WASHINGTON − As theSupreme Courtis deciding whether PresidentDonald Trump'ssweeping tariffsare legal, the justices will take up on Jan. 21 his other major attempt to assert unprecedented control over the U.S. economy.
Although it's not unheard of for presidents to pressure the Federal Reserve over monetary policy, Trump is the first presidentto try to removea member of the central bank's board.
The court's consideration of whether Trump can bounceLisa Cookfrom the seven-member board comes as the political and financial worlds are still reeling from thestunning revelationthat the Justice Department is investigating whether to bring criminal charges against Federal Reserve Chair Jerome "Jay" Powell.
"This is a case that's about much more than Cook," said Lev Menand, a law professor at Columbia University and former Treasury Department official. "We can think about the Cook removal as seeking a road map from the court for how to potentially remove other governors, including Jay Powell."
Trump wants lower interest rates
Trump is upset that the Fed hasn't lowered interest rates as fast as he wants.
"If I had the help of the Fed, it would be easier," Trumpsaidduring a recent speech to the Detroit Economic Club which included a swipe at Powell. "That jerk will be gone soon."
More:In Detroit speech, Trump touts an economic boom invisible to many
Lower interest rates could goose the economy, increase employment and make the federal debt less expensive.
That would help Trump politically in this year's mid-term elections. Polls showvoters are unhappywith his handling of the economy.
Lowering rates too quickly can lead to inflation
But the Fed has taken a more cautious approach to lowering rates because short-term economic gains can jeopardize long-term economic stability, leading to persistently higher inflation.
That's why every living former Federal Reserve chair, along with many former economic officials and economists, have emphasized to theSupreme Courtthe importance of maintaining the independence of the top policymaking body for the U.S. economy that is also a cornerstone of the world financial system.
"The Fed's ability to fight inflation is directly related not only to its actual insulation from short-term political pressures but also to the public's perception of its independence," former Fed chairs Janet Yellen, Ben Bernanke and Alan Greenspan and others wrote in afilingsupporting Cook.
The U.S. Chamber of Commerce likewise called the independence of the Fed"essential for a strong economy and financial stability."
The Trump administration countered that the "perceived benefits" of an independent Fed is a policy argument, and the only issue before the Supreme Court is whether the president's attempt to remove Cook followed the law.
Supreme Court has signaled support for Fed independence
The court, despite its 6-3 conservative majority, has already signaled it may be skeptical of Trump's legal arguments.
The high court didn't immediately weigh in on a lower court's decision to let Cook stay at the Fed while she fights Trump's attempt to fire hire. Instead, itdelayed a rulinguntil after the Jan. 21 oral arguments.
More:Supreme Court says Trump cannot, for now, remove Lisa Cook from Fed; will take up matter in January
By contrast, the court did allow Trump to temporarily remove leaders at other independent agencies before their cases were fully litigated.
And in a May decision about removing members of the Merit Systems Protection Board and the National Labor Relations Board, the court went out of its way to portray the Fed as a different type of agency from those it's indicated should be directly under a president's control.
"The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States," the opinion said.
The administration's investigation into whether Powell allegedly misled Congress about a building renovation project at the Fed's headquarters could stiffen the justices' collective spine in Cook's case.
It creates a context that will undermine Trump's arguments by suggesting that his overall goal is taking control of the Fed, not figuring out if Cook committed a removable offense, said Menand, the Columbia University law professor.
Cook hasn't been charged with a crime
Trump has accused Cook of making false statements on mortgage applications before she began her 14-year term in 2023.
Cook hasn't been charged with a crime and wasn't given a chance to respond formally to Trump's claim on social media that she declared more than one home as her "primary residence" in an effort to get a more favorable interest rate for a second home.
The law allows a Fed member to be removed "for cause," but does not elaborate on what would qualify as a cause or specify a procedure for proving someone has committed a disqualifying act.
Cook, who "vigorously contests" that she committed mortgage fraud, argues the allegation is a pretext to fire her for her stance on monetary policy. He lawyers also said unproven allegations about mortgage papers Cook signed before joining the Fed aren't a good enough reason to get rid of her under the "for cause" removal protection created by Congress to keep the Fed free from political pressure.
"Congress did not mean for the Nation's monetary policy to turn on that game of find-an-alleged-crime," they wrote in a filing.
Trump dismissed concerns about Fed independence
The Justice Department argues that because the law creating the "for cause" protections doesn't spell out how that should work, the president – not the courts – gets to decide when there's sufficient cause.
Allowing Cook to remain at the Fed while she fights the allegations undermines public confidence in the central bank, the Justice Department said.
"The American people should not have their interest rates determined by someone who made misrepresentations material to her mortgage rates that appear to have been grossly negligent at best and fraudulent at worst," the department wrote in a filing.
Trump, in a recent interview with Reuters, dismissed concerns that eroding the Fed's independence could undermine the value of the U.S. dollar and spark inflation.
"A president should have something to say" about Fed policy, Trump told Reuters. "I made a lot of money with business, so I think I have a better understanding of it than Too Late Jerome Powell."
This article originally appeared on USA TODAY:Will the Supreme Court let Trump take control of the Fed?
