After months of trial balloons from President Trump about the prospect of firing the Federal Reserve chair Jerome Powell, he announced on Monday that he was indeed ousting a Fed official — only it was not Mr. Powell, but Lisa Cook, a member of the Fed’s board of governors.
If Ms. Cook challenges Mr. Trump’s effort to remove her, the courts will have to answer a question of global consequence: Can the president do that?
Under a proper understanding of the Federal Reserve’s place in our constitutional order, the answer should be no. There’s a reason no president has ever tried to fire a Fed governor: It has long been understood that presidents do not get to control the monetary policy decisions of the Federal Reserve, and they can’t get around that prohibition by seeking by fiat to remove the individuals who make decisions about monetary policy.
To dig in deeper on how to understand Mr. Trump’s move, I talked to Lev Menand, a law professor at Columbia, who’s been thinking and writing about the Fed for years.
Kate Shaw: The Federal Reserve is the most important central bank in the world. It’s also one of the last remaining pockets of genuine independence inside the federal government. Lev, historically, what has given it this independence?
Lev Menand: The word “independence” has different meanings in different contexts. In law, in recent decades, it has been used as a technical term of art: It refers to an agency whose leaders do not serve at the pleasure of the president.
On a broader understanding, the Fed’s independence — the ability of its leaders to make policy decisions on the merits and not in response to outside pressures, including from the banks it regulates — is a product of institutional design as well as cultural norms.
In terms of institutional design, Congress produced an intricate legal structure to promote long-term, expert decision-making. That includes a seven-person governing board with members serving staggered 14-year terms, removable by the president only for cause. It also includes 12 Federal Reserve Banks with their own leaders and the Federal Open Market Committee, composed of members of the board and representatives of the Federal Reserve Banks. (This particular configuration has been in place since 1935.)
The idea was not to make the Fed unaccountable or to render it fully autonomous. The president, for example, is responsible for selecting the board’s governors (subject to Senate confirmation). The Fed is also subject to legally mandated oversight by Congress.
Shaw: The Supreme Court’s shadow-docket order in the Trump v. Wilcox case — in which, in May, the justices allowed the president to fire heads of independent agencies and all but overruled the court’s 1935 opinion in Humphrey’s Executor v. United States — noted that the president likely did not have the authority to summarily fire members of the Fed’s board of governors and the Federal Open Market Committee. The order said this was because 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.”
To me, the court was right in broad terms that the Fed is not subject to complete presidential control, but it was wrong both in the way it described the Fed’s historical pedigree and in the way it sought to distinguish the Fed from other independent agencies. What did you make of that one-sentence explanation?
Menand: What the court offered in Wilcox simply does not make sense. The Federal Reserve Board is not uniquely structured in a legally relevant sense: It is a multimember commission established on the model of the Interstate Commerce Commission (established in 1887). The board was designed to regulate the banking sector in much the same way that the commission was designed to regulate railroads.
Nor is the board quasi-private: It is wholly public. It is a federal government agency. The Federal Reserve Banks are nominally private and functionally public — perhaps, then, quasi-private — but they are separate from the board.
If you look at the Federal Reserve Act, the legislative scheme is clear: The board regulates the Federal Reserve Banks and a range of other banking entities. The board has a similar structure to other agencies like the National Labor Relations Board — an agency the court suggested in Wilcox that Congress cannot insulate from presidential at-will removal.
Shaw: Ms. Cook, an economist and the first Black woman to serve as a Fed governor, was appointed in 2022 and is serving a term that is not set to end until 2038. Under existing understanding, the president has the power to remove her for cause.
The statute also provides for a 14-year term of service. Similar removal provisions, and also fixed terms, protect a number of other members of the federal government. What do these provisions mean, and is there a difference between the “for cause” language of the Fed statute and the “inefficiency, neglect or malfeasance” language in statutes pertaining to officials at other agencies?
Menand: A for-cause removal is fundamentally different from an at-will removal. Officials who have fixed terms (and can be removed only for cause) have a vested legal right to serve the balance of their term. For-cause removal involves an adjudication to determine whether that right is forfeit or not.
For-cause removal requires process, including notice and an opportunity to be heard. The president must inform Lisa Cook of the charges and give her a chance to contest them. The executive must then create a factual record that supports its determination and that courts can review. Otherwise, for-cause removal would just be a dressed-up version of an at-will dismissal.
