Supreme Court Shields Fed Independence in 5-4 Ruling

The Supreme Court on Monday kept in place a preliminary injunction blocking President Trump’s attempt to fire Federal Reserve Governor Lisa Cook, preserving the central bank’s independence from direct presidential control. The 5-4 vote came on the Court’s interim docket, with Chief Justice John Roberts joined by Justices Brett Kavanaugh, Elena Kagan, Sonia Sotomayor, and Ketanji Brown Jackson. Dissenting were Justices Clarence Thomas, Samuel Alito, Neil Gorsuch, and Amy Coney Barrett.

The Cook case is the second major executive-power ruling this term. Earlier, in Trump v. Slaughter, the Court overruled the 1935 precedent Humphrey’s Executor and held that the president can remove heads of administrative agencies at will. Chief Justice Roberts wrote both opinions, creating a double standard: most agency heads are now at-will employees, but the Fed remains protected by a “for cause” removal standard under the Federal Reserve Act.

“America has always had a central bank,” Roberts wrote in the Cook decision, tracing the lineage from the Bank of North America through the First and Second Banks of the United States. The Federal Reserve, he argued, follows in that tradition, and its “uniquely structured, quasi-private” character justifies independence even as the Court strips similar protections from other agencies. The majority cited the risk of “calamities that could arise from even the ‘suspicion’ of political manipulation of monetary policy” as a key reason for the carve-out.

Justice Thomas, in a dissent that quoted the libertarian economist Murray Rothbard, challenged the historical reasoning. The First and Second Banks “were banks with no executive power,” Thomas wrote. The modern Federal Reserve Board, by contrast, is “unquestionably a federal agency that wields considerable executive power,” including issuing rules, levying assessments, banning individuals from banking, and enforcing statutes through civil and criminal penalties. He called the Fed a “novel ‘federal agency’ with ‘broad powers affecting the entire banking and currency system,’” quoting Woodrow Wilson.