The US Supreme Court on Monday ruled in a 5-4 decision that Federal Reserve governor Lisa Cook can continue serving on the Board of Governors, hobbling President Trump’s effort to remove her.
Trump fired Cook, the first Black woman to serve as a Fed governor, last August, claiming she committed mortgage fraud by making misrepresentations on loan documents years before her appointment to the central bank. Cook, a Biden appointee, denied any wrongdoing and sued.
The technical matter before the court was whether Cook should be allowed to remain in her position while her lawsuit against Trump moves forward.
“The Court rejects the Government’s halfhearted contention that Cook in fact received due process. At minimum, Cook was entitled to some explanation of the evidence at issue, some avenue for a response,” the opinion said.
The majority opinion was written by Chief Justice John Roberts and joined by the court’s three liberal justices — Sonya Sotomayor, Elena Kagan, Ketanji Brown Jackson — as well as Trump appointee Brett Kavanaugh.
The ruling is the court’s most definitive defense yet of Federal Reserve independence. In a separate case on Monday, the conservative majority held that the president has wide power to remove other independent regulatory heads. But it effectively said the Fed is different.
Read more: How much control does the president have over the Fed and interest rates?
“Not only the fact of independence but also the appearance of independence is key to the Federal Reserve’s design,'” the justices wrote.
Section 10 of the Federal Reserve Act states that each member of the board shall hold office for 14 years unless sooner removed for cause by the president. The statute does not detail what constitutes “for cause.” That term has been interpreted in legal rulings to mean inefficiency, neglect of duty, or malfeasance.
On the statutory question of whether the president can remove a member of the Federal Reserve for alleged wrongdoing and without providing her an opportunity to respond, the justices wrote that to accept any one of the Trump administration’s arguments “would in effect transform the Federal Reserve’s for-cause protection into at-will employment — an interpretive leap out of step with the statute Congress enacted and our Nation’s tradition of central banking protected from political interference.”
The justices said that whether a governor should be “removed for cause” is a decision only the president can make, but that does not mean he may make it for any reason, or no reason. Any definition of “cause” in this context must reflect the Fed’s unique historical status and role.
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