Legal Docket: Who controls the Fed?

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NICK EICHER, HOST: It’s Monday the 26th of January.

Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Nick Eicher.

JENNY ROUGH, HOST: And I’m Jenny Rough. Time now for Legal Docket.

Once again, a major case at the U.S. Supreme Court involving President Donald Trump. This time: Trump versus Cook.

And this one goes back just five months, to August 20th, 2025, when the president posted a message on social media: Cook must resign, now!!! Three exclamation points.

He meant economist Lisa Cook, a member of the Federal Reserve Board of Governors. Trump cited allegations that Cook had committed mortgage fraud.

Two days later, reporters asked him about it. Audio from CNBC:

CNBC REPORTER: While all this is happening, the President spoke to the media this morning in Washington about the controversy surrounding Governor Cook. Take a listen.

REPORTER: Are you going to fire Lisa Cook, the Fed Governor?

TRUMP: Yeah, I’m going to fire her if she doesn’t resign. What she did was bad. So I’ll fire her if she doesn’t resign.

EICHER: Three days later, August 25th. The president again takes to social media. This time, he posts a formal letter addressed to Cook. It says he’s removing her from office under his authority in the Constitution and the Federal Reserve Act. He thanks her for her attention to this matter.

That move raises a basic question: Can a president fire a Federal Reserve governor like that?

The Fed is designed to be independent. Congress established it more than a century ago, and its seven governors serve long, staggered fourteen-year terms—so no single president can easily remake the board.

Cook was first appointed by President Joe Biden in 2022 and confirmed to a full term the following year.

Under the Federal Reserve Act, a president can remove a Fed governor—but only for cause.

And that is what Trump is attempting here.

ROUGH: Cook sued to stop him and save her job, and it’s already on the Supreme Court’s docket. Here’s Solicitor General John Sauer defending Trump during his opening statement at oral argument:

SAUER: Deceit or gross negligence by a financial regulator in financial transactions is cause for removal. In a two-week period in 2021, Lisa Cook submitted mortgage applications for two properties in Michigan and Georgia. In both, she told the lender that, within 60 days, she would occupy that property for one year as her principal residence.

A borrower like Cook will get a cheaper interest rate on a primary residence than a second one. But a person cannot have two of them simultaneously. Sauer said to represent both properties to lenders as her primary residence was grounds for her removal.

SAUER: The American people should not have their interest rates determined by someone who was, at best, grossly negligent in obtaining favorable interest rates for herself.

EICHER: Cook disputes that. About three months after the president said he was firing her, Cook’s lawyer sent a letter to the Department of Justice. The letter explained she had no intent to defraud the lender. It said her Michigan home was her primary residence. And as far as her Georgia property is concerned, she said the line on the mortgage application naming it primary was “inadvertent.” A second document to the same lender correctly identified it as a summer home.

ROUGH: Here’s Chief Justice John Roberts asking the solicitor general about the facts still in dispute.

ROBERTS: You began by talking about deceit. Is what you said after that apply in the case of an inadvertent mistake contradicted by other documents in the record?

SAUER: Even if it was inadvertent or a mistake, it’s quite a big mistake, so to speak, in a key financial representation made in the context of interest rates.

ROBERTS: Well, I mean, I suppose we can debate that, how significant is it in a stack of papers you have to fill out when you’re buying real estate ...

Now, let me pause for a moment.

Because if you think things sound a bit unusual right now, you’re right about that. The Supreme Court generally reviews questions of law. Not questions of fact. The trial court typically sorts out the facts. By the time a case reaches the Supreme Court, the factual record is often set. But this case came to the Supreme Court on an emergency appeal. Because Cook’s lawsuit has not gone to trial, the factual record is still underdeveloped.

EICHER: After Cook sued, the trial court granted Cook’s request for a temporary order to block Trump from removing her while her case is pending. In other words, she gets to stay in her job in the meantime.

At this stage, the Supreme Court is not deciding whether Cook did anything wrong. It’s deciding whether to reverse that order. If it’s reversed, Cook is off the Fed during that lawsuit.

ROUGH: Eventually, the oral arguments did turn to the law. And tackled a range of questions.

Let’s start with due process. Cook argues Trump violated her rights under the due process clause of the Constitution and the Federal Reserve Act by denying her fair notice and a hearing.

Trump’s lawyer Sauer said what the president did was adequate. But Justice Kentaji Brown Jackson pushed back.

JACKSON: Traditionally, when an allegation is made about someone’s misconduct, or whatnot, there’s an opportunity for that person to present evidence, for the other side to present evidence. … So what I’m trying to understand is, what is the evidence that has been presented and considered with respect to Ms. Cook’s alleged misconduct?

SAUER: Well, the removal order addresses that, because...

JACKSON: What is the removal order? The Truth Social post?

