The SCOTUS hearing over Fed governor Lisa Cook is also about Fed independence

This Wednesday, the Supreme Court will hear arguments over the Trump administration’s attempted firing of Federal Reserve governor Lisa Cook. And while it’s not quite clear which way the court may go, this ruling could determine how easily the president can dismiss Fed officials, and thereby erode the Fed’s independence over monetary policy.

In a previous ruling last May, the Supreme Court sided with the president, ruling that he could fire several government officials “without cause.” At the same time, SCOUTS carved out a special case for officials in the Federal Reserve. Governor Cook’s hearing could test that language.

“Marketplace” host Kai Ryssdal spoke with Leah Litman, a law professor at the University of Michigan, co-host of the podcast “Strict Scrutiny,” and the author of the book, “Lawless: How the Supreme Court Runs on Conservative Grievance, Fringe Theories, and Bad Vibes.” The following is an edited transcript of their conversation.

Kai Ryssdal: We had you here a year or so ago, before a big Federal Trade Commission case, Humphreys Executor, and who the president could fire when and if he feels like it, or not. And I asked you about the Fed, and you said, and this is almost a quote, that you thought they were going to, and you hoped they would, find a way to carve out a special thing for independent monetary policy. And lo and behold, that ruling comes down, and the court says the Federal Reserve is, and this is the quote, "a uniquely structured, quasi private entity that follows in the distinct historical tradition of the first and second banks of the United States." So first of all, congratulations on your prescience. Second of all, though, we're going to hear that a lot tomorrow with governor Cook's case.

Leah Litman: Yes, yes, absolutely. And if only I could manifest everything the Supreme Court would do. But yes. So the case they're hearing tomorrow is if the president is purporting to operate kind of within the strictures that they gave him. They said Congress can limit the circumstances under which presidents can fire governors of the Federal Reserve Board to what's called "good cause." And the president is claiming to have good cause for firing Lisa Cook. And so it's really going to be about the extent to which the court is willing to review the president's claims to have good cause. And that's, of course, going to be bound up into their really-felt need to continue to allow the Fed to make independent monetary policy.

Ryssdal: So Chair Powell is going to be in the courtroom, the Associated Press reports, and obviously, one hopes that the justices honestly ignore his presence, right? He's there to support governor Cook. It's tough, though, for them to ignore the atmospherics of the subpoenas that were sent by the Justice Department to Chair Powell and the Fed and the talk of the criminal investigation, right? I mean, they can read newspapers

Litman: Absolutely. That is definitely going to be hanging over the argument, because I think what it underscores is the president is really not going to stop trying to drum up pretty dubious claims about why he has cause to fire any governor of the Federal Reserve that he doesn't like. And so the fact that the President is basically trying to use these cause exceptions to fire whoever he wants, it would be impossible for the justices not to acknowledge that and have that influence their thinking about the case.

Ryssdal: Alright, so you're the lawyer in this conversation. You've got the Supreme Court experience. How are they going to get themselves out of this jam? Because they have given the president, as we all know, extraordinary powers over who he hires and fires.

Litman: They have, and my guess is they are not going to want to call him a liar. And this case, you know, is one of the ones that tees up, you know, will they listen to the President's somewhat specious claims? I mean, I don't think many people think he's firing Lisa Cook because of these allegations of mortgage fraud.

Ryssdal: Sorry to interrupt, we should say those charges not only have been not charged, not proven in any way. I mean, they're just out there being bandied about.

Litman: Exactly, they are just allegations. And you know, ProPublica, their reporting has indicated that many people in the Trump administration have done exactly what Trump accused Lisa Cook of doing, which is listing some house she purchased as a primary residence when in fact it wasn't going to be. But anyways, I don't think they're going to want to say that the president is lying. Instead, I think if they end up ruling for Lisa Cook, and I'm not sure they will, they will probably do so by saying the president didn't follow the statutorily or constitutionally required process for removing a governor of the Federal Reserve, because that would allow them to limit his power and prevent this particular removal without having to call BS on his claims.

Ryssdal: Doesn’t it give him another bite at the apple, though, right? Because he can come back now and say, 'Oh, I'm doing what you told me to do.'

Litman: It does, and you would hope that they would have learned their lesson from, you know, saying, 'oh, the Fed is different. You can fire everyone except for the Fed.' So what does he do? He goes and fires a governor of the Federal Reserve. You would think that they would internalize the timeless tale of, if you give a mouse a cookie, what is the mouse going to do? But it's not clear they will do so. And, you know, I think some of the things that they limited him from doing during the first Trump administration, for example, attempting to end the DACA, the Deferred Action for Childhood Arrivals program there, they told him he didn't use the right process, and he didn't actually end up trying to do it again. Now, that was Trump 1.0, this is Trump 2.0, but it's a little bit hard to say that he would definitely try to do the same thing if they went this narrower route.

Ryssdal: Different topic, but since I have you on the phone, the tariff ruling did not come down today. We in the business and economic press are waiting for it like nobody's business. What's taking them so long?

Litman: You know, it's hard to know. The usual rule is big cases — and the tariff case is a big case — usually those cases end up being decided at the end of the Supreme Court term which would be in June. Now we all think this case could be decided more quickly, in part because as these tariffs continue, you know, the government is accumulating additional debts it may have to pay back. But I think the reality is the normal course would be for this case to take longer, because the justices are probably disagreeing, and this isn't a question they have decided before and on which there is a ton of precedent. But I certainly wish they would hurry up and get this one out, especially as you know, he just threatened additional tariffs related to Greenland. So please, please weigh in.