US supreme court rules Trump’s firing of Lisa Cook from Fed was unconstitutional

Justices find president does not have constitutional authority to fire Federal Reserve governor without cause

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The US supreme court has ruled that Donald Trump’s firing of a Federal Reserve governor was unconstitutional, in a landmark ruling that limits a president’s authority over the central bank.

In its opinion, the court said that Trump does not have the constitutional authority to fire a Fed governor without cause.

The case was centered on Lisa Cook, a Biden appointee whose 14-year term on the Federal Reserve board of governors is scheduled to expire in 2038. Cook is the first Black woman to serve on the Fed’s board.

Last August, on social media, Trump abruptly fired Cook. The president claimed he had evidence that Cook committed mortgage fraud, an illegal practice where a homebuyer lists a second property as a primary resident to get a better mortgage rate. Cook denied the allegations and sued the Trump administration, saying it fired her without cause.

The justices’ protection over the Fed decision is a departure from how the court has handled Trump in his second term, allowing the president broad power to carry out his agenda without congressional approval.

The court allowed Trump to remove a Democratic-appointed member of the National Labor Relations Board (NLRB), leaving the powerful union board without a quorum needed to decide on labor disputes. The court also stripped lower district courts of their power to issue nationwide injunctions , which was often used to block Trump in his first administration, and stayed a lower court’s ruling that restricted Immigration and Custom Enforcement’s (ICE) from using race and ethnicity as the basis for reasonable suspicion in immigration enforcement.

But Trump has finally met his limit. The ruling is a major win for the central bank, which has spent the last year under attack from the White House.

Over the last year, most Fed officials have broadly ignored demands of loyalty from Trump, who believes interest rates should be lower. Trump has attacked the Fed for holding interest rates at levels he believes are too high and are stifling the economy. The independence of the Fed is widely regarded as sacrosanct, but Trump has continued to press for the central bank to follow his will.

Much of his ire over the last year has been directed at Jerome Powell, a Fed governor and former Fed chair who Trump first appointed in 2018. In January, the justice department put Powell under an investigation, purportedly over testimony he gave last summer about renovations at the Fed’s headquarters that went over budget.

The justice department closed the investigation in April, after it attracted sharp backlash, but the White House has suggested the inspector’s general office is still looking into the renovations.

Before Powell’s term as chair ended in May, he announced he would stay on as a Fed governor – a rare move that signaled his concern over the future of Fed independence – until the White House’s probes into the renovations are “well and truly over with transparency and finality”.

Kevin Warsh replaced Powell as chair in May and is expected to be much more amenable to interest rate cuts despite the impact it could have on prices, which have been heating up amid the war with Iran.

The Fed has vast power over the US economy because it sets interest rates, which determines the cost of borrowing money. Cook is one of 12 board members who vote eight times a year on interest rates. Economists widely agree that an independent central bank, removed from the pressure of politics, is essential for a stable economy. The Fed was created in 1913 and while it technically sits inside the executive branch, it has historically been siloed from the White House and Congress.