Supreme Court hears case on Trump's attempt to control Federal Reserve

Geoff Bennett:

The U.S. Supreme Court heard arguments today in a landmark legal battle centered on President Trump's efforts to shape the Federal Reserve in his image.

Our justice correspondent Ali Rogin has more on the case that could threaten the independence of the nation's Central Bank -- Ali.

Ali Rogin:

Geoff, you may recall it was a key moment in the president's standoff with the Federal Reserve. Back in August, President Trump posted on his social media platform that he was firing one of the Central Bank's governors, Lisa Cook, alleging she'd committed mortgage fraud.

But Cook, who was appointed by President Biden, sued Trump to block her removal, claiming her firing was illegal, and lower courts have blocked her dismissal. A majority of the justices had tough questions today for Solicitor General John Sauer, expressing skepticism about the rushed nature of the case and Cook's lack of recourse.

Samuel Alito, U.S. Supreme Court Associate Justice:

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?

Ketanji Brown Jackson, U.S. Supreme Court Associate Justice:

Was Ms. Cook given the opportunity in some sort of formal proceeding to contest that evidence or explain it?

D. John Sauer, U.S. Solicitor General:

Not a formal proceeding. She was given an opportunity in public because she was notified.

Ketanji Brown Jackson:

In the world?

D. John Sauer:

Yes.

Ketanji Brown Jackson:

Like, she was supposed to post about it, and that was the opportunity to be heard?

Ali Rogin:

The case comes as the Trump administration has moved to exert greater control over the Federal Reserve. This month, the Justice Department opened a criminal investigation into Chairman Jerome Powell over comments he made to Congress about a building project.

For analysis on today's argument, we're joined now by "News Hour" Supreme Court analyst and SCOTUSblog co-founder Amy Howe and David Wessel, director at the Hutchins Center on Fiscal and Monetary Policy at the Brookings institute.

Thank you so much, both of you for being here.

Amy, this case has massive implications for the independence of the Federal Reserve. What were the key questions that were being looked at today and what are your major takeaways?

Amy Howe:

So the key questions -- I mean, as a really technical matter, the questions before the justices was simply whether to leave in place an order by a federal judge in Washington, D.C., that leaves Lisa Cook in office.

This case came to the Supreme Court on its emergency docket. The Trump administration was seeking permission to fire Cook and asking the justices to put this order by U.S. District Judge Jia Cobb on hold. And after nearly two hours of oral arguments today, the justices seemed inclined to leave Cook in office, to turn down the Trump administration's request to pause Cobb's order.

The real question is how they are going to do it. Are they going to just send the case back to the lower courts and let the litigation play out there? Or are they going to try to resolve some of the thorny issues that are in play, things like what does it mean for the president to fire someone for cause? Can courts review a president's determination that he has fired a governor of the Federal Board -- Federal Reserve Board for cause?

What kind of process is someone entitled to before she can be fired? And the justices really sort of weren't sure. Several of them seemed inclined to send the case back to the lower courts. Chief Justice John Roberts, on the other hand, seemed to suggest that the court maybe should go ahead and decide the case right now.

Ali Rogin:

Yes, it was interesting, David. Some of the conservative justices seemed to engage in some of those thorny questions that Amy was talking about.

Justice Kavanaugh raised concerns about what this attempted dismissal code means for the Fed's independence. He said that, if the president alone can determine whether somebody can be removed for cause and what that cause is, that that could -- quote -- "weaken, if not shatter the independence of the Fed."

Why is the independence of this body so important?

David Wessel, Brookings Institution:

So the argument is that politicians, if they set interest rates, will tend to sit them too low in order to get more growth now and at the cost of more inflation later.

And so the U.S. and other major capitalist democracies have decided it would be better to have an independent Central Bank that is insulated from that political pressure. The Fed has a mandate set by Congress, maximum employment and price stability. And Congress has said, you guys decide what's the best interest rate to achieve that goal.

Ali Rogin:

And we have heard from a number of bankers, economists had written briefs in favor of Lisa Cook today, saying why this would be such a bad idea.

Why is there so much concern now over the firing for cause of just this one person on the Board of Governors?

David Wessel:

If President Trump gets his way, he will be able to fire any Fed governor for anything he deems is cause. The administration argues that the courts can't even review that.

So, for instance, his attacks on Jay Powell, the Fed chair, over the building, the Fed's handling of the building, not its finest hour, by the way, could become perhaps a reason to fire him for cause. And if the president can get rid of all seven members of the Federal Reserve Board, he would have control.

In fact, one of the questions that lawyers were asked today was, well, if we let Trump do this, will his successor just do the same and get rid of all the Trump appointees?

Ali Rogin:

The Supreme Court, Amy, has had to weigh in on a number of these sort of existential questions this term. They have looked at different ways the president has tried to exert control. They heard a case just this month, last month, about Rebecca Slaughter, a member of the Federal Trade Commission whom Trump had dismissed.

How is the court grappling with Trump's efforts to reshape the federal government in this major way?

Amy Howe:

So up until the case of Lisa Cook, the Supreme Court has green-lit Trump's efforts to remove the heads of independent multimember agencies. And so most of that has happened on the court's emergency docket.

The Supreme Court has given the OK to the Trump administration to fire members of the National Labor Relations Board, the Merit Systems Protection Board, the Federal Trade Commission, the Consumer Product Safety Commission, even though there are similar statutes that only allow the president to remove officials at those agencies for cause.

And then the Supreme Court heard oral arguments, as you said, in December, in the case of Rebecca Slaughter, a commissioner on the Federal Trade Commission whom Trump fired. And they seemed inclined to rule in favor of the Trump administration.

So in one of the orders on the emergency docket, the Supreme Court rejected an argument that members of the NLRB and the MSPB had made that said, if you are allowed to -- if Trump is allowed to fire us, what happens to the Fed? Because the statutes are similar.

And the Supreme Court in that case said, essentially, the Fed is special, and don't worry about the Fed. And so the case of Lisa Cook today suggests that the Supreme Court does regard the Fed as special.

Ali Rogin:

Yes, we are now worrying about the Fed.

David, last question to you.

Today's arguments, of course, were part of a longstanding -- just the latest in the longstanding effort by President Trump to take on the Fed. We mentioned the investigation into Jerome Powell. It's hard not to look at these things all in concert together. Are they all of a piece, or should we be looking at them discretely?

David Wessel:

They are definitely all of a piece.

I mean, as Amy pointed out, the court is a hard time here to explain why the Fed is special. I can argue why the Fed is special, but I don't have to make a legal argument. Jerome Powell was in the courtroom today, and I think that was a reminder to the justices that this is not about one Fed governor who may or may not have made a mistake or cheated on her mortgage application.

This is about the very concept that people are appointed to the Federal Reserve Board for terms of up to 14 years, and they can only be removed for cause, and most of the justices seem to think that whatever she did on her mortgages wouldn't qualify.

Ali Rogin:

Amy Howe with SCOTUSblog, David Wessel of the Brookings Institution, thank you both so much.

David Wessel:

You're welcome.

Amy Howe:

Thank you.