Supreme Court may leave big questions unresolved on Trump bid to fire Fed’s Lisa Cook

By Jan Wolfe

WASHINGTON, Jan 24 (Reuters) – U.S. Supreme Court justices appear reluctant to grant President Donald Trump’s request to let him immediately remove Federal Reserve Governor Lisa Cook. But their eventual ruling following this week’s arguments in the case may not give Cook a sweeping victory. 

Rather, according to some legal experts, a likely outcome would be a narrow decision that could return the matter to a trial court for more fact-finding without the justices resolving big questions involving whether Trump has proper cause to oust Cook or whether a president has the power to fire Fed officials. In such a scenario, the case could return later to the Supreme Court.

Trump’s attempt to fire Cook and a separate criminal investigation launched by his Justice Department against Fed Chair Jerome Powell together represent the biggest challenge to the central bank’s independence since its founding in 1913.

A ‘MINIMALIST’ DECISION 

“The Supreme Court clearly seems to be looking for a way to get the case back to the lower courts with as minimalist of a decision as possible,” said law professor Peter Margulies of Roger Williams University in Rhode Island, “rather than a broad pronouncement.”

Trump’s Justice Department asked the Supreme Court to block U.S. District Judge Jia Cobb’s September preliminary injunction that halted his attempt to fire Cook the prior month. The U.S. Court of Appeals for the District of Columbia Circuit denied the administration’s subsequent request to lift Cobb’s order.

A narrow Supreme Court ruling against Trump would leave Cobb’s injunction in place and provide instructions to the judge about how to move the case toward a final judgment on the merits of Cook’s legal challenge to the Republican president’s bid to remove her.

The court, which has a 6-3 conservative majority, has backed Trump in numerous other cases decided on an emergency basis since he returned to office 12 months ago, including letting him remove officials from other federal agencies.

In creating the Fed, Congress passed a law that included provisions meant to insulate it from political interference, allowing a president to remove central bank governors only “for cause.” The law does not define “cause” or establish procedures for removal. 

Trump, who has taken a broad view of presidential powers under the U.S. Constitution, is the first president to try to fire a Fed official. 

Economists view central bank independence as indispensable to prevent interest rate decisions from being dictated by the short-term whims of politicians at the expense of long-term economic stability.

‘A HURRIED MANNER’

During the arguments on Wednesday, some of the justices noted that Cook’s case moved quickly to them, with little time for weighing evidence and resolving complex legal questions.

Conservative Justice Samuel Alito asked: “Is there any reason why this whole matter had to be handled by everybody – by the executive branch, by the district court, by the D.C. Circuit – in such a hurried manner?”

Cook sued Trump days after he posted to his Truth Social platform a letter informing her that she was “hereby removed.”

Trump said he had proper cause to fire Cook, citing unproven allegations made by one of his political appointees that she had falsified documents to obtain loans on two different properties she listed as her primary residences. Cook has called these allegations of mortgage fraud a pretext to remove her over monetary policy, as the Fed has resisted Trump’s persistent demands for fast and big interest rate cuts.

Alito said he did not think Cobb had created a full evidentiary record of Trump’s basis for removing Cook.

“No court has ever explored those facts,” Alito said. “Are the mortgage applications even in the record in this case?”

The justices “are wary of the relative paucity of the material for them to go on,” said law professor Jane Manners of Fordham University in New York. 

‘IRREPARABLE HARM’

The burden is on Trump to show he is entitled to a stay, or halt, of Cobb’s preliminary injunction. The administration must show Trump would be irreparably harmed if a stay is not granted. The justices must also consider whether a stay serves the public interest more broadly.

Conservative Justice Amy Coney Barrett noted that economists had filed briefs with the court arguing that granting Trump’s request to remove Cook immediately could trigger a recession, and asked whether that risk meant the court should proceed cautiously.

“The court could cite the irreparable harm factor and say the public interest isn’t clearly served by allowing removal at this point, particularly because of questions about effects on the markets,” Margulies said.

Boston University law professor Jed Shugerman said it is possible the Supreme Court’s ruling could come in the form of a one-paragraph order that denies Trump’s request for a stay but does not provide much if any legal reasoning. The court, for example, took that approach in an immigration case last year involving Trump that it decided on an emergency basis.

DUE PROCESS RIGHTS

The trial judge ruled that Trump’s attempt to remove Cook without notice or a hearing likely violated her right to due process under the Constitution’s Fifth Amendment and that the mortgage fraud allegations likely were not a sufficient cause to remove a Fed governor under the law.

Shugerman said Wednesday’s arguments revealed skepticism among the justices toward Trump’s legal arguments but a lack of consensus on how to interpret the law that created the Fed, what “for cause” means and how to distinguish the Fed from other government agencies.

Rather than delve into these questions in their pending ruling, the justices could kick them down the road and revisit them later with the benefit of further work by the lower courts, Shugerman said.

“I think they hinted at oral argument – if not said explicitly – that they find these issues too historically complicated and too legally complicated to be worthwhile to dig into at this stage,” Shugerman said. 

Some legal experts said the justices might rule in favor of Cook in a more forceful way that brings the case to an end. The court could rule, for example, that the process afforded to Cook to challenge the accusations against her was insufficient. 

But such a ruling still would be narrow in the sense that it would “avoid the question of why independence is necessary and important for the Fed and just focus on procedure,” said professor Andrea Katz of Washington University School of Law in St. Louis.

For his part, Trump said a day after the arguments that he did not get the impression that the court seemed skeptical of his bid to fire Cook.

“I didn’t get that impression other than they thought maybe it should have gone through a more normal court system,” Trump told reporters aboard Air Force One.

The court’s ruling is expected by the end of June but could come sooner.

(Reporting by Jan Wolfe; Editing by Will Dunham)