SAUER: No, it’s the August 25th letter. … The evidence is you have mortgage applications within two weeks of each other that make clearly conflicting representations.

JACKSON: Was Ms. Cook given the opportunity in some sort of formal proceeding to contest that evidence or explain it?

SAUER: Not a formal proceeding. She was given an opportunity in public because she was notified—

JACKSON: In the world? Like she was just supposed to post about it and that was the opportunity to be heard?

If social media was the wrong way to handle fair notice and a hearing, what would be the right way? Here’s Justice Clarence Thomas and Cook’s lawyer, Paul Clement:

THOMAS: What would the review look like?

CLEMENT: I mean one example we have historically is President Taft, and he sort of gave the removed officials the full Taft, and it was notice opportunity for a hearing before an impartial tribunal … so that’s kind of the maximum that the president could give.

At a minimum, Clement said she should get at least three things: notice, the opportunity to present evidence—

CLEMENT: And then the third thing is some effort to keep the final decision maker from prejudging the issue. … and the president can be the final decision maker... then he needs to be a little bit careful and say, "These are the allegations." He can’t start by prejudging the issue by saying, “Resign.”

But Chief Justice Roberts sounded unconvinced a hearing would be of much help here, given what’s already played out.

ROBERTS: I’m not sure exactly what you want a hearing for. If your argument is inadvertence, it doesn’t seem to me that there’s much you can say factually other than that. … You have one sentence to say, "it was an inadvertent mistake."

Trump’s lawyer Sauer agreed. What’s happened is enough. But Justice Amy Coney Barrett saw no harm in doing more.

BARRETT: Sit down across the table in the Roosevelt Room where the president provides Ms. Cook, Governor Cook, with the evidence and waits to hear what her response is, gives her a chance to defend herself. I mean, that just wouldn’t be that big a deal, it seems, if that's enough.

EICHER: Sauer insisted: The text of the statute says nothing about a formal or informal hearing. It simply says the president can fire her for cause and that’s what he did.

Courts often treat “for cause” as shorthand for serious on-the-job wrongdoing—but Congress didn’t define it that way here, leaving the question unanswered: What is the meaning of the term “for cause”?

Cook’s attorney wants the court to adopt a standard known as I-N-M: I for inefficiency, N for neglect of duty, M for malfeasance. That standard is found in other statutes that allow firing “for cause.” But, as Justice Barrett pointed out—

BARRETT: It doesn’t say INM, and so I mean, I appreciate your argument that INM and “for cause” are one and the same... I mean, it doesn’t say INM.

Another issue: Cook’s conduct happened before she took office. Justice Sonia Sotomayor.

SOTOMAYOR: It’s not as if she’s been incompetent, negligent, or committed malfeasance while in office. This is something pre-office. So keeping her in-office is not causing an immediate harm to the agency.

But solicitor general Sauer argued that “for cause” gives the president broad discretion. The Court’s own precedent distinguishes between the president’s political actions that are discretionary in nature. In those cases, courts do not have the authority to review them. That’s left to the political process and the voting booth.

ROUGH: The propriety of Cook’s interim relief is technically the main issue in this case. The court will consider whether leaving the status quo causes Trump irreparable harm and what best serves the public interest.

EICHER: Now just last month, the court heard a similar case involving government agencies, Trump vs. Slaughter. There, the president took the position that requiring him to fire a federal trade commissioner “for cause” was unconstitutional. Here, he concedes that he can only fire a federal governor “for cause.”

ROUGH: There’s lots to unpack there, but for better or worse, the Fed is treated differently than other agencies. The idea is to separate monetary policy from politics.

Justice Brett Kavanaugh thought giving the president too much control over the Fed...

KAVANAUGH: I mean that would weaken, if not shatter, the independence of the Federal Reserve. It incentivizes a president to come up with … trivial or inconsequential or old allegations that are very difficult to disprove. It incentivizes kind of the search and destroy, and find something and just put that on a piece of paper, no judicial review, no process, nothing, you’re done.

Along with the Cook case, the Supreme Court handed down three opinions last week. All were short. All were unanimous. All turned on the same idea: when a law’s written plainly and constitutionally, that dictates the result. Judges don’t get a say.

EICHER: In Berk v Choy, the court said federal, not state procedural rules govern medical malpractice cases in federal court. That matters because it determines how hard it is for patients to sue and for doctors to defend themselves, depending upon where a case is filed.

In Ellingburg v United States, the court held that forcing certain defendants to pay money to the victims counts as criminal punishment, not a civil remedy. That means Congress cannot apply those penalties retroactively—and that protects defendants from being punished under rules that didn't exist when they acted.

And finally, in Coney Island Auto Parts v Burton, the court enforced a time limit on challenging an alleged void judgment—that brings closure to cases that might otherwise keep the doors open.

ROUGH: And that’s this week’s Legal Docket.

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