The US Supreme Court on Monday ruled in a 5-4 decision that Federal Reserve Governor Lisa Cook can continue serving on the Federal Reserve Board of Governors after president Trump fired her last year.
The technical matter before the court was whether Cook should be allowed to remain in her job while her lawsuit against Trump moves forward.
“The Court rejects the Government’s halfhearted contention that Cook in fact received due process. At minimum, Cook was entitled to some explanation of the evidence at issue, some avenue for a response,” the opinion read.
The high court stipulated only then can the courts assess the validity and sufficiency of charges.
But the justices confronted the statutory question of whether the president can remove a member of the Federal Reserve for alleged wrongdoing before she came to office and without providing her an opportunity to respond to the allegations.
Section 10 of the Federal Reserve Act states that each member of the board shall hold office for 14 years unless sooner removed for cause by the president. The statute does not detail what constitutes “for cause.” That term has been interpreted in legal rulings to mean inefficiency, neglect of duty, or malfeasance. Those terms were dissected in numerous instances during oral arguments in January.
The justices noted that to accept any one of [the Trump administration’s arguments would in effect transform the Federal Reserve’s for-cause protection into at-will employment—an interpretive leap out of step with the statute Congress enacted and our Nation’s tradition of central banking protected from political interference. We therefore deny the Government’s application.”
During oral arguments in January, the justices reacted skeptically to the Trump administration’s arguments for firing Cook, cautioning that the case carried implications not just for the central bank and its independence but also for government appointees more broadly.
Trump fired Cook, the first Black woman to serve as a Fed governor, last August, claiming she committed mortgage fraud by making misrepresentations on loan documents. Cook, a Biden appointee, has denied any wrongdoing and sued the president.
Justice Brett Kavanaugh, who was nominated to the court by Trump during his first term, said that “a low bar ‘for cause’ would weaken if not shatter independence of the Fed.”
This is a breaking news update.
Jennifer Schonberger is a veteran financial journalist covering the Federal Reserve, Congress, the White House, the Treasury, the SEC, the economy, cryptocurrencies, and the intersection of Washington policy with finance.
