Trump sets up Supreme Court battle over Fed independence

The Trump administration on Thursday asked the Supreme Court to intervene and grant it the ability to fire a top Federal Reserve official, setting the stage for a major ruling on the Fed’s traditional separation from the executive branch.

It’s the culmination of a months-long campaign from Trump to browbeat the central bank into lowering interest rates and rev up economic activity. White House spokesperson Kush Desai had previously issued a statement saying that Trump “lawfully removed Lisa Cook for cause. The Administration will appeal this decision and looks forward to ultimate victory on the issue.”

The president for months has employed a relentless pressure campaign against the Fed and its chair Jerome Powell. He’s issued frequent attacks on Powell in particular, deriding him as someone who has misjudged the economy and repeatedly been “too late” in lowering borrowing costs.

It’s not clear how the Supreme Court will decide the case. In April, the high court fortified the Supreme Court’s legal protection from Trump’s en-masse firings, even as it granted the president the ability to remove leaders of the National Labor Relations Board and the Merit Systems Protection Board. It described the Fed as a distinct institution compared to other government agencies for its central role in the U.S. economy.

Up to now, Trump has been dealt two legal setbacks in his campaign to remake the Fed into a more compliant institution. An 11th-hour Monday ruling  from the U.S. Court of Appeals for the District of Columbia Circuit reaffirmed an earlier lower court decision that reinstated Cook as a Fed official. Cook was ultimately able to cast a vote on interest rates in this week’s two-day Fed meeting even while she sues in federal court to keep her job.

Trump moved to fire Cook last month after she was accused of falsifying records that showed her claiming two homes as primary residences to secure favorable mortgage terms in 2021. The events in question took place a year before then-President Biden appointed her to the Fed. The New York Times recently reported that newer records indicate Cook did not try to mislead lenders and appropriately designated her property as a second residence.

Cook has not been convicted of wrongdoing, much less charged with a crime.

On Thursday, the Fed lowered interest rates by a quarter-percentage point in the first rate-cut of Trump’s second term. In the post-meeting news conference, Powell said at one point that the Fed was “strongly committed” to preserving its independence but otherwise decided to stay out of the political fray.

Asked about the Cook case, Powell responded: “I see it as a court case that it would be inappropriate for me to comment on.”