How Trump Firing Lisa Cook Puts Major Supreme Court Precedent At Risk

Topline

Federal Reserve Governor Lisa Cook is suing President Donald Trump for attempting to fire her, bringing a lawsuit that could tee up the Supreme Court to overturn a 1935 ruling that largely shields independent agencies from political influence—which would significantly expand Trump’s power over the federal government if justices strike it down.

Lisa Cook testifies during a Senate Banking nominations hearing on June 21, 2023 in Washington, DC.

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Key Facts

Cook filed a lawsuit Thursday challenging her termination, after Trump sent her a letter saying she was fired because of alleged misstatements on her mortgage agreements.

While the Federal Reserve Act allows presidents to fire Fed board members “for cause,” Cook argues Trump’s decision to fire her goes against Supreme Court precedent that holds members of federal agency boards should be largely independent, and can only be fired in cases of “inefficiency, neglect of duty or malfeasance in office.”

That Supreme Court ruling was in the case Humphrey’s Executor v. United States, a 1935 ruling that has been used over the past 90 years to shield members of independent boards—who are typically appointed to lengthy terms that span multiple presidencies—from political interference.

The Humphrey’s Executor case has repeatedly come up during Trump’s second term, as the president has fired a number of officials who traditionally would have been shielded under the law, including board members at the National Labor Relations Board, Consumer Product Safety Commission and Merit Systems Protection Board.

The Supreme Court has so far allowed those firings—weakening Humphrey’s Executor but not explicitly overturning the ruling—but said in a ruling earlier this year that the Federal Reserve is distinct from other agencies where the justices have allowed firings to move forward.

Cook’s lawsuit could test whether justices are still willing to back the Federal Reserve and its independence or if they’ll side with Trump and overturn Humphrey’s Executor once and for all, clearing the way for the president to fire any federal agency official for any reason.

What To Watch For

A federal district judge will consider Friday morning whether to grant Cook’s request to keep her on the Federal Reserve board until a more lasting ruling can be made, preventing Trump from firing her immediately. It’s unclear how long the litigation could take to play out, though it’s largely expected to ultimately go to the Supreme Court.

What Did The Humphrey’s Executor Ruling Say?

Humphrey’s Executor v. U.S. concerns William Humphrey, a former Federal Trade Commissioner who was appointed and kept on by Republican presidents before Democratic President Franklin Delano Roosevelt fired him in order to replace him with a political ally. Humphrey died a year later, but his estate sued the federal government for back pay, arguing Humphrey’s firing was unlawful because it was not for “inefficiency, neglect of duty, or malfeasance in office.” The Supreme Court agreed and ruled against the Roosevelt administration, ruling Humphrey was improperly fired and was not serving at the pleasure of the president. Independent officials like Humphrey can only be fired for “inefficiency, neglect of duty, or malfeasance in office,” the court ruled, writing, “It is quite evident that one who holds his office only during the pleasure of another, cannot be depended upon to maintain an attitude of independence against the latter’s will.”

What Happens If Humphrey’s Executor Is Overturned?

While the Supreme Court has already weakened its Humphrey’s Executor precedent by allowing Trump to fire some members of independent boards, the justices fully overturning the ruling would give the president free rein to fire any officials he chooses for any reasons he wants. That would include at the Federal Reserve, likely paving the way for Trump to fire chair Jerome Powell, as he has long suggested he wants to do. Humphrey’s Executor only directly concerns members of agencies that fall under the purview of the executive branch, but Lev Menand, a Columbia University law professor who studies the Fed, speculated to The New York Times it could also make it easier for Trump to potentially try to fire federal judges in the future, who the Constitution says serve “during good behavior.” “Once we abandon the approach to the presidency that has undergirded the Republic more or less since the founding and instead embrace a theory in which accountability of government officials requires that the president be able to remove the officials whom the president appoints, we are on the doorstep of the president asserting ‘bad behavior’ grounds … for removing federal judges,” Menand told The Times.

What Has The Supreme Court Said Before About It?

The Supreme Court’s most recent major ruling concerning Humphrey’s Executor was in 2020, when the court’s conservative majority said the head of the Consumer Financial Protection Bureau was not covered under the ruling’s heightened standard for firing federal officials. The Humphrey’s Executor ruling only applies to members of multi-person boards and not individual agency heads, the court ruled in a 5-4 decision, narrowing the 1935 precedent without overturning it entirely. Justices Clarence Thomas and Neil Gorsuch wrote in a concurring opinion that they would go further and overturn the ruling entirely, with Thomas arguing the Humphrey’s Executor decision “poses a direct threat to our constitutional structure and, as a result, the liberty of the American people.” The court’s conservative majority did not say much about Humphrey’s Executor in its May ruling allowing Trump’s firings of other federal officials to move forward, writing only in an unsigned opinion, “Because the Constitution vests the executive power in the President … he may remove without cause executive officers who exercise that power on his behalf, subject to narrow exceptions recognized by our precedents.” Justice Elena Kagan repeatedly cited Humphrey’s Executor in her dissent against the ruling, which the court’s other two liberal justices joined, arguing the 1935 decision “remains good law, and it forecloses both the President’s firings and the Court’s decision” to allow the terminations. The court’s conservative majority also singled out the Federal Reserve in its May ruling, saying that while Trump’s decision to fire other officials is allowed, the Fed is “a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”

Key Background

Trump posted a letter to Truth Social on Monday announcing his intention to fire Cook, claiming the alleged issues with her mortgage agreements “calls into question [her] competence and trustworthiness as a federal regulator.” Bill Pulte, the director of the Federal Housing Finance Agency and a Trump appointee, has publicly accused Cook of listing multiple residences as being her “primary” residence on mortgage documents in 2021, which could have allowed her to obtain a lower mortgage rate than if one had been listed as a vacation or rental property. Cook has not been charged with any crimes in relation to the mortgage documents, and experts told The Times that Pulte has not provided sufficient evidence to prove Cook committed fraud. While Trump has fired numerous other officials since taking office in January, his decision to fire Cook has become a flashpoint, given the necessity to the economy that the Federal Reserve is independent and free from political influence. It marks the first time a president has tried to fire a Federal Reserve governor, who typically serves a 14-year term.