STORY: The U.S. Federal Reserve faces the biggest test of its independence in more than a century.
On Wednesday (January 21), the Supreme Court will hear a case that could determine whether the president can fire the central bank’s governors at will, or whether the Fed remains insulated from political pressure, as Congress originally intended.
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The case stems from President Donald Trump’s attempt to remove Governor Lisa Cook over allegations she misrepresented information on a mortgage application.
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No charges have been filed, and Cook says the claims are a pretext, arguing that Trump targeted her over her stance on interest rates.
John Yoo is a law professor at the University of California, Berkeley:
“It’s undeniable that the decision that they make will not just affect our economy, that it will spill over into the rest of the world due to the central importance of the Fed and just the management of the global financial system.”
“In terms of the protections which Congress gave to the governors of the Fed, the governors of the Fed have this ‘for cause’ protection, which means they can’t be relieved of duty unless they’ve committed a crime, abused their powers, and maybe something equally as bad.”
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Under the Federal Reserve Act, governors can only be removed “for cause,” a term the law never defined, leaving room for the administration to argue that the president decides what qualifies.
Legal experts say the Supreme Court could set a clearer standard, requiring evidence of serious misconduct — a compromise that avoids dismantling the Fed’s longstanding protections.
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Cook has sued to keep her seat, and a lower court ruled she could stay pending review.
Trump appealed, sending the fight to the Supreme Court — where the outcome could reshape not just the Fed, but the balance of power over U.S. monetary policy.