Supreme court to weigh Fed independence
Case could redefine presidential power over central bank governors
The Supreme Court is set to resolve a high-stakes dispute over presidential authority to remove Federal Reserve governors, a case that could fundamentally reshape the central bank’s independence and the balance of power over U.S. monetary policy. The litigation arose after President Donald Trump sought to remove Fed Governor Lisa Cook over allegations she misrepresented information on a mortgage application; no charges have been filed and Cook says the accusations are a pretext tied to disagreements over interest rates. A lower court allowed Cook to remain in her seat pending review, and the administration appealed.
Under the Federal Reserve Act, governors may be removed only “for cause,” a term left undefined by Congress. The administration argues that the president determines what constitutes cause, a position critics say would reduce statutory protections to near at-will removal. Legal scholars and Fed officials warn that such an outcome could politicize interest-rate setting and other monetary decisions, undermining market confidence and potentially affecting the global financial system.
Observers see several possible judicial paths: the court could uphold broad presidential removal power, significantly curtailing longstanding safeguards; or it could define a stricter “for cause” standard — for example, requiring proof of crime, abuse of authority, or severe misconduct — and remand the case for application of that test, preserving much of the Fed’s insulation.
Cook and Fed Chair Jerome Powell contend the move to oust her stems from White House frustration with persistently high interest rates; the administration has also publicly criticized Powell and opened a probe into his congressional testimony about Fed building renovations. A ruling that narrows removal protections could set a sweeping precedent affecting other independent agencies; a decision reinforcing “for cause” limits would preserve the institutional autonomy that has guided U.S. monetary policy for decades.
The court’s decision is being watched closely by policymakers, financial markets and international observers for its potential to alter how monetary policy is insulated from partisan pressures and to redefine executive control over independent regulators.
