After two hours of lively arguments on Wednesday, the Supreme Court seemed likely to rule narrowly and provisionally in favor of Lisa D. Cook, the Federal Reserve governor whom President Trump has sought to fire based on an accusation of mortgage fraud.
Some justices voiced reluctance to imperil the independence of the Federal Reserve Board. Others said the alleged fraud, which Ms. Cook has denied, did not appear grave enough to satisfy the law governing the Fed, which allows the president to remove officials only “for cause.” Ms. Cook has not been charged with a crime.
The court is likely to return the case to the lower courts for further proceedings, including a fuller exploration of the facts.
A separate question for the justices is whether Ms. Cook should keep her job in the meantime. On that, the majority seems to be leaning toward leaving her in place while the case proceeds.
Here are four key takeaways from the arguments.
Due Process Denied?
Several justices questioned whether Mr. Trump’s notice that he intended to fire Ms. Cook in a social media post satisfied due process. D. John Sauer, the solicitor general, said she was not entitled to any particular procedures before her dismissal.
He said that she had, in any event, received notice of the president’s intention via the social media and then had an opportunity to tell her side of the story. A letter formally firing her landed five days after the post.
Paul D. Clement, Ms. Cook’s lawyer, said due process requires notification of the charges against her, a hearing during which she could tell her side of the story and a decision maker with an open mind. He said Mr. Trump’s rush to judgment, evident in his first post, violated her rights.
“Cook must resign, now!!!” Mr. Trump wrote 30 minutes after Bill Pulte, the director of the Federal Housing Finance Agency, said on social media that he had referred allegations about Ms. Cook’s banking records to the Justice Department for a criminal inquiry.
While a majority of the justices appeared sympathetic to aspects of Mr. Clement’s argument, there was no consensus about what sort of hearing should be required. That, too, seemed to be a question the justices were likely to let the lower courts decide first before tackling it again themselves.
Fed Independence
The independence of the Federal Reserve Board was brought up repeatedly by all parties on Wednesday, underscoring the centrality of the issue to Ms. Cook’s case. Her lawyers said that if the justices ruled against Ms. Cook, the central bank would no longer retain its autonomy to set interest rates free of political meddling, because a president could essentially remove an official for any reason.
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Justice Brett M. Kavanaugh, for instance, seemed concerned about the implications of allowing Ms. Cook to be removed under these circumstances. He told Mr. Sauer his position that the president’s determination could not be subjected to judicial review or challenge would “weaken, if not shatter, the independence of the Federal Reserve that we just discussed.”
The effort to remove Ms. Cook is just one of a litany of attacks on the Federal Reserve’s governors from the Trump administration, as Mr. Trump has pressured the central bank to lower borrowing costs.
The arguments came on the heels of the Justice Department opening up a criminal investigation into Jerome H. Powell, the Fed chair, over testimony he gave Congress about renovations underway at the central bank’s headquarters in Washington. Mr. Powell, who attended Wednesday’s oral arguments, took the extraordinary step of accusing the administration of trying to use legal threats to coerce the central bank into giving the president the policy he wants.
Defining Cause
One of the central issues of this case revolves around what constitutes “cause,” which is the only legal justification a president can cite to remove an official at the Fed, according to the Federal Reserve Act. What “cause” means has never been specifically defined, in part because no president has ever tried to remove a policymaker at the central bank.
Legal experts said most people have interpreted the word cause to mean gross misconduct or a dereliction of duty while carrying out the responsibilities of the job.
Right from the start, the justices appeared skeptical about whether the allegation made against Ms. Cook had reached the threshold of “cause.” They also seemed to cast doubt on the argument that the president’s interpretation of what “cause” means could not be questioned, as his lawyers have contended.
Chief Justice John G. Roberts Jr. asked D. John Sauer, the solicitor general, if it made a difference whether an inaccurate notation on Ms. Cook’s mortgage document was “an inadvertent mistake” or a “devious way to get a better interest rate.”
The justices also focused on the fact that the fraud that the Trump administration alleges Ms. Cook committed occurred before she joined the Federal Reserve Board in 2022 and had nothing to do with her duties as a governor.
An Emergency Application
The justices seemed keenly aware that the case had reached them on a rushed basis, on what critics call the court’s shadow docket. They repeatedly noted that the factual record was not fully established, the briefing was thin and the stakes enormous.
That appeared to push them toward caution. They had already allowed Ms. Cook to keep her job when they took the rare step of setting the administration’s emergency application down for argument, and they did not seem eager to change her status for now.
The question for the justices is in a way modest: whether to pause a trial judge’s preliminary injunction in favor of Ms. Cook. That injunction halted her dismissal while a lawsuit challenging her removal is pending.
If they decline to do so, the trial judge will consider additional evidence and argument, eventually issuing a final judgment after perhaps a year. Appeals would very likely follow, and the case could return again to the Supreme Court late in Mr. Trump’s presidency.
Adam Liptak covers the Supreme Court and writes Sidebar, a column on legal developments. A graduate of Yale Law School, he practiced law for 14 years before joining The Times in 2002.
The post 4 Takeaways from Supreme Court Hearing on Trump’s Firing of Fed Official appeared first on New York Times.