There is a further question about what sort of causes are authorized under the statute: What sort of facts does the president have to find? Most statutes, as you note, cite three specific causes, all having to do with an officer’s job performance. The Federal Reserve Act is very unusual in using the open-ended language “for cause.” In the 20th century, legislators and lawyers often assumed that “for cause” in the Federal Reserve Act was just shorthand for inefficiency, neglect of duty or malfeasance in office.
It is not clear if that’s right. There are sources that support a broader reading in which other grounds would be legally permissible. But even if “for cause” language admits of causes beyond inefficiency, neglect of duty and malfeasance in office, which I think judges today would probably conclude that it does, there is no legal support that I’m aware of for the notion that “for cause” encompasses unproven allegations of private misconduct.
Shaw: How much are courts likely to probe any explanation given by the president? There must be some limit to courts’ willingness to accept explanations that strain credulity.
Menand: If the Supreme Court applies the law, it will side with Ms. Cook. But if we could count on the court to apply the law, it would have denied the government’s emergency application in Wilcox. What has happened with the Fed this summer is downstream of the Wilcox decision. Yes, the court said the Fed was different from other agencies. But it also endorsed an incredibly broad conception of executive power and gutted binding precedent on the shadow docket — and acted in a lawless manner.
The White House has good reason to think, based on Wilcox, that the court won’t side with Ms. Cook, at least during the pendency of the litigation, and possibly also following full review.
But could this be the moment the court steps up? It’s certainly possible.
Shaw: If Mr. Trump is able to remove Ms. Cook, what if anything stops him from removing Mr. Powell?
Menand: Great question. This attempt to remove Ms. Cook is about much more than Ms. Cook. If the court acquiesces in Ms. Cook’s removal, the president may well force resignations of Mr. Powell and others or try similar for-cause removals that stand on unproven allegations rather than actual factual findings.
Shaw: How does this make its way through the courts? When do you expect the Supreme Court to weigh in?
Menand: First, there will probably be a decision by a federal district judge in Washington about whether to grant Lisa Cook an injunction putting her back in her job. We saw this in the Wilcox case. We can then expect the government to seek emergency relief from higher courts, starting with the U.S. Court of Appeals for the District of Columbia Circuit. If the circuit rules in favor of the administration — leaving Ms. Cook out of a job while the litigation continues — then the case might not make it up to the Supreme Court in the near term. If the circuit rules in favor of Ms. Cook, then I think we can expect the court to entertain an emergency application before the end of the year.
Shaw: Do you see this as having implications beyond central bank independence? Another constitutional value this president might find inconvenient is judicial independence. Even this president is unlikely to assert the power to fire federal judges outright. But it’s not hard to imagine him finding other ways to interfere with the ability of federal judges to do their jobs. At what point does allowing the president to eliminate all checks on his power come back to bite the federal courts?
Menand: In important ways, agency independence is related to judicial independence, and the constitutional attack on independent agencies involves a theory of presidential power that leaves the judiciary exposed to future efforts at presidential control.
It is important to remember that, up through the 17th century, judges served at the pleasure of the crown — the King’s Bench. Federal judges, like Federal Reserve Board governors, are appointed by the president with the advice and consent of the Senate. The Constitution says, in Article III, that federal judges serve “during good behavior.” Once we abandon the approach to the presidency that has undergirded the Republic more or less since the founding and instead embrace a theory in which accountability of government officials requires that the president be able to remove the officials whom the president appoints, we are on the doorstep of the president asserting “bad behavior” grounds (that is, cause) for removing federal judges.
The Constitution does not authorize the president to remove federal judges for bad behavior, and it has long been a settled legal understanding that the president cannot — but the same is true of officials granted term-of-years tenures by Congress.
Shaw: As I think this exchange makes clear, the Supreme Court has gone badly off course in the last seven months — that it has allowed presidential actions that threaten the very basis of a system of separated powers. But most of its rulings in favor of expansive presidential power have been preliminary.
And while the court can’t entirely unring the bell of officials fired and agencies dismantled or reorganized, it could announce a more historically and constitutionally sound understanding of the relationship between agencies and the president.
This episode isn’t just about Lisa Cook, and it isn’t even just about the Fed. But it does provide an opportunity for a badly needed recalibration of a balance of powers that has gotten dangerously unbalanced.
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Kate Shaw is a contributing Opinion writer, a professor of law at the University of Pennsylvania Carey Law School and a host of the Supreme Court podcast “Strict Scrutiny.” She served as a law clerk to Justice John Paul Stevens and Judge Richard Posner.
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