WASHINGTON — Tackling an issue with huge ramifications for both the economy and the structure of government, the Supreme Court on Wednesday appeared unlikely to greenlight President Donald Trump's attempt to oust Federal Reserve board member Lisa Cook.
With Trump seeking to exert control over the central bank, which, among other things, sets interest rates, the case has taken on even greater importance after it emerged that the Justice Department is investigating Federal Reserve Chair Jerome Powell.
During two hours of oral argument on whether Trump can immediately fire Cook, both conservative and liberal justices appeared sympathetic to the idea that she should have some ability to challenge Trump’s move.
Federal Reserve board members, by law, can be fired only “for cause,” which requires some showing of wrongdoing. After he fired her, Trump cited allegations of mortgage fraud, which Cook has denied. Bank documents obtained by NBC News appear to contradict the fraud claim.
Some justices suggested the court could go further than to simply deny the emergency application filed by the Trump administration, which would allow litigation to continue in lower courts. Instead, the court could issue a decision that sets a legal standard for "for cause" removal that Trump's claims do not meet.
Congress set up the Federal Reserve to be independent, so it would not be influenced by immediate political concerns in fulfilling its mandate to maintain price stability and low unemployment.
Trump's lawyers have taken the position that his firing decision, made by a social media post, requires no process and cannot be reviewed by courts.
But as conservative Justice Brett Kavanaugh pointed out, if there is no review and the president can do whatever he wants, that would effectively nullify the "for cause" restrictions.
"That would weaken, if not shatter, the independence of the Fed," he said.
Chief Justice John Roberts, a fellow conservative, made a similar point.
Justice Amy Coney Barrett, another member of the conservative majority, expressed concerns about the risk of a hasty decision, citing the potential impact on markets.
"If there is a risk, doesn't that counsel ... caution on our part?" she asked Trump's lawyer, Solicitor General D. John Sauer.
The court's liberals also seemed sympathetic to Cook's argument that, at a minimum, the administration has to do more to show it is harmed by Cook's remaining in office while the case proceeds.
"I'm not sure we have evidence here that Ms. Cook is an immediate threat to the public," Justice Ketanji Brown Jackson said.
Justices debated at length what kind of process Cook should be afforded, with Sauer pushing for a minimalist proceeding and some members of the court pushing for more.
Conservative Justice Neil Gorsuch at one point discussed with Sauer a hypothetical White House meeting with Trump that had echoes of "The Apprentice," Trump's former reality TV show.
"Just a meeting across a conference table, finished with 'you're fired?'" Gorsuch said in questioning whether that was sufficient.
Jackson also touched upon Trump's use of social media to announce the firing, questioning Sauer about whether, based on the White House's insistence that no hearing is necessary, Cook's only means to respond would be "to post about it" herself.
Roberts appeared to be open to the idea of the court's probing further into whether Cook can be fired for cause for what he referred to as an "inadvertent mistake" and questioned the value of a White House meeting.
"There obviously are a lot of legal questions to be addressed, but again, those are questions for the court, a court, and not the basis for a factual hearing," Roberts said.
The Supreme Court in October refused to allow Trump to fire Cook immediately, instead scheduling oral arguments in the case, suggesting the administration may face an uphill battle over his claim that the decision to remove her cannot be challenged in court.
Cook's lawyers argue she should have notice and a chance to rebut Trump's stated reasons for firing her before she can be removed. They say Trump's rationale does not meet the threshold for "for cause" removal.
Sauer says in court papers that it is up to the president alone to decide whether the "for cause" hurdle is met under the powers allocated to him under the Constitution, he said.
Cook and Powell both attended Wednesday’s argument.
Trump has long been critical of the Fed, and Powell in particular, for not doing more to lower interest rates, even though he originally appointed Powell to the position in 2017.
Trump has not moved to fire Powell, though the Justice Department investigation, related to testimony Powell gave to Congress about refurbishments at the Fed's headquarters in Washington, could similarly give him a reason. Although Powell's term as chair ends in May, he could stay as a board member until 2028.
President Joe Biden appointed Cook to a term that ends in 2038.
The Trump administration's handling of Cook and Powell has raised alarm among former Fed officials and Trump critics who say the Federal Reserve must maintain its independence to be effective and fear it could be directly controlled by the White House.
Economists warn that lower rates in the short term to achieve Trump's political goals could have negative long-term consequences.
"This is how monetary policy is made in emerging markets with weak institutions, with highly negative consequences for inflation and the functioning of their economies more broadly," former Fed chairs and other former senior officials said in a joint statement issued in light of the Powell investigation.
Since he started his second term a year ago, Trump has waged war on what have previously been known as independent agencies set up by Congress to be protected from political influence by firing various members despite "for cause" protections, including the Federal Trade Commission and the National Labor Relations Board.
The Supreme Court has allowed those firings, but in a May decision, it suggested that the Federal Reserve might be treated differently. The court noted then that the Federal Reserve is a “uniquely structured, quasi-private entity” that has its own historical tradition.
In a separate case argued in December and not yet decided, the court is considering whether the "for cause" protections afforded to members of the FTC are unconstitutional. The court appears likely to rule in Trump's favor.
