Trump asks Supreme Court to remove Fed Gov. Cook

Kent Nishimura/Bloomberg

• Key insight: The Trump administration is asking the highest court in the nation to remove barriers from ousting Federal Reserve Gov. Lisa Cook before litigation proceeds.
• Expert quote: "This court should stay the district court's deeply flawed preliminary injunction and should grant an immediate administrative stay," — U.S. Solicitor General John Sauer.
• What's at stake: It has been speculated that the case would reach the Supreme Court, and the justices' interpretation of the "for cause" provision, which has historically protected Federal Reserve officials, could have seismic implications for the central bank's future independence.

President Donald Trump has asked the Supreme Court to strike down an injunction allowing Federal Reserve Gov. Lisa Cook to remain on the job while courts decide whether Trump's efforts to remove her are legal. 

On Sept. 18, Trump's legal team petitioned the nation's highest court to overturn lower court rulings that blocked the president's effort to fire Cook from taking effect. A preliminary injunction issued by the D.C. district court allowed Cook to remain at the central bank and continue voting on the Federal Open Market Committee while her lawsuit against the president is litigated. Trump appealed that decision to the D.C. Circuit Court of Appeals late last week, but the appellate court on Monday decided to leave the injunction in place.

John Sauer, the U.S. solicitor general, asked the Supreme Court Thursday to freeze the lower court's injunction, arguing that the decision represents "improper judicial interference with the president's removal authority."

"Put simply, the president may reasonably determine that interest rates paid by the American people should not be set by a governor who appears to have lied about facts material to the interest rates she secured for herself — and refuses to explain the apparent misrepresentations," Sauer wrote in the filing. "This court should stay the district court's deeply flawed preliminary injunction and should grant an immediate administrative stay."

Sauer also asserted that the president had identified sufficient grounds for Cook's removal under the Federal Reserve Act's "for cause" provision. He said Cook received proper notice of the administration's intent to remove her from the board.

"Even if Cook's acts reflect gross negligence, the president expressly determined that her lack of care in making important financial representations provides sufficient cause for her removal because it 'calls into question [her] competence and trustworthiness as a financial regulator,'" Sauer added.

The government's lead counsel before the Supreme Court added that the administration itself faces "irreparable harm from an order allowing a removed officer to continue exercising the executive power over the president's objection." 

In response, Cook's legal team submitted a filing opposing the president's request for an administrative stay and argued that granting it would "subvert the Federal Reserve's historical independence and disrupt the American economy."

"Temporarily removing [Cook] from her post would threaten our Nation's economic stability and raise questions about the Federal Reserve's continued independence — risking shock waves in the financial markets that could not easily be undone," Cook's attorneys said in their response brief.

Observers long expected the case to end up before the Supreme Court, setting up a potentially consequential decision that could have broad and significant implications for the longstanding independence the Fed enjoys from political interference. Legal experts have said that the way the "for cause" provision is interpreted by the court could reinforce or weaken protections that have historically shielded Fed officials from outside pressures. 

Though Trump has been outwardly critical of the Fed's monetary policy and has threatened to fire Chair Jerome Powell, the attempt to oust Fed Gov. Cook in mid- August was an unprecedented and historical move.

On Aug. 20 Trump's social media post consisted of a screenshot of a letter to Cook informing her that she was "removed" from her seat on the Fed board. Allegations that Cook claimed primary residence on two mortgages before joining the Fed board are cited as the justification in Trump's letter. Cook has not been charged with a crime.

"The executive power of the United States is vested in me as President and, as President, I have a solemn duty to ensure that the laws of the United States are faithfully executed," Trump's letter said. "I determined that faithfully executing the law requires your immediate removal from office."

Following the attempt to oust her, Cook immediately filed a complaint against the president and the Federal Reserve arguing that the Federal Reserve Act only allows the president to remove a Federal Reserve Board governor "for cause," and that the allegations presented by Trump do not meet that standard.