Can President Trump fire Fed governor Lisa Cook? Supreme Court raises doubts

President Donald Trump’s effort to remove Federal Reserve Governor Lisa Cook has put the Supreme Court at the center of a conflict over central bank independence. Early signs from the justices show significant skepticism about the president’s stance.

During oral arguments on January 21, the court questioned whether Trump can just dismiss a Fed governor based on his claimed authority. They raised concerns about a lack of a legal process to assess the allegations against Cook. The case is seen as a critical test of the Federal Reserve’s ability to stay free from political influence and a pivotal moment in Trump’s push to increase presidential control over independent institutions.

Trump claims that Cook should be removed “for cause,” stating she misrepresented mortgage information to get better interest rates. Cook denies these claims and argues that the president is using them as an excuse to remove officials who do not agree with his demands for more aggressive interest rate cuts.

Several justices, including some from the court’s conservative majority, expressed worry that Trump’s view on removal power could seriously harm the Fed’s independence. Justice Brett Kavanaugh questioned why the administration was so eager to fire Cook without a judicial fact-finding process. He warned that such authority might “weaken, if not shatter” the Fed’s role as an independent policymaker.

This skepticism is notable since Trump appointed three of the conservative justices, who have frequently supported him in executive power disputes. Chief Justice John Roberts also seemed unconvinced that alleged mistakes on mortgage paperwork automatically counted as misconduct that justifies removal.

Justice Samuel Alito and Justice Neil Gorsuch challenged the administration on procedural fairness. They asked whether a simple dismissal, followed by a public explanation, would comply with the law. Solicitor General John Sauer argued that the president only needs to inform Cook of the reasons for her removal, claiming that a chance for public rebuttal was enough. Several justices appeared doubtful of this argument.

Cook’s attorney, former Solicitor General Paul Clement, argued that Trump’s position would undermine Congress’ carefully designed protections. He stressed that the Federal Reserve was intentionally created as a unique institution, protected from political fluctuations due to its critical role in monetary policy.

The implications reach well beyond Cook. If the court rules in favor of Trump, it could allow similar actions against other Fed officials, including Chair Jerome Powell. Powell, who has resisted Trump’s push for quicker and deeper rate cuts, is already under scrutiny from the Justice Department over a renovation project at the Fed’s headquarters. Critics say this investigation could add another layer of pressure.

Economists and former Fed leaders from both sides of the political spectrum have warned that permitting a president to remove governors at will could destabilize financial markets. The credibility of the Fed depends on the belief that interest rate decisions are based on data and long-term economic stability, not on electoral politics.

The Trump administration dismisses these warnings as the opinions of out-of-touch elites. Sauer told the court that ordinary Americans should not have their interest rates set by officials accused of wrongdoing. However, critics argue that framing the issue this way overlooks the broader institutional damage that could occur.

Importantly, the Supreme Court has previously set the Federal Reserve apart from other independent agencies. In recent decisions, the court permitted Trump to temporarily remove leaders of agencies like the National Labor Relations Board, but it specifically described the Fed as a “uniquely structured, quasi-private entity” with a different historical background.

This distinction might be crucial. The court signaled caution last fall by allowing Cook to stay on the board while full arguments were pending, a move it did not make in similar agency cases.

For economists and investors, this case is about more than legal theory. It raises essential questions about whether future presidents could alter the Fed to meet short-term political aims. As one investment strategist noted, once the perception of independence is weakened, regaining trust becomes much harder.

President Donald Trump’s bid to remove Federal Reserve Governor Lisa Cook has drawn skepticism from the Supreme Court, with justices questioning whether the president can fire a Fed official without a full legal process. The case raises profound concerns about the independence of the Federal Reserve and whether presidents can exert direct control over monetary policy. Economists warn that a ruling in Trump’s favor could destabilize markets and erode trust in the central bank, while the court appears inclined to treat the Fed differently from other independent agencies.

Trump’s attempt to fire Cook may ultimately not succeed. But the fact that it has reached the Supreme Court highlights how fragile established norms around economic governance have become.