Supreme Court casts doubt on Trump’s firing of Fed Governor Lisa Cook

The Supreme Court expressed worry over President Trump’s firing of Federal Reserve Governor Lisa Cook, suggesting Wednesday that the move undermines the independence of the central bank and would invite retaliation by future presidents.

Justices across the ideological spectrum said they were concerned by the short shrift Mr. Trump gave to Ms. Cook: firing her with a social media post, denying her any chance to challenge the ouster as unfair or illegal, and then arguing that the courts had little role in refereeing the matter at the moment.

“That would weaken, if not shatter, the independence of the Federal Reserve,” said Justice Brett M. Kavanaugh, one of Mr. Trump’s appointees. “If this were set as a precedent, it seems to me, just thinking big picture, what goes around comes around.”

With Fed Chairman Jerome Powell in the audience, the justices repeatedly cited the unprecedented nature of the firing — the first time in 112 years that a president has found cause to boot a member from the Fed’s Board of Governors.

U.S. Solicitor General D. John Sauer said the malfeasance Ms. Cook is accused of — errors in claiming two primary residences, one in Michigan and one in Georgia, on mortgage applications — undermines the credibility of the Fed.

He said Mr. Trump was right to take action in a case where “there’s the appearance of playing fast and loose, or at least being grossly negligent, in getting favorable interest rates for herself.”

“What’s the message for ordinary Americans?” he told the justices. “The American people should not have their interest rates determined by someone who exercised gross negligence.”

The case is the latest in a string of lawsuits challenging Mr. Trump’s use of firing powers. The high court has been deferential in other instances in which the president has axed employees over policy differences at so-called independent agencies such as the National Labor Relations Board and the Federal Trade Commission.

Ms. Cook’s case is different. Mr. Trump said he had good cause to fire her, namely, the mortgage application errors.

Justices raised a host of questions about that. They wondered whether those errors, made on applications before she was appointed to the Fed, and not directly related to any actions taken at the Board of Governors, rose to the level of malfeasance necessary under the law Congress wrote.

“The president called it gross negligence. Who decides that issue?” said Justice Sonia Sotomayor, an Obama appointee to the court.

Justices also wondered whether Mr. Trump’s firing by Truth Social post, without hearing from Ms. Cook, was sufficient due process.

“He’s provided adequate process,” Mr. Sauer responded.

Several justices suggested the case was rushed to the high court too quickly. Justice Samuel A. Alito Jr., a George W. Bush appointee, questioned whether the mortgage applications at issue were even part of the record in the case.

Mr. Sauer, in a moment emblematic of the Trump presidency and judges’ reaction, said the record does include a social media post with screenshots of the applications.

Justice Alito was nonplussed.

“Is there any reason why this whole matter had to be handled by everybody — by the executive branch, by the district court, by the D.C. Circuit — in such a hurried manner?” he said. “No court has ever explored those facts.”

Justice Kavanaugh said that if a president could carry out a firing in the way Mr. Trump has, it might undermine the for-cause restrictions Congress wrote into the law. He said presidents would seek “trivial” offenses to justify for-cause firings of those who disagreed with the White House on interest rate policy.

“It incentivizes a kind of search and destroy,” he said. “What are we doing when we have a system that incentivizes that?”

Justice Amy Coney Barrett, a Trump appointee, pointed to filings in the case by economists who warned that a president’s firings at the Fed could trigger a recession.

Mr. Sauer countered that stock markets rose on the three days after Mr. Trump’s announcement of Ms. Cook’s firing in August and dismissed economists as “elite opinion.”

“There’s a risk, General Sauer,” Justice Barrett countered.

Ms. Cook, in a statement after the case was heard, said the outcome will determine whether the Federal Reserve can remain free of presidential pressure.

“For as long as I serve at the Federal Reserve, I will uphold the principle of political independence in service to the American people,” she said.

The specific issue before the high court is whether Ms. Cook can remain on the job while the case continues to develop in lower courts. The justices previously said she could, at least until they gave the matter a fuller hearing.

Both Democratic and Republican appointees wondered what harm it would do to Mr. Trump to let Ms. Cook stay on for now. They pointed out that Mr. Trump isn’t arguing Ms. Cook is undermining him, since Mr. Sauer conceded the removal wasn’t over policy differences.

“I’m not sure we have evidence here that Ms. Cook is an immediate threat to the public,” said Justice Ketanji Brown Jackson, a Biden appointee.

Paul Clement, Ms. Cook’s attorney in Wednesday’s argument, said the mortgage application errors were “at most an inadvertent mistake” and not the deceit or fraud the administration has suggested.

He said the president prejudged the issue by first posting on Truth Social that Ms. Cook should resign and two days later adding, “Resign or be fired!”

“The president can’t be the final decision maker,” Mr. Clement said. “You can’t start by prejudging the issue.”

In addition to the removal fight, Ms. Cook has been referred to the Justice Department for investigation over her mortgage form.

President Biden nominated Ms. Cook to the Board of Governors in 2022, and she was confirmed on a 51-50 vote, with Vice President Kamala Harris breaking the tie.

Ms. Cook was the first Black woman to reach that body.

Republicans argued at the time that Ms. Cook, a professor of economics at Michigan State University, lacked relevant experience in interest rate policy.

She was confirmed to a full 14-year term in 2023 on a 51-47 vote.