The US supreme court is hearing oral arguments over Donald Trump’s bid to fire a Federal Reserve governor this morning, as his administration continues its extraordinary campaign for control over the central bank.
The US president tried to fire Lisa Cook in August over apparent discrepancies on mortgage applications Trump’s officials claim are evidence of fraud.
A federal court blocked Cook’s removal, and she remains on the Fed’s rate-setting board. The supreme court’s decision on the case will test the limit of Trump’s powers as leader of the executive branch.
The Trump administration is waging an unprecedented battle with the Fed over interest rates, after policymakers defied the president’s repeated calls for drastic cuts.
The Department of Justice has been widely criticized this month for launching a criminal investigation into Jerome Powell, the US central bank’s chairman. While it is pursuing Powell over renovations to the Fed’s historic office buildings in Washington DC, he has argued he is being targeted for not “following the preferences of the president”.
Powell plans to attend Wednesday’s hearing at the supreme court in person, according to reports.
Trump’s attempt to remove Cook last summer marked the first time in US history that a president fired a sitting Fed governor. She was appointed by Joe Biden in 2022, becoming the first woman of color to serve on the Fed’s board. Her term is set to be completed in 2038, as Fed governors serve 14-year terms.
The administration has alleged that Cook committed mortgage fraud by misrepresenting multiple properties as her primary residence to get a better mortgage rate – an accusation which initially came from Bill Pulte, a close Trump ally and head of the Federal Housing Finance Agency, who has instigated similar investigations against others, including the New York attorney general, Letitia James, and Democrat senator Adam Schiff.
Cook’s lawyers have accused the administration of “cherry-picking” information, and argued that Cook accurately listed her property on other loan documents. The discrepancy the administration is focused on is an “isolated notation”, they have said.
Beyond the accused mortgage fraud, Cook’s lawyers are arguing that Fed governors can only be fired “for cause”, and that the Fed governor was denied due process in violation of the US constitution’s fifth amendment.
Trump as president has enjoyed wielding seemingly unlimited power from the executive branch, including allowing the so-called Department of Government Efficiency to fire tens of thousands of federal workers and defund programs across the government.
But this case is set to test his limits. Last spring, supreme court justices briefly mentioned the Fed in an unrelated ruling around two labor officials Trump had fired. “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” they wrote.
Legal experts believe that the note suggests, softly, that the court may give special protections to the Fed, and its officials, that are not granted to other government agencies.
Congress created the Fed in 1913 and gave it a unique structure that made it more independent than other parts of the executive branch. It does not receive funding directly from Congress. Its Federal Open Market Committee sets interest rates at eight scheduled meetings a year.
Economic research has shown that a truly non-partisan central bank, unswayed by politics, is essential in keeping economies and markets stable. That has not stopped Trump from embarking on a public campaign to get Fed officials to lower rates, a move he says would accelerate growth.
The president has repeatedly made public attacks against Powell, who he has called “a stupid person”, and last spring privately told advisers that he wanted to fire Powell. While Trump backed down when markets dipped at news that he could fire Powell, he continued his relentless campaign.
Fed officials have resisted playing along with Trump’s desired agenda. The Fed has what it calls a “dual mandate” to manage inflation and unemployment. Raising interest rates can stabilize high prices at the risk of causing unemployment.
Out of the eight rate-setting meetings the Fed held last year, economists lowered rates at only three of them, bringing rates down to a range of 3.5% to 3.75%. Fed officials, including Powell, have cautioned that Trump’s policies, including mass deportations and increased tariffs, have been influencing prices and the labor market, and increasing uncertainty in the economy.
