Fed independence after Trump v. Cook

… <p>As a technical legal matter, the Supreme Court’s decision in <em>Trump</em> <em>v. Cook<a id="citation-1" class="citation" aria-describedby="citation-tooltip-1" tabindex="0" aria-haspopup="true" aria-expanded="false">¹</a> </em>was a narrow one. As a practical matter, it has far-reaching, mostly favorable implications for the independence of the Federal Reserve. Most importantly, on the same day the Court mandated that the President can remove members of traditionally independent agencies such as the Federal Trade Commission, it made clear that the Board of Governors of the Federal Reserve is an exception to that new rule. During their fourteen-year statutory terms, Members of the Board may not be removed for policy disagreements or at the whim of the president. They may be removed only, as the Federal Reserve Act says, “for cause.”<a id="citation-2" class="citation" aria-describedby="citation-tooltip-2" tabindex="0" aria-haspopup="true" aria-expanded="false">²</a></p> <p>The immediate consequence of the decision is that the President’s effort to remove Governor Lisa Cook from the Board has been halted. Although the Court did not preclude the President from trying again if he provides her with some explanation of the evidence for her removal and an opportunity to respond, the Court’s interpretation of the “for cause” requirement in the Federal Reserve Act makes the case against her a difficult one to win unless important new facts emerge. The remainder of this post provides some background on the case, explains the Court’s ruling, and identifies significant questions that remain: the nature of the process that must be followed before a Governor can be removed, the extent to which the exception for the Fed applies to its functions other than monetary policy, and the durability of the critical ruling that for-cause protection for Fed Governors is constitutional.</p> …