The Supreme Court on Wednesday seemed poised to reject President Trump’s bid to immediately remove Lisa D. Cook from the Federal Reserve board, with key justices expressing concern about undermining the longstanding independence of the central bank.
Justices from across the ideological spectrum questioned whether the allegations President Trump lodged against Ms. Cook — an unproven assertion that she engaged in mortgage fraud before taking office — were serious enough to allow the president to fire her.
They suggested it was premature for the court to resolve the case when there were still factual disputes over those allegations, and they sounded skeptical that Ms. Cook had received sufficient notice of Mr. Trump’s accusations and an opportunity to respond.
After about two hours of argument, a majority of the justices seemed likely to order additional proceedings, perhaps in the lower courts, meaning the Supreme Court’s ruling may not be the final word in the case. But if the justices agree to allow Ms. Cook to keep her job in the meantime, the result would be that the president’s effort to reshape the Fed would be frozen for now.
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.
Key justices sharply questioned the Trump administration’s lawyer about the implications of the president’s position for the independence of the Fed and the economy.
Justices Brett M. Kavanaugh and Amy Coney Barrett, who are often in the majority, noted that former Fed chairs and Treasury secretaries had warned against allowing the president to immediately remove Ms. Cook.
Accepting the president’s view, Justice Kavanaugh said, would “weaken, if not shatter, the independence of the Federal Reserve,” opening the door to future presidents trying to dismiss Fed officials “at will.”
“Once these tools are unleashed, they are used by both sides,” he warned. “We have to be aware of what we’re doing and the consequences of your position for the structure of the government.”
The justices agreed to hear Ms. Cook’s case on an expedited basis and had allowed her to remain at the Fed before Wednesday’s arguments. The court is expected to rule in the coming weeks or months. The final outcome of the case could determine how much latitude presidents have to influence the direction of the powerful central bank, which Congress intentionally tried to insulate from political pressures.
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 central bank’s renovation of its headquarters.
Mr. Powell, whose term as chair ends in May, forcefully pushed back on the threat of criminal charges, suggesting they were motivated by politics because the Fed set 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 were at risk.
Both Ms. Cook and Mr. Powell watched Wednesday’s arguments from inside the courtroom. Ms. Cook sat in the center of the public gallery and in full view of the justices. She issued a statement after the hearing, saying her case was “about whether the Federal Reserve will set key interest rates guided by evidence and independent judgment or will succumb to political pressure.”
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 establishing 14-year terms for its leaders, known as governors, and allowing presidents to remove them only for “cause.”
Among the key questions before the justices: How much discretion does a president have to fire Fed officials? What counts as cause? And what kind of notice and due process should officials have 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 skepticism of the president’s position on Wednesday came from an ideologically diverse set of justices.
Chief Justice John G. Roberts Jr., a conservative, and Justice Elena Kagan, a liberal, each seemed concerned that the administration’s view could render meaningless removal protections in the statute that established the Fed.
If a president must have a valid reason for ousting a Fed official, the chief justice told the president’s lawyer, “you can’t be right about the idea that courts can’t order anybody who’s been removed to be reinstated.”
Chief Justice Roberts repeatedly pressed the solicitor general, D. John Sauer, about the substance of the allegations against Ms. Cook. Ms. Cook’s lawyers have acknowledged that she improperly wrote that a Georgia apartment would be a primary residence in a 2021 mortgage application. The chief justice noted that her lawyers have asserted that it was “an inadvertent mistake contradicted by other documents in the record.”
In response, Mr. Sauer called it the kind of “inadvertent notation that people could be indicted for.”
More broadly, Mr. Sauer said Fed governors set interest rates for “ordinary Americans all across the country,” and there is “the appearance of having played fast and loose, or at least being grossly negligent in getting favorable interest rates for herself.”
In response, Ms. Cook’s legal team said that a person’s private conduct before taking 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 central bank’s independence.
A lawyer for Ms. Cook, Abbe Lowell, provided a detailed response to the allegations in a November letter to the Justice Department and accused the administration of targeting the president’s perceived enemies. He wrote that the notation on the 2021 application was “plainly innocuous” because of other documents Ms. Cook submitted where she provided more specific disclosures about the Georgia property’s use as a vacation home.
Throughout the hearing, there appeared to be broad consensus among the justices that Ms. Cook was entitled to more process than a post on social media.
Another lawyer for Ms. Cook, Paul Clement, said that in theory, a Truth Social post could count as “notice” to Ms. Cook that the president intended to fire her. In this instance, he called it “fundamentally defective notice,” because it also amounted to “indisputable evidence that the president prejudged the matter.”
Justice Samuel A. Alito Jr., a conservative typically aligned with the administration’s view, worried that the case had been handled in “a hurried manner.” No court, he emphasized, has reviewed the factual basis for the allegations against Ms. Cook.
Similarly, Justice Sonia Sotomayor, a liberal, said the Fed’s “independence is harmed if we decide these issues too quickly and without due consideration.” The justices should at least allow the lower courts to look more closely at the issues, she said, saying it “makes the most sense to the public’s confidence and to the world’s confidence.”
But after two hours, it was unclear how the case would proceed. If the justices side with Ms. Cook, she would continue to serve on the Fed board while litigation continued before a trial judge in the district court. That judge would consider additional evidence and argument, eventually issuing a final judgment that could be appealed, potentially returning to the Supreme Court.
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 be fired by the president only for “inefficiency, neglect of duty or malfeasance in office.”
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.
Aishvarya Kavi and Adam Liptak contributed reporting.
Ann Marimow covers the Supreme Court for The Times from Washington.
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