In the case of the Federal Reserve, Supreme Court appears to carve out a murky exception

In a move that highlights the unique status of the Federal Reserve among U.S. government institutions, the Supreme Court appears poised to protect Fed Governor Lisa Cook from presidential removal, even as it has allowed President Donald Trump to dismiss heads of other independent agencies.

During oral arguments Wednesday, the Supreme Court signaled that it views the Fed differently from other independent regulatory bodies. Justice Brett Kavanaugh, a Trump appointee, remarked that allowing Cook’s firing “would weaken, if not shatter, the independence of the Federal Reserve.”

This position marks a significant distinction from the court’s recent decisions regarding other independent agencies. In the past year, the court has permitted Trump to fire officials from the National Labor Relations Board and the Merit Systems Protection Board, and has indicated it would likely allow the dismissal of Federal Trade Commission Commissioner Rebecca Slaughter.

The justices’ apparent willingness to protect the Fed from presidential interference stands in contrast to the court’s broader trend of expanding executive power. The conservative majority has generally supported the “unitary executive” theory, which advocates for presidential control over executive branch agencies.

What remains unclear is the precise legal principle that distinguishes the Fed from other independent agencies. The court has stated that “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,” but has not fully elaborated on this distinction.

Legal scholars have expressed skepticism about this differentiation. Jane Manners, a law professor at Fordham University, noted, “There’s no historical grounds for distinguishing the Fed from other independent agencies that Congress has designed.” Peter Conti-Brown, a professor of financial regulation at the University of Pennsylvania, was more blunt, calling the differentiation “hocus pocus.”

The Cook case centers on whether the president can remove a Fed governor without demonstrating “cause,” typically defined as neglect of duty or malfeasance. The court has previously indicated that Fed governors can only be removed “for cause,” while officials at other independent agencies may be dismissed for any reason, including policy disagreements.

During Wednesday’s arguments, even the government’s top Supreme Court lawyer, D. John Sauer, acknowledged this distinction, noting, “There is a long tradition of having this exercise of monetary policy be exercised independent of executive influence. And we don’t dispute that that’s what Congress was doing.”

Some legal experts have attempted to justify the Fed’s special status. Aaron Nielson, a law professor at the University of Texas, argued in a brief that “the Fed’s core function is monetary policy, which need not and often does not require executive power,” unlike agencies such as the FTC that “indisputably exercises executive power.”

Others disagree. Lev Menand, a law professor at Columbia University and author of a book about the Fed, contends that the central bank does exercise executive power through banking regulation, including monetary policy adjustments. “There is no fourth type of government power,” Menand said. “There is no other place to locate the Fed.”

The Supreme Court will initially rule on whether Cook can remain in her position while the larger dispute proceeds through lower courts. A more comprehensive ruling explaining the Fed’s distinctive status may come later.

The outcome of this case has significant implications for the independence of the U.S. central bank, which has historically operated with considerable autonomy from political pressure. As Cook’s lawyer, Paul Clement, noted during arguments, “There’s a reason that the markets watch the Fed a little more closely than they watch really any other agency of government.”

The court’s apparent reluctance to allow presidential interference with the Fed underscores the central bank’s crucial role in managing monetary policy and maintaining economic stability, even as the justices have expanded presidential control over other regulatory agencies.