The Supreme Court will consider Wednesday whether President Trump can fire Lisa Cook from the Federal Reserve board, in a case that tests the longstanding independence of the central bank, with potentially major consequences for the economy.
The court’s conservative majority has repeatedly allowed Mr. Trump to oust leaders of other independent agencies as he moves to expand presidential power and seize control of the federal bureaucracy. But the justices have signaled that the Fed may be different and uniquely insulated from executive influence because of its structure and history.
The case lands as the administration has dramatically escalated its attacks on the Fed, apparently aimed at remaking its board and lowering interest rates. The Justice Department this month opened a criminal investigation into whether Jerome H. Powell, the Fed chair, lied to Congress about cost overruns related to the Fed’s renovation of its headquarters.
Mr. Powell, whose term as chair ends in May, forcefully pushed back on the threat of criminal charges, saying it was a result of the Fed setting borrowing costs “based on our best assessment of what will serve the public, rather than following the preferences of the president.”
The investigation prompted a backlash from Republicans, international policymakers, Wall Street and some Trump allies, who warned that the central bank’s independence and credibility was at risk.
It also threatened to complicate Mr. Trump’s plans to name Mr. Powell’s replacement as chair — and, legal experts said, the Supreme Court case being heard on Wednesday.
The justices agreed to hear Ms. Cook’s case on an expedited basis, and are likely to rule quickly on her status as litigation continues in the lower courts. The outcome of the case could determine how much latitude Mr. Trump and future presidents have to influence the direction of the powerful central bank, which Congress intentionally tried to insulate from political pressures.
Mr. Trump announced on social media in late August that he would fire Ms. Cook. He claimed that she had engaged in mortgage fraud involving loan documents she signed before joining the Fed in 2022. She has not been charged with or convicted of a crime, and she vigorously disputes the allegations.
Still, the president said that the allegations gave him sufficient “cause” to dismiss Ms. Cook under the federal law that established the Fed in 1913. Congress tried to ensure that Fed officials could set interest rates with the goal of attaining low, stable inflation and a strong labor market free from political pressure by setting 14-year terms for its leaders, known as governors, and only allowing presidents to remove them for “cause.”
Among the key questions for the justices on Wednesday are how much discretion a president has to fire Fed officials, what counts as cause, and what kind of notice and due process should be afforded to officials before a president can remove them.
The Trump administration is not challenging the constitutionality of the law establishing the Fed — distinguishing the case from one the justices heard in December that dealt with the president’s ability to fire other independent regulators. But the Justice Department said the courts cannot second-guess a president’s justifications or reinstate a fired official.
“The president identified a valid cause for removing Cook: apparent fraud or gross negligence in a financial matter, which created a grave appearance of impropriety in her governance of American’s financial matters,” D. John Sauer, the solicitor general, wrote in a court filing.
In response, Ms. Cook’s legal team said a person’s private conduct before he or she took office cannot be cause for removal, and that Mr. Trump’s stated reason for removing her was a “pretext” for policy disagreements. If any cause counts as cause, the team said, that is essentially the same as saying a president can remove a governor at will, which would eviscerate the traditional independence of the Fed.
Ms. Cook’s attorney Abbe Lowell provided a detailed refutation of the allegations in a November letter to the Justice Department and accused the administration of targeting the president’s perceived enemies. He acknowledged that Ms. Cook had improperly written that a Georgia apartment would be a primary residence in a 2021 mortgage application. But he wrote the notation was “plainly innocuous” because of other documents she submitted where she provided more specific disclosures about the property’s use as a vacation home.
“There is no fraud, no intent to deceive, nothing whatsoever criminal or remotely a basis to allege mortgage fraud,” Mr. Lowell wrote in November.
The Supreme Court is separately reviewing the president’s firing of another independent agency official. At issue in that case, which involves the Federal Trade Commission, are laws that say officials can only be fired by the president for “inefficiency, neglect of duty or malfeasance in office”
But the justices have indicated that the Fed may be uniquely insulated from presidential meddling because of its distinct history. During oral arguments in the F.T.C. matter in December, Justice Brett M. Kavanaugh took issue with the suggestion by Mr. Sauer, the solicitor general, that courts do not have the power to reinstate an official removed by the president.
The justice said the administration was suggesting “an end run” around removal protections for Fed officials that Mr. Sauer had said he was not challenging. “In other words, you could just remove those people. So long as you continue to pay their salary, you wouldn’t have to reinstate them,” Justice Kavanaugh continued.
Lower courts have sided with Ms. Cook. A District Court judge in Washington said Ms. Cook could not be removed for conduct that occurred before she became a Fed governor, nor for claims that did not involve her professional conduct.
In a 2-to-1 decision, the U.S. Court of Appeals for the D.C. Circuit also backed Ms. Cook. Tenure protections for the Fed were devised to “assure members of the Board of Governors — and national and global markets — that they do not serve at will and thus enjoy a measure of policy independence from the president,” wrote Judge Bradley N. Garcia, who was joined by Judge J. Michelle Childs, both nominees of President Joseph R. Biden Jr.
Judge Gregory G. Katsas dissented, writing that the president had invoked a cause related to Ms. Cook’s “conduct, ability, fitness, or competence” and that courts do not typically “look behind” a valid justification. Judge Katsas, a nominee of Mr. Trump, warned that ruling out conduct that occurred before someone joined the government could protect an official who bribed a lawmaker to ensure confirmation or even committed murder before taking office.
Ann Marimow covers the Supreme Court for The Times from Washington.
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