The Supreme Court will hear oral arguments on Wednesday in the case around President Donald Trump’s bid to fire Federal Reserve Governor Lisa Cook over mortgage fraud allegations.
Cook denies any wrongdoing, and she hasn’t been charged with any crime. Federal Reserve Chair Jerome Powell is set to attend tomorrow’s session.
The question central to the case: Can a president remove a sitting Fed governor?
For more, “Marketplace Morning Report” host David Brancaccio spoke with Sarah Binder, a senior fellow at the Brookings Institution and a professor of political science at George Washington University. The following is an edited transcript of their conversation.
David Brancaccio: The Federal Reserve Act says that presidents can only remove governors for cause. Now, I know HR people around the country deal with “for cause” all the time. How do you understand that idea of firing for cause?
Sarah Binder: Well, when Congress writes that, its point is that the president has to have an actual, real, nonpolicy reason to dismiss an appointee, right? “Negligence,” “inefficiency in office” — those phrases go. The president just doesn’t have carte blanche to say, “I don’t like you. I don’t like your policy decisions.” That’s why Congress put that for cause phrase into many of the laws that set up these agencies.
Brancaccio: I mean, regardless of what one’s view is on the seriousness of the allegations against Lisa Cook, it is fact that they’re not proven yet.
Binder: Correct, and I think it’s important to keep in mind, this isn’t a case on the merits. It’s not about whether or not there was mortgage fraud here. The key question is, can the president remove Governor Cook while her legal case works its way through the federal courts?
Brancaccio: I mean, is it relevant that the court has, in a previous case, allowed President Trump to remove members of various other federal agencies that he does have latitude when we’re not talking about the Fed.
Binder: For sure, and in fact, the Supreme Court has basically given carte blanche to President Trump to remove all these other officers that he has fired from various agencies, and in these other cases, the court has kind of left these little breadcrumbs. They say there’s something unique and different about the Federal Reserve, and they’ve sort of suggested we might treat the effort to remove a governor from the Board of Governors of the Fed, we might treat that action by the president differently.
Brancaccio: I mean, if those breadcrumbs have led us astray here and the Court were to side with the administration on this, I guess we’d live in a world where the Fed is closer to, I don’t know, the National Security Council, where those members serve at the pleasure of the President. I mean, that idea will shake our central banking system.
Binder: Absolutely. And even though it’s a narrow legal question, it has potentially explosive implications for how the Fed governors make their decisions, but also — more importantly — what markets think about the Fed and their commitment to low inflation, and that’s why so many people are paying such attention.
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