As an economics student, I have spent countless hours studying and analyzing Federal Reserve policies in textbooks, but nothing prepared me for the chance to go to a Supreme Court hearing concerning those policies. The case I attended, Donald J. Trump, et al. v. Lisa D. Cook, centers on whether Trump can fire Federal Reserve Board governor Lisa Cook. The hearing was two hours of arguments.
Solicitor General D. John Sauer, arguing for President Trump, spent time detailing how Lisa Cook allegedly made conflicting representations on two mortgage applications within a two-week period in 2021.
What impressed me the most was Justice Sotomayor’s intervention. She systematically dismantled the government’s emergency posture argument. Firstly, the president by his own admission, cannot fire Cook for policy disagreements. Secondly, Cook has not been incompetent or negligent while in office; the grounds for removal concerns pre-office conduct. Lastly, the Fed’s independence is important, and rushing a ruling on these issues without due consideration might harm public confidence.
After that, Sauer argued this case violates equity principles with regards to the 1789 Sawyer decision, but Justice Jackson pressed him - determining that Cook filed for an injunction before being terminated to prevent termination. Overall, Sauer never gave a satisfying answer to why preventing removal differs from restoring someone already removed. Justice Kagan later pointed to the circularity that if the president can remove a Governor for gross negligence without defining what gross negligence means, and there is no judicial review of whether conduct actually constitutes gross negligence, then what does the "for cause" restriction restrict?
After that, Paul Clement arguing for Cook, raised different issues. His core defense centers around his claim that that "for cause" in the 1913 Federal Reserve Act means “inefficiency, neglect, or malfeasance” (INM) with ineligibility under Section 244 of the statute. Therefore, from my point of view, Clement’s argument revolves around the claim that pre-office conduct, unless it rises to an infamous crime requiring conviction at common law, does not need to be qualified.
Justice Alito tested this contention with hypotheses. Clement stuck to his position - not INM, therefore not removable, but impeachable. Watching Clement defend this made me realize how much his arguments depend on trusting that extreme hypotheticals will not happen, or that resignation will solve them. Political appointees often fight to keep their positions, and impeachment is too slow and political to quickly remove them. The "backup to the backup" helps with some hypotheticals but requires conviction that seems arbitrary.
I kept thinking about why central banks need independence from political pressures, how it prevents the boom-bust cycles of the 1970s when politicians kept pushing for loose money before elections. The government theory “for cause” means almost anything, with minimal process and with minimum court review. This renders the restriction essentially meaningless.
Future presidents might have the power to remove Fed governors they dislike, find some justifications, and a court will not be able to stop it. Clement theory, on the other hand, creates scenarios where manifestly unfit officials can’t be removed through any realistic mechanism. Neither side is convinced what “for cause” means in practice, how much process is required, or what judicial review looks like.
It seems possible to me that the Supreme Court will rule narrowly that the removal protections are constitutional based on precedent. Cook will keep her job, and everyone will move on. But nobody in that courtroom convinced me that we have actually solved the underlying problem: how do you give an institution enough independence to make good long-term decisions while maintaining enough accountability to call it democratic?
Maybe that is unsolvable.