The government official that President Trump seems most eager to fire – the Federal Reserve Board’s chairman – might be the one that the Supreme Court will keep on the job.
Trump and Fed chair Jerome Powell have feuded for years – lately as well as in Trump’s first term in the White House – even though Powell got the job initially by Trump’s appointment in 2018. (Powell was named to a second four-year term in May 2022 by President Biden; that expires in 13 months.)
With Trump again fuming in public that Powell and the Fed are not ordering lower interest rates to stimulate an economy being weakened by Trump policies, the Supreme Court even now has the Fed chairman’s future on its mind as it ponders a pending case over presidential power to fire top government officials.
While the President early in his new term has fired a lengthening list of key officers, none of those dismissals has had an impact on national policy and the economy as unsettling as removal of Jerome Powell almost certainly would have. The Fed has been an independent agency since its creation in 1913, and it has a profound influence on the nation’s money supply and on the cost of borrowing, in business and personal affairs.
Many financial experts of widely varying economic views seem to agree that the Fed’s independence from political influence is vital to its core function in stabilizing the nation’s currency and credit systems. And those experts seem to agree that firing of the chairman might crash financial markets here and around the globe. That prospect apparently is causing some of the President’s close advisers to urge him to leave Powell at the Fed, according to news reports.
Under existing law, the members of the Federal Reserve Board and its chairman cannot be removed except for “cause” – a legal concept that generally means a failure to perform official duties or a fundamental abuse of official powers. Similar restrictions, however, have not kept Trump from firing officials at will, citing no cause.
The legal case that the Supreme Court is now considering does not squarely involve Jerome Powell’s future or the Fed’s independence, but lawyers on all sides of that case have fervently disputed whether the Fed’s reputation and operations could be strongly influenced by what the Justices choose to do.
The case now under review is a test of the legality of President Trump’s firing of a member of the National Labor Relations Board, Gwynne A. Wilcox, and a member or the Merit Systems Protection Board, Cathy A. Harris. Both agencies are led by multi-member boards. The NLRB supervises on-the-job disputes involving workers in private industry and the MSPB carries out similar tasks for federal government employees.
The laws governing those boards protect the members from being fired except for a significant cause, such as failure to perform their duties. Trump ousted them without cause, insisting that he had full constitutional power to do so as the head of the federal Executive Branch.
Lower courts ruled that the firings were illegal, and ordered the two officials reinstated.
However, Chief Justice John G. Roberts, Jr., in a temporary order earlier this month, delayed the reinstatements while the lawyers file written arguments. The filing of those briefs was completed on Wednesday, so the Court could act at any time. The Court has been asked by the Administration to grant full review of the President’s powers, to consider that at a public hearing in May, and then decide the case before the Court recesses for the summer in late June or early July.
The Trump Administration’s filings in the case focus on several recent decisions by the Court enhancing the powers of the presidency, including strengthening White House control of appointments and dismissals in scores of agencies across the Executive Branch. The President seeks to extend that trend to support quick firings of members of independent agencies like the NLRB and the MSPB.
Administration lawyers are also trying to convince the Court that it does not have to overrule any prior constitutional decisions on presidential power to remove officials in order to sustain the firings of Wilcox and Harris. The most significant constitutional precedent looming in the background is the Court’s 1935 decision in Humphrey’s Executor v. United States, which struck down the presidential firing of the chair of an independent agency, the Federal Trade Commission.
But the current Supreme Court’s conservative majority has been chipping away at the boundaries set by that 90-year-old ruling, although insisting that it need not confront the suggestion – put forth five years ago by Justices Neil M. Gorsuch and Clarence Thomas – to overrule the precedent. Those two Justices argued at that time that the Court’s recent rulings had “repudiated almost every aspect of [the] Humphrey’s Executor [precedent].”
If that precedent were to fall, one almost certain impact of that could be to undermine the tenure of the Federal Reserve chairman and of any other member of an independent federal agency, with repercussions affecting many aspects of American life governed by such agencies.
And that is why the President’s ongoing feud with Fed Chair Powell hangs over the cases now pending at the Court. Not surprisingly, the lawyers defending the tenure of Wilcox at NLRB and Harris at MSPB stress, in the opening pages of their briefs, the potential impact on the Fed of a coming decision.
Wilcox’s attorneys wrote that any indication by the Court that the government will win this test of presidential power will “call into question the constitutionality of dozens of federal statutes” that protect leaders of independent agencies – everything from the Federal Reserve Board and the Nuclear Regulatory Commission to the National Transportation Safety Board and the Court of Appeals for Veterans’ Claims.”
That brief added: “At a time when the President is publicly pressuring the Fed Chair on monetary policy, experts warn that any signal from this Court that the Fed’s independence is in jeopardy will further unsettle jittery [financial] markets.”
Attorneys for Harris told the Court the same, writing that the Administration’s constitutional position “would have immediate consequences for foundational institutions – from the Federal Reserve to the National Transportation Safety Board.”
A group of four professors of finance law have filed their own brief in the case, saying that any ruling in this case “that markets could construe as abrogating the independence of the Federal Reserve System…could prompt significant market turmoil and undermine the credibility of Federal Reserve officials in ways that might not be easily reversed.”
What has been happening in recent days in the ongoing feud between President Trump and Chairman Powell will be in the background, and might even come up during the hearing the Justices will hold in May in the NLRB-MSPB case.
After Powell made a speech in Chicago on Wednesday, warning of a possible rise in inflation as a result of Trump’s economic policies, the President struck back on his Internet platform, Truth Social, on Thursday. He argued that Powell “is always TOO LATE AND WRONG….Too late should have lowered interest rates…long ago.” At the end, he wrote: “Powell’s termination cannot come fast enough!”
Later Thursday, he told reporters at the White House that, if he asked Powell to leave the Fed, Powell would do so. Powell, however, has said firmly in the past that he would not resign in response to any request from Trump. The Fed leader has said that he is protected by federal law to serve out his current term on the agency board.
The potential threat to the Fed from the Supreme Court’s recent decisions expanding presidential power to fire officials prompted a debate among the Justices in one of those rulings, five years ago (the 5-to-4 ruling in Selia Law v. Consumer Financial Protection Bureau).
The dissenting Justices recounted a lengthy history, going back to the 18th Century and early 19th Century, of actions by Congress to create national financial institutions and to insulate them from political interference, especially by the President. That history included a reference to the creation in 1816 of the Second Bank of the United States – a “central bank” ancestor of the Federal Reserve.
Chief Justice Roberts, the author of the main opinion, wrote an answer to the dissenters’ recital of that history. In a footnote, he said that one might be able to assume that financial institutions “like the Second Bank and the Federal Reserve can claim a special historical status.”
Given that the Chief Justice is known to consider himself to be a minimalist, who prefers to decide cases in narrow rather than broad strokes, those few words can be understood as giving him and perhaps other Justices a way to avoid threatening the independence of the Fed.
It is on such thin threads that constitutional history is sometimes woven.
Jerome Powell’s Fed chairmanship just might be safe.
