Supreme Court balks at Trump’s push to control the Fed

Their comments during nearly two hours of oral arguments signaled that the court will likely allow Fed board member Lisa Cook to remain in the job while her legal challenge to her dismissal proceeds in the lower courts.

Justice Brett Kavanaugh, a Trump appointee, highlighted the long history and economic impetus of shielding monetary policy from White House control. The Trump administration’s claims of broad and unreviewable firing authority “would weaken, if not shatter, the independence of the Federal Reserve," Kavanaugh warned.

And he cautioned that such a broad power would pass to other presidents, allowing a future Democrat to dismiss anyone Trump appoints to the Fed during the remainder of his term.

“Thinking big picture, what goes around comes around," Kavanaugh said. “History is a pretty good guide. Once these tools are unleashed, they are used by both sides."

The Supreme Court’s skepticism toward Trump’s bid to oust Cook is a shift for its conservative majority, which in recent months has largely allowed the president to swiftly fire board members of other historically independent agencies in the executive branch.

But even in those rulings, the court has signaled that it views the Fed as occupying a unique place in the government ecosystem. And on Wednesday, the justices reiterated that view, saying the financial markets and the public need confidence in the Fed’s decisions.

“Congress had decided that this particular agency, because of the sensitive information and policy determinations that it has to make, needs to not have the pressure of having all of its governors be fireable at the whim of the president," Justice Ketanji Brown Jackson said.

What was less clear by the end of Wednesday’s session is how broadly the court might rule. Justices openly pondered different options. One was to say that Trump’s effort to fire Cook—which he announced on social media—was legally insufficient, but then leave lower courts to sort out the rest. Another more challenging option: Write a broad ruling on the extent of the president’s authority to remove the central bank’s members, who according to federal law can be fired only “for cause."

Cook’s lawyer, Paul Clement, made clear that he would be happy with a simple win, but added that if the court “decided to go a little further and say something substantive, it might bring all of this to an end. And there’s probably some virtue to that."

Legal observers said that even a narrow or temporary win for Cook would be a significant constraint on Trump’s bid to remake the Fed, as it would block him from replacing her during the months or years while her case plays out.

Her lawyers “just bought Cook another year or more on the Fed," said Jed Shugerman, a Boston University law professor who filed an amicus brief supporting her arguments. “It sure seems like there are nine justices who did not think the Trump administration had crossed their t’s and dotted their i’s."

Cook, appointed by Joe Biden, took office in 2022 and was sworn in to a new 14-year term in 2024. When Trump tried to fire her last August, he cited allegations that she misled lenders about her primary residence in mortgage applications the year before she joined the Fed. Trump’s move was the first time a president had ever tried to remove a Fed governor in the central bank’s 112-year history.

Cook hasn’t been criminally charged, and she denies any wrongdoing. Her lawyers say any misstatement in her mortgage papers was, at worst, an inadvertent paperwork error. And they cited one document showing she had, in fact, disclosed to her lender an intent to treat the property at issue as a vacation home.

She sued to challenge the firing, arguing that the allegations against her are a pretext for Trump’s true motive: exerting more influence over the Fed’s decisions on interest rates. Two lower courts blocked the firing, prompting the Trump administration to file an emergency appeal to the Supreme Court.

The emergency posture of the case rankled some justices, who repeatedly noted that the lower courts haven’t had a chance to perform factual findings about Trump’s allegations. They struggled aloud about what additional evidence Cook might wish to introduce and what sorts of procedures she should have to defend herself.

“No court has ever explored those facts," Justice Samuel Alito told Trump’s solicitor general, D. John Sauer. “Are the mortgage applications even in the record in this case?"

Sauer conceded that the court’s official record doesn’t contain the mortgage applications—but does contain screenshots of social-media posts discussing the applications.

Chief Justice John Roberts, while observing the disputed nature of the mortgage claims, asked Sauer whether any misrepresentation may have been an afterthought in the “stack of papers you have to fill out when you’re buying real estate."

Justice Amy Coney Barrett, a Trump appointee, pressed Sauer on why the administration was unwilling to give Cook a formal chance to contest the allegations.

“Why are you afraid of a hearing?" she asked.

Despite their skepticism of the administration’s position, several justices made clear they wanted to leave presidents enough room to fire Fed officials who clearly deserve to be removed.

A federal district judge in the Cook case ruled that the president cannot fire a Fed member based on activities that occurred before the person was appointed to the office. Several justices indicated they disagree with that view. Surely, they suggested, the president could fire a Fed board member who was discovered to have previously supported white supremacists or committed egregious sexual misconduct. The same goes if a Fed member engaged in bad personal behavior while in office, they said.

Also lurking in the background of the case: Trump’s escalation against Fed Chair Jerome Powell, whom the president has repeatedly threatened to fire. Earlier this month, Trump’s Justice Department sent criminal subpoenas to the Fed over Powell’s congressional testimony about the Fed’s ongoing building renovation. Powell, who attended Wednesday’s arguments, has called the investigation a pretext as part of a broader pressure campaign for lower interest rates.

During the hearing, no one mentioned Powell or Trump’s broader threats against the Fed. But the economic ramifications of the case were at the forefront of the justices’ minds.

Barrett noted that the court had received amicus briefs from economists warning of dire consequences if Trump is allowed to immediately proceed with Cook’s firing.

“It could trigger a recession," she said. “How should we think about the public interest in a case like this?"

Write to James Romoser at james.romoser@wsj.com and Nick Timiraos at Nick.Timiraos@wsj.com