It comes down to the meaning of two words: “for reason.” Hanging in the Balance: The President’s ability to control how the Federal Reserve conducts monetary policy.
Federal Reserve Act States that the president can fire a member of the Fed board “for cause.” Exactly what that means has been ambiguous, in no small part because no president has ever removed a Fed governor.
Making that clear, or not, is the crux of the matter before the Supreme Court. Hanging in the Balance: Over a Century of Law and Precedent, The Degree of (Political) Independence of a Government Affects How It Determines Monetary Policy.
Backstory: President Trump has been pushing the Fed to cut since he returned to office a year ago. For example, in a social media post earlier this month, he wrote:
“Jerome ‘Too Late’ Powell Should Cut Interest Rates, Meaningfully!!!”
The case, which is scheduled to go before the high court today, is the president’s attempt to fire Federal Reserve Governor Lisa Cook, as part of an effort to rebuild the Fed and install new governors who will be able to lower interest rates to a level that satisfies Trump.
In August, whatever the motivation, Trump wrote on his social media account: “You are hereby removed” from the role of Fed governor, referring to Cook. It was the first announcement since the creation of the Fed in 1913 that a Fed governor had been fired, or in this case, attempted to fire Cook.
U.S. District Judge Jaya Cobb ruled in September that Cook, who had refused to resign, could remain at the Fed while he defended himself against allegations that he committed mortgage fraud — allegations made by Federal Housing Finance Agency Director Bill Platte, a Trump appointee.
The Supreme Court will hear arguments on Trump’s request to overturn a lower court judge’s ruling that prevents him from firing Cook while his case is in the legal system. Continue to remove.
A related development, though not officially part of the Cook case, is the Trump administration’s opening of a criminal investigation this month into Fed Chair Powell’s testimony to Congress last year about the Fed building project.
Powell responded by issuing video description, Framing the Justice Department’s investigation as an attack on the central bank’s ability “to set interest rates based on evidence and economic conditions — or rather to direct monetary policy by political pressure or threats.”
“The court has to tell us what a fire offense looks like for members of the Federal Reserve Board,” says Leif Manand, a scholar of economic law at Columbia Law School and a former Treasury Department official. “But it can’t be what the president says.”
Ultimately, “it’s a matter of much more than the cook,” Menand says. “It’s about whether President Trump will be able to take over the Federal Reserve Board in the coming months, and the administration is very clear about that.”
Betting markets are currently pricing in low odds that Cook will be ousted as governor. By the end of this month, Kalshi is estimated at 29 percent, down from 6 percent during March. Polymarket is reporting similarly low removal difficulties.
Meanwhile, Fed business continues, including monetary policy. The fed funds futures market is currently pricing in a high probability that the central bank will leave its target rate unchanged at next week’s policy meeting (January 28).
If true, the news could further anger Trump. The big question is how else does the Supreme Court’s decision change monetary policy expectations and decisions, and, in turn, if and how does it spill over into Treasury yield prices?
Whatever the outcome of the court case, it appears that politics, law and fiscal policy are melding. At stake is the Fed’s sovereignty, and by extension, the integrity, real or perceived, of the financial system. In short. , the case before the Supreme Court is about more than deciding whether Lisa Cook can keep her job.