Trump's Legal Gambit Tests the Fed's Independence

President Donald Trump has escalated his efforts to reshape the Federal Reserve by filing an emergency application with the U.S. Supreme Court seeking to remove Lisa Cook, a Federal Reserve Governor. This move follows the rejection of Trump’s earlier attempts to remove Cook by lower courts, including the U.S. Court of Appeals for the D.C. Circuit. Trump has accused Cook of mortgage fraud, alleging she misrepresented two properties—located in Michigan and Georgia—as “primary residences” to secure more favorable mortgage terms. Cook denies the allegations, asserting that the properties were accurately described in her loan documents as a “vacation home” and a “second home,” and has not been charged with any crime.

The White House’s campaign to remove Cook represents a historic challenge to the Fed’s institutional independence, as no U.S. president has ever successfully removed a sitting member of the Federal Reserve Board in the agency’s 112-year history. Trump’s actions, which include appointing Stephen Miran—a proponent of reducing the Fed’s independence—to the board, aim to shift the balance of power within the central bank. The president’s broader strategy is to replace Fed governors with appointees who align with his economic agenda, which includes calls for lower interest rates to stimulate economic growth.

The legal battle over Cook’s removal has already reached the Supreme Court, where Trump’s administration is seeking an emergency order to remove her from the board. The administration argues that Cook’s alleged mortgage fraud constitutes sufficient “cause” under the law to warrant removal. However, previous rulings from both the federal district court and the appeals court have questioned the validity of this argument, emphasizing that the allegations predate Cook’s appointment to the Fed and that no formal charges have been brought against her. The courts also noted that the removal process lacks due process and does not provide Cook with an opportunity to defend herself.

The Supreme Court has previously distinguished the Federal Reserve from other independent agencies in terms of its structure and removal protections. In a 2025 ruling, the court emphasized that the Fed is a “uniquely structured, quasi-private entity” designed to operate independently of political influence. This historical precedent raises questions about whether Trump’s removal of Cook for alleged pre-appointment misconduct meets the legal threshold for “cause.” Critics of the president argue that his actions are an overreach of executive power and set a dangerous precedent for future presidential interventions into the Fed’s operations.

Market reactions to the dispute have been mixed. Following Trump’s initial announcement, financial markets reacted with volatility, as investors expressed concerns over the potential politicization of the Fed’s monetary policy. The S&P 500 futures dipped slightly, and the U.S. dollar weakened against the euro and yen. Analysts warn that if the Fed is perceived as politically influenced, it could undermine its credibility and global trust in U.S. financial markets. Some experts also note that the appointment of Trump-aligned governors could lead to structural shifts in the Fed, including changes to its budget, staffing, and oversight of regional bank presidents, further altering its institutional dynamics.

The outcome of the Supreme Court’s review of Trump’s emergency request will have significant implications for both the Federal Reserve and the executive branch’s authority. If the court sides with the administration, it could embolden future administrations to challenge the independence of other federal agencies. Conversely, a ruling in favor of Cook would reinforce the Fed’s longstanding autonomy and reaffirm legal precedents that limit presidential removal powers in the context of independent agencies. The case has already sparked political debate, with Senate Democrats condemning Trump’s actions as an “authoritarian power grab” and a violation of the Federal Reserve Act.