Supreme Court Upholds Federal Reserve Independence
The US Supreme Court has blocked President Donald Trump's attempt to remove a governor of the US central bank, in a ruling regarded as reinforcing the Federal Reserve's independence.
In a narrow 5-4 decision, justices from the nation's highest court determined that the administration had not provided Federal Reserve Governor Lisa Cook with adequate
"due process"to contest her removal.
The ruling returns the case to lower courts, where the administration must substantiate its claims that Cook committed mortgage fraud if it intends to proceed with the dismissal. At that stage, Cook will have the opportunity to challenge the allegations.
Cook has denied the accusations, which supporters of the Fed argue are a pretext for President Trump to exert greater control over the central bank.
Legal Protections for Federal Reserve Governors
Under federal law, a president may only remove Federal Reserve governors
"for cause". This provision is designed to protect the Fed from political interference and to ensure that its policies serve long-term economic objectives rather than short-term political interests.
During oral arguments in January, Cook's attorney, Paul Clement, contended that the administration's approach to the firing would render Congress' intended protections for the Fed
"kind of a joke".
Background of the Removal Attempt
President Trump announced his intention to remove Cook from the Federal Reserve in August via social media, citing allegations that she had submitted mortgage documents claiming two different principal residences simultaneously. Banks typically offer lower interest rates for primary residences.
Solicitor General John Sauer, representing the White House, argued before the court in January that the social media announcement constituted sufficient notice and opportunity for Cook to respond.
He asserted that the issue, even if unintentional, amounted to
"negligence"that could damage confidence in the Federal Reserve. Sauer also maintained that courts should defer to the president's judgment regarding what constitutes cause for removal.
