WASHINGTON, Dec 13 – The independence of the U.S. Federal Reserve is facing one of its most serious legal tests in decades as the Supreme Court prepares to hear arguments over President Donald Trump’s decision to remove Federal Reserve Governor Lisa Cook. The case has placed the nation’s central bank squarely at the center of a broader constitutional debate about presidential power, congressional authority, and the future of independent regulatory agencies.
Since returning to office in January, Trump has repeatedly pushed the boundaries of executive authority, often with the backing of the Supreme Court’s conservative majority. From immigration measures to federal workforce reductions and policy changes across multiple agencies, the court has frequently allowed Trump’s actions to proceed while legal challenges work their way through the system. Yet the Federal Reserve may represent a different line, one that even conservative justices appear hesitant to cross.
Arguments in the Cook case are scheduled for January 21, and the outcome could redefine the balance between political control and institutional independence in Washington. While the president argues that his decision was justified and lawful, critics warn that allowing such a move could undermine the credibility of the central bank and expose monetary policy to political pressure.
A Test of Presidential Power
At the heart of the dispute is Trump’s August decision to fire Lisa Cook, a Fed governor appointed by former President Joe Biden. Trump claimed he acted “for cause,” accusing Cook of mortgage fraud prior to her time in office. Cook has firmly denied the allegations, arguing that they were used as a pretext to remove her because of disagreements over monetary policy.
Under the law that created the Federal Reserve in 1913, governors are granted tenure protections similar to those enjoyed by commissioners at other independent agencies. They can be removed only for specific reasons such as inefficiency, neglect of duty, or malfeasance. These protections were designed to shield the central bank from political interference, particularly when it comes to sensitive decisions like interest rate policy and money supply management.
The Cook case follows closely on the heels of another major dispute involving Trump’s authority. Earlier this month, the Supreme Court heard arguments related to his firing of Rebecca Slaughter, a Democratic member of the Federal Trade Commission. In that case, Trump did not claim cause, instead openly stating that Slaughter did not align with his policy agenda.
During oral arguments, conservative justices appeared skeptical of the longstanding rule that limits a president’s ability to remove FTC commissioners. Many legal observers believe the court is poised to strike down or significantly weaken a 1914 law that established those protections, potentially overturning a Supreme Court precedent that has stood since 1935.
Such a ruling would give presidents broader power to remove leaders of independent agencies. However, the Federal Reserve complicates that picture. Unlike the FTC or the National Labor Relations Board, the Fed plays a direct role in managing the nation’s economy, and lawmakers across party lines have historically viewed its independence as essential.
In previous orders, the Supreme Court has suggested it sees the Fed differently. In May, when allowing Trump to remove a member of the National Labor Relations Board, the court explicitly stated that its decision should not be read as extending the same authority over Federal Reserve officials. The justices described the Fed as a uniquely structured institution with deep historical roots, distinct from other regulatory bodies.
Justice Brett Kavanaugh, in particular, has long acknowledged the special status of the central bank. Years before joining the Supreme Court, he wrote that insulating certain agencies from direct presidential control may be justified, citing the Federal Reserve as a prime example due to its ability to immediately influence economic conditions.
Why the Fed May Be Different
The concern over Fed independence has loomed large during recent court proceedings. During arguments in the Slaughter case, attorneys warned that adopting the administration’s legal theory could place the central bank “on the chopping block.” Justice Kavanaugh openly shared those concerns, pressing the administration’s lawyer on whether their arguments would weaken protections for Fed officials.
The administration responded by emphasizing that the Fed is unique and that Trump is not challenging its tenure protections as a general rule. Instead, officials argue that Cook’s removal was justified by alleged misconduct, not policy disagreement. This distinction, they say, separates the Cook case from disputes involving other agencies.
Legal experts are divided on whether this distinction will hold. Some believe the Supreme Court will carve out a special exception for the Federal Reserve, preserving its independence while allowing presidents greater control over other agencies. Others argue that such an approach lacks a clear constitutional principle and risks creating confusion in administrative law.
Supporters of Fed independence point to history, noting that since the nation’s founding, there has been a tradition of managing public debt and monetary policy through bodies that operate at arm’s length from the president. They argue that this tradition supports the idea that the Constitution allows, and perhaps even encourages, a degree of separation between politics and monetary decision making.
Critics counter that the Federal Reserve’s modern structure resembles that of other multi member commissions and that treating it differently is more a matter of preference than principle. They warn that selectively preserving Fed independence while dismantling protections elsewhere could invite future challenges and politicize institutions that were meant to remain neutral.
As the January arguments approach, one thing is clear. The Supreme Court is once again positioned to play a decisive role in shaping the scope of presidential authority. Whether it ultimately sides with Trump or draws a firm boundary around the Federal Reserve, the ruling will have lasting consequences for the balance of power in the federal government and for the stability of the U.S. financial system.