The Supreme Court is about to weigh in on the Fed's independence in a case that goes beyond Jerome Powell

• The Supreme Court is set to hear arguments over whether Trump can fire Fed board member Lisa Cook.
• The oral arguments come amid a new criminal probe into Fed Chair Jerome Powell.
• December arguments over the firing of an FTC commissioner suggest how the Supreme Court might rule.

The Supreme Court on Wednesday is scheduled to hear arguments over President Donald Trump's attempts to fire a sitting Federal Reserve board member.

Lisa Cook, whom Trump tried to remove in August, has asked the high court to ensure she can keep her job. She's argued that the "cause" Trump cited, which involves allegations of mortgage irregularities, is a pretext. The efforts to fire her are based on politics, not economic data or job performance, her lawyers say.

The case has broad implications for the central bank's independence at a critical moment. Last week, Fed Chair Jerome Powell accused Trump's Justice Department of an unprecedented attempt to pressure him with what he described as a sham criminal probe.

As Powell continues to battle what he has described as improper political interference, the Cook case tests a separate but related legal question: Can the president of the United States unseat a sitting Fed governor for any reason?

Josh Chafetz, a constitutional law professor at Georgetown Law School, predicted the criminal investigation into Powell could make the Supreme Court justices more inclined to "put the brakes" on Trump's efforts to pressure the Fed.

"John Roberts doesn't want to throw the global economy into turmoil," Chafetz said, referring to the chief justice.

Over the past year, the Supreme Court has greenlit Trump's firing of other independent agency leaders. At the same time, the majority of justices have said they would treat the Federal Reserve with special deference.

In Wednesday's oral arguments, we'll learn more about just how special the Fed really is.

A Supreme Court argument last month offers clues

The Federal Reserve — like the Federal Trade Commission and National Labor Relations Board — was created by Congress as an independent agency, structured to insulate its members from political winds. Presidents appoint board members for staggered 14-year terms. Cook, a Biden appointee, has until 2038 before her term expires.

Over the years, the Supreme Court has chipped away at the independence of similarly constructed agencies.

In 2020, it ruled that the Consumer Financial Protection Bureau, an independent agency with a single director, could have its leader fired by the president "at will" — meaning for any reason whatsoever — rather than "for cause."

The Supreme Court has suggested it may soon allow "at will" firings of leaders of independent agencies led by multi-member boards, too. In December, it heard oral arguments for a lawsuit brought by Rebecca Slaughter, who Trump fired from the Federal Trade Commission.

Trump's letter firing Slaughter didn't identify any cause, even though the Supreme Court has previously said presidents need to meet that standard to remove FTC commissioners. And unlike Cook, the Supreme Court has allowed Slaughter to be removed from her post while additional legal proceedings play out.

The Supreme Court hasn't yet issued a final ruling in Slaughter's case. But during oral arguments in December, several Republican-appointed justices indicated they could deal a death blow to a 90-year-old case that recognized limits to the president's ability to fire members of independent agencies. The landmark unanimous ruling said agencies like the FTC were "quasi-judicial and quasi-legislative," a structure intended to safeguard them from "political domination."

Chief Justice John Roberts referred to the 1935 opinion, known as Humphrey's Executor, as "a dried husk." Justices Neil Gorsuch and Amy Coney Barrett both asked Slaughter's lawyer if he could cite different Supreme Court precedents that would allow her to keep her job.

During the past year's legal battles between the Trump administration and independent agency leaders, the justices have gone out of their way to single out the independence of the Federal Reserve.

In May, a majority of justices allowed Trump to remove members from two independent agencies — the Merit Systems Protection Board and National Labor Relations Board — but said the Federal Reserve's "for cause removal protections" would need to be considered with its "distinct historical tradition" in mind.

"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 justices wrote in an unsigned opinion.

Justice Brett Kavanaugh took pains during oral arguments in the Slaughter case to indicate that he was inclined to give the Federal Reserve special treatment.

While questioning Solicitor General John Sauer, Kavanaugh asked about drawing "a principled, sensible line" that would distinguish the Federal Reserve from other agencies.

"The other side says that your position would undermine the independence of the Federal Reserve and they have concerns about that, and I share those concerns," Kavanaugh told Sauer.

The stakes for the American economy

Although most Americans don't interact with the Fed directly, its policies affect their everyday lives. By controlling the direction of interest rates, the central bank determines the cost of borrowing and returns on savings. The Fed and its independence are the cornerstones of the dollar's status as the world's reserve currency.

To hear Cook's lawyers and prominent economists tell it, the potential damage is extraordinarily high. If Trump can fire her, then the door is open for future presidents to steamroll the Fed and cause economic chaos, they say.

"We can think about the Cook removal as seeking a roadmap from the court for how to potentially remove other governors, including Jerome Powell," said Lev Menand, a professor of administrative law and financial institutions at Columbia Law School.

In his attempt to fire Cook, Trump cited a criminal referral from Bill Pulte, the director of the Federal Housing Finance Agency, who said Cook lied on mortgage forms.

That apparent deceitfulness, according to Trump, made Cook ill-suited for her role in setting interest rates.

There is no public indication that, in the months since Pulte's letter, the Justice Department has opened a criminal investigation into Cook's mortgage paperwork.

The Trump administration has maintained that the president can fire a Federal Reserve board member for any reason and that courts don't have the power to second-guess any "for cause" justifications.

Cook's attorneys argue that such freedom defeats the entire purpose of "for cause" limitations, turning Fed board members into "at will" government employees. They also say that "for cause" justifications can only involve conduct during Cook's service — not years-old mortgage paperwork.

With the Powell investigation "hovering" over the Cook case, the justices may be more wary of giving Trump the flexibility he wants to get rid of Cook, Chafetz said.

"If the president gets to define anything as 'cause,' and that's completely unreviewable, then that is serving at the pleasure of the president," Chafetz said.