegations against her. And the court majority did not even prescribe the exact venue in which Cook should be allowed to respond to the allegations.
The president did not hesitate to seize on that legal ambiguity. In a social media post, he described the decision as merely a “procedural” matter and vowed to “take appropriate action immediately to make sure that someone who has committed wrongdoing will not be making vital decisions concerning the Welfare of the United States of America!”
The outcome left many legal scholars on edge, particularly given Trump’s well-documented desire to install more of his supporters at the top ranks of the central bank as part of his pursuit for lower borrowing costs.
“It may look to be an attempt to quiet the temptation by presidents to meddle with the Fed, but I read it in the opposite direction,” said Peter Conti-Brown, an expert on Fed governance at the University of Pennsylvania. “It’s an invitation for more meddling.”
He added: “This saga is not over.”
Cook still found reason to celebrate Monday, as she conveyed in a statement after the court’s decision.
“Today’s ruling affirms a principle that has underpinned sound economic stewardship for generations: that the Federal Reserve must make all its policy decisions guided by evidence and independent judgment, free from political interference,” Cook wrote. “I am grateful for this decision, not for my own sake, but for the sake of the American people, whose economic well-being depends on a central bank that answers to its mission, not political intimidation,” she added.
Those stakes loomed large over the Supreme Court as it wrestled with Trump’s power over the Fed, and they appeared to factor heavily into the opinion written by Chief Justice John Roberts.
The liberal and conservative justices at one point cited the “ruinous financial panics” that had dotted the nation’s history, as they acknowledged the importance of a central bank that can operate free from political influence. And they channeled the country’s founders as they spoke to “the calamities that could arise from even the ‘suspicion’ of political manipulation of monetary policy.”
In addition to allowing Cook to keep her job for the time being, the split decision shot down the Trump administration’s argument that judges had no power to review its decision to fire a Fed official. It also undercut the premise that the president had nearly limitless ability to determine the conditions that would warrant such a removal.
Roberts said a decision accepting the view of Trump and his aides “would allow the president to remove a member of the Federal Reserve at any time, for any reason, without any notice before, and without any judicial check after.” That, the opinion said, “would turn for-cause protection into little more than at-will employment.”
For Scott Alvarez, the former general counsel for the Fed, the decision Monday “helped to reinforce the court as a guardrail for Fed independence.” But it did not make the central bank impenetrable to further political encroachment.
For one, the Cook ruling was paired with a separate decision that vastly expanded the power of the executive branch by affirming Trump’s ability to fire all other independent regulators. In her dissent in Cook’s case, Justice Amy Coney Barrett said the decision to safeguard the Fed’s independence was “in serious tension” with the court’s ruling on the other agencies.
By invalidating the independence of those agencies, said Kathryn Judge, a Columbia Law School professor who was a Supreme Court law clerk for Justice Stephen Breyer, the central bank’s claim to that autonomy was more “precarious” given that for the last 90 years, “the Fed’s independence has really grown alongside the independence of other agencies.”
“There’s a path forward for the Fed to maintain meaningful independence, but it’s going to require more work to justify that independence in a way that really distinguishes it,” Judge added.
By leaving so many questions unanswered, the court gave Trump an opening to keep fighting, even if it is clear a majority does not want him to keep interfering with the Fed.
“This punt to the future is mostly a hope that the Trump administration and successive administrations will abandon this effort to meddle with the Federal Reserve,” Conti-Brown said.