Trump Challenges 1935 Precedent Seeking More Dismissal Power

President Trump has recently taken a significant legal step by filing an emergency application with the U.S. Supreme Court. This move aims to challenge the long-standing precedent set by the "Humphrey's Executor v United States" case, which has limited the President's power to dismiss certain executive agency officials without cause. This case, dating back to 1935, was established when President Franklin D. Roosevelt attempted to dismiss a Federal Trade Commission member, William Humphrey, due to policy disagreements. The Supreme Court ruled in Humphrey's favor, setting a precedent that the President does not have unlimited dismissal power over executive agency heads with "quasi-judicial" or "quasi-legislative" powers.

This precedent has been crucial in protecting the independence of various agencies, including the Equal Employment Opportunity Commission and the Securities and Exchange Commission. Recently, a district court ruled that Trump did not have the authority to dismiss two officials appointed by Biden in 2021 and 2022: Cathy Harris and Gwynne Wilcox. The court deemed Trump's actions invalid because he did not provide reasons for the dismissals and solely believed these individuals would not support his policies.

In his emergency application to the Supreme Court, Trump's legal team argued that these court rulings are "untenable." They stated that the President should not be forced to relinquish executive power to agency heads who oppose government policy, even temporarily. Legal experts, including University of Virginia law professor Sai Prakash and University of Chicago Law School's Will Baude, have suggested that the "Trump v. Wilcox case" could potentially overturn the "Humphrey's case" precedent. If successful, this legal challenge would grant the President more authority to dismiss officials, including the Federal Reserve Chair.

The Federal Reserve and its Chair have historically faced political influence, such as when President Nixon requested Chairman Burns to lower interest rates before the 1972 election. Trump himself has expressed regret over nominating Jerome Powell as Fed Chair and has stated that he would not replace Powell before his term ends in May 2026. However, if Trump becomes dissatisfied with Powell again and the "Humphrey's case" is overturned, he would have more leeway to dismiss the Fed Chair.

The potential overturning of the "Humphrey's case" could significantly alter the power dynamics between the executive branch and the Federal Reserve. The Federal Reserve, as the central bank of the United States, plays a crucial role in managing the nation's monetary policy. Its decisions on interest rates, inflation, and economic stability are pivotal for the overall health of the economy. An independent Fed ensures that these decisions are made based on economic data and expert analysis, rather than political considerations.

If the President gains the power to fire the Fed Chair, it could lead to increased political influence over monetary policy. This could result in decisions that prioritize short-term political gains over long-term economic stability. For instance, a President might pressure the Fed to lower interest rates to stimulate economic growth ahead of an election, even if such a move is not economically sound.

Moreover, the potential for political interference could undermine public trust in the Federal Reserve. The Fed's credibility is built on its independence and expertise, and any perception of political meddling could erode this trust. This could have ripple effects throughout the financial markets, as investors and businesses rely on the Fed's stability and predictability.

The legal battle over the "Humphrey Case" is ongoing, and its outcome remains uncertain. However, the potential for a shift in power dynamics between the executive branch and the Federal Reserve is a significant development that warrants close attention. The independence of the Fed is a critical component of the U.S. economic system, and any changes to this independence could have far-reaching implications for the nation's financial stability.