The U.S. Supreme Court handed the Federal Reserve a victory Monday, but legal scholars are warning that the win may come with a significant cost — leaving the central bank as the last remaining agency shielded from the president’s power to fire its officials at will.
The court issued two separate rulings that together reshaped the landscape of federal agency independence. In one decision, the justices blocked President Donald Trump’s attempt to remove Federal Reserve Governor Lisa Cook, citing unproven allegations of mortgage fraud that she denied. In the other, the court sided with Trump’s firing of Federal Trade Commission member Rebecca Slaughter — overturning a 1935 legal precedent that had long protected leaders of independent regulatory agencies from presidential removal.
Columbia Law School professor Kathryn Judge, who focuses on the Fed and regulatory matters, said the outcome leaves the central bank in a precarious position. “Fed independence lives on but the foundation is much weaker than it has been over the past 90 years,” she said.
“In a very close, 5-4 opinion, the court says the Fed is different” from other agencies whose officials can now be dismissed at the president’s discretion, Judge said. “The Fed is now going to be forced to stand alone.”
She added: “It’s possible for the Fed to maintain its independence as the other independent agencies disappear. But it puts far more pressure on the Fed to justify its independence in the eyes of the public.”
The ruling in Cook’s favor also removes a potential threat hanging over new Fed Chairman Kevin Warsh, a Trump appointee who recently took the helm of the central bank. Trump has so far expressed confidence in Warsh, saying he trusts him to make the decisions he sees fit — a noticeably different tone from the president’s repeated criticism of former Fed Chair Jerome Powell, whom Trump nominated to the position in 2017.
Had the court ruled against Cook, Warsh and his fellow Fed policymakers could have faced immediate vulnerability if Trump’s supportive stance shifted. The ruling now sets a high bar for any future attempt to remove a Fed governor, requiring proof of serious misconduct with a direct connection — or “nexus” — to the person’s duties at the Fed.
Conservative Chief Justice John Roberts, who authored the ruling, wrote that without such guardrails, “any perceived or alleged misstep (past or present) could provide a ready pretext for a governor’s removal. Nothing could be more corrosive of the independence that Congress sought to preserve.”
However, in the Slaughter ruling, Roberts also wrote: “Subordinates who exercise the president’s power are subject to removal by him.”
When Congress created the Federal Reserve in 1913 through the Federal Reserve Act, it included language designed to protect the institution from political interference. The law requires that Fed governors only be removed “for cause,” though it did not spell out what that means or lay out any formal removal process.
Legal experts say the court’s decision to carve out an exception for the Fed while dismantling protections for other independent agencies raises a fundamental question about fairness and consistency. Former Fed vice chair for regulation Randal Quarles anticipated this tension in remarks made in April, warning that placing the Fed on its own island “will not be sustainable.”
“The Supreme Court says, ‘Look, here’s how the system is supposed to operate, the president has to be able to dismiss entities that execute executive power.’ But the Fed — we just say it’s magically different,” Quarles said. “At some point that is an unstable solution,” he added, predicting further legal challenges down the road.
The court justified its special treatment of the Fed in part by pointing to the warnings of Alexander Hamilton, one of the nation’s 18th-century founders, about the “calamities” of allowing politicians to influence monetary policy. The justices also cited the Fed’s unique hybrid structure — its Washington-based Board of Governors is appointed by the president with Senate confirmation, while the heads of its 12 regional reserve banks are selected by local boards of directors at what are essentially private regional institutions. The Fed also operates independently of congressional funding, earning its own revenue to cover expenses.
Despite Monday’s ruling, Cook’s situation is not entirely resolved. The court did not weigh in on the underlying substance of Trump’s mortgage fraud allegations against her — it only ruled that she may remain in her position while a court proceeding on the firing moves forward. Trump said Monday he plans to keep pushing the matter.
Cook released a statement after the decision, saying: “This was never about mortgage documents signed years before I became a Federal Reserve governor. It was an attempt to remove me on a manufactured pretext because I refused to bow to political pressure and continued to set interest rates based only on what would best serve the American people. Today’s ruling affirms a principle that has underpinned sound economic stewardship for generations.”
