The Supreme Court heard arguments on January 21, 2026, in a case with significant implications for presidential power and the independence of the Federal Reserve. The case, brought by Lisa Cook, a member of the Fed’s Board of Governors, stems from her firing by President Donald Trump in August 2025. A lower court temporarily reinstated Cook to her role on September 9, 2025.
The Core of the Dispute
The dispute centers on the scope of presidential authority to remove members of the Federal Reserve’s Board of Governors. The Federal Reserve Act states that board members are appointed to 14-year terms and can only be removed by the president for “cause.” However, the statute does not define what constitutes “cause,” leading to disagreement over the extent of the president’s power.
The Department of Justice investigated Cook, alleging false statements made on mortgage applications in 2021, allegations Cook has denied. The government argued that this provided sufficient cause for her removal. However, the lower court ruled Cook was entitled to “due process” – notice, an explanation of the evidence, and an opportunity to respond – before termination.
Why This Case Matters
This case is not a typical employment dispute. Unlike the vast majority of U.S. workers who are employed “at-will” and can be fired for any reason, Cook’s position is protected by the Federal Reserve Act. The Fed’s independence is crucial, as former Fed governors have argued, to ensure effective monetary policy and maintain the stability of the U.S. dollar in the global economy.
Justices, including Brett Kavanaugh, have previously expressed support for insulating the Federal Reserve Board from direct presidential oversight. The court’s focus during oral arguments appeared to be on the importance of maintaining the Fed’s independence from political interference.
What Could Happen Next
The Supreme Court could rule narrowly, simply allowing the lower court to proceed with a full determination of the facts in Cook’s case. This would be the most cautious approach, given justices’ concerns about the incomplete record. Alternatively, the court could offer guidance on the meaning of “cause” under the Federal Reserve Act. If it does, it may look to the historical context of the 1935 amendment to the Act, which reinstated the “for cause” provision after a series of Senate hearings on Fed independence.
If the court defines “cause” as requiring inefficiency, neglect of duty, or malfeasance in office – as suggested by legal scholars – it would likely strengthen the protections afforded to Fed governors. A ruling upholding the lower court’s decision on due process would also reinforce the requirement for a fair process before a Fed governor can be removed. However, even with a clear definition of “cause,” the court could still find that Cook’s actions met that standard.
Frequently Asked Questions
What is the Federal Reserve?
The Fed serves as the U.S. central bank and sets monetary policy, including a key interest rate that influences borrowing costs, as stated in the source.
What does “at-will” employment mean?
According to the source, the vast majority of U.S. workers are employed “at-will,” meaning they can be fired for any reason and without advance notice.
What is “due process”?
The source explains that “due process” requires some notice, an explanation of the evidence against someone, and an opportunity to respond before their termination.
As the Supreme Court deliberates, how might the outcome of this case reshape the balance of power between the executive branch and the Federal Reserve?
