Trump Gets Cooked In Supreme Court Arguments Over Federal Reserve Removal

President Donald Trump’s effort to seize control of the Federal Reserve by firing Governor Lisa Cook over bogus charges of mortgage fraud ran into a wall of opposition during arguments before the Supreme Court on Wednesday.

The justices, both conservative and liberal, repeatedly panned the administration’s argument that the president can fire a Federal Reserve Board governor “for cause” without any judicial review or due process for the accused. It was clear that, no matter the ideological position of the justice, they do not want to mess with the central bank’s independence.

The Federal Reserve would not be independent “if there is any level of cause” for removal, as the Trump administration argued, Chief Justice John Roberts said.

And that independence is exactly what’s at issue in this case. When Congress created the Federal Reserve, it made it independent of presidential control by restricting the removal of its Board of Governors to cause only. That means the president cannot fire a governor for policy reasons. No governor had been removed by a president for cause until Trump attempted to fire Cook.

Trump’s removal of Cook on trumped-up charges of mortgage fraud occurred amid his public pressure campaign to get the Fed to lower interest rates. It also comes as the Department of Justice announced a criminal investigation into Federal Reserve Chair Jerome Powell. This context indicates the allegations of mortgage fraud are really a pretext for Trump to seize control of the central bank.

Justice Brett Kavanaugh, nominated by Trump in 2018, got directly to this point when he pressed Solicitor General D. John Sauer on what he called the “real world” implications of Cook’s removal.

If the court sided with Sauer’s argument that the president can remove a Federal Reserve Board governor with “no process,” “no remedy,” and a “very low bar of for cause that the president alone determines,” he said, that would “weaken if not shatter the independence of the Federal Reserve.”

“It incentivizes a president to come up with … trivial or inconsequential or old allegations that are difficult to disprove,” Kavanaugh said.

Once unleashed, he said, these kinds of attacks could be used by any president of any party.

“What goes around comes around,” Kavanaugh said, quoting himself from his own confirmation hearing.

Sauer was left to merely respond that the court is supposed to provide a “presumption of regularity” to the president and not question his motive.

Kavanaugh stated he was only talking about a hypothetical future president. But the justice’s argument, whatever he claimed, fits the context of Cook’s removal.

Where Sauer had been treading water from the beginning of arguments, this left him fully submerged with no hope to resurface.

Sauer had already received a hostile reception from both Roberts and Justice Amy Coney Barrett, conservatives appointed by George W. Bush and Trump, respectively.

Roberts appeared aghast at Sauer’s argument that there could be no judicial review of for-cause removal in a situation like Cook’s. The chief justice argued that, under Sauer’s view, it “doesn’t make a difference” if Cook’s removal stemmed from an actual offense on her part or “an innocent mistake,” or a “devious way to get a lower interest rate.”

The Federal Reserve would not be independent “if there is any level of cause” for removal, Roberts said later.

Barrett, like Kavanaugh, raised the real-world implications of eliminating the central bank’s independence. A group of economists filed a brief in the case stating that such a move would cause a recession, Barrett pointed out. Shouldn’t the court consider the public interest?

With three conservative justices clearly questioning Trump’s arguments, there appeared to be little way forward for Cook’s removal. How the justices rule to restrain the president remains to be seen. There appeared to be two avenues to do so.

Since the case came before the court as an emergency application, the justices could send the case back to the lower courts for hearings on the merits. This would keep Cook in her office and enable the lower courts to judge the meaning of cause in a for-cause removal and whether a removed officer is provided due process to challenge that removal.

The other is for the justices to actually rule on these questions and end the case in its tracks by ruling that making an “inadvertent mistake,” as Roberts called the allegation against Cook, is not a fireable offense.