Last week, the Supreme Court heard oral arguments in Trump v. Cook.
This case came to the court on an expedited basis because in August of last year President Donald Trump posted on social media a letter addressed to Lisa Cook telling her that “Pursuant to my authority under Article II of the Constitution of the United States and the Federal Reserve Act of 1913, as amended, you are hereby removed from your position on the Board of Governors of the Federal Reserve, effective immediately.”
Cook, of course, didn’t like that and immediately ran to a District of Columbia district court, which enjoined—stopped—the removal from moving forward. The D.C. Court of Appeals, and the U.S. Supreme Court both declined to put that order on hold. But the Supreme Court did agree to hear the case on an expedited basis.
The crux of the case primarily turns on what qualifies as “cause” for removal under the Federal Reserve Act. Unlike other statutory removal provisions that specify the president can only remove officials for “inefficiency, neglect of duty, or malfeasance in office,” the Federal Reserve Act contains no such limitation. It only provides that a President can remove a member of the Board of Governors “for cause.”
And here, the president says that cause exists because Cook—before she joined the Fed—had listed two different properties on mortgage applications as her “primary residence.” This matters because primary residences typically receive more favorable mortgage terms—like lower interest rates—than second homes or other types of properties.
Trump said the situation, “[a]t a minimum … exhibits the sort of gross negligence in financial transactions that calls into question [her] competence and trustworthiness as a financial regulator,” asserting “sufficient cause to remove [Cook] from [her] position” due to “deceitful and potentially criminal conduct in a financial matter” or “gross negligence in financial transactions.”
While the advocates at oral argument sparred over a host of issues, three stood out: 1) What qualifies as cause? 2) Can it be based on pre-office conduct? And 3) what process, if any, is due to an individual before being removed?
No clear consensus seemed to exist among the justices based on their questions at oral argument—though all agreed that for purposes of this current case the president is only advancing a claim that he can remove Cook under the express terms of the Federal Reserve Act. He is not invoking a broader Article II authority to remove Cook or to control the Fed, as he did in a similar case involving his removal of Rebecca Slaughter at the Federal Trade Commission. That fight will wait for now.
Of course, the oral argument came on the heels of Federal Reserve Chairman Jerome Powell publicly announcing that he had received subpoenas seeking information about testimony he gave before Congress and expensive renovations to the Fed’s headquarters in Washington. (We don’t know the exact parameters of those requests, though, because the Justice Department typically cannot, and will not, divulge those types of details).
Part of the conversation too revolved around what role courts should play in this process.
Can judges substitute their own views of what constitutes “cause” for the president’s where the statute doesn’t define the term? Can courts reinstate an official who has been removed from office? Can courts compel the president to adopt a specific process to follow in making these decisions?
The justices will continue to wrestle with all these questions—and others—while deciding this important case.
