Today, the United States Supreme Court has issued a tremendously important ruling. This recent decision bolsters the independence of Federal Reserve board members and provides President Donald Trump the authority to remove members from the boards of other federal agencies. This decision comes on the heels of a legal challenge regarding the president’s authority to remove two agency heads. It raises serious concerns about separation of powers and independence of these critical, non-partisan financial institutions.
Here’s what the Supreme Court just let slip in a recent opinion. They proposed extending the ability of Federal Reserve board members to only be removed by a president for malfeasance, a measure that’s held for close to 90 years. The justices ruled in favor of Trump’s power to dismiss two members from different federal boards, specifically Gwynne Wilcox and another unnamed member. To be clear, a federal district court judge in Washington, D.C., has already blocked Trump from making any removals. This ruling occurred in the midst of that continuing court case.
The Supreme Court’s ruling acted as a stay of that order, letting the president move forward with the terminations. This latest development underscores the increasing conflict between the executive branch and independent agencies, especially as it concerns the Fed.
Justice Elena Kagan, representing the court’s liberal wing, dissented from the majority’s decision. Kagan contended that relief Trump seeks is not legally permissible under current law. First, this means that he cannot simply overrule the lower court’s injunction against the removal of Wilcox and Harris. Additionally, she raised alarm over what such a ruling would mean for the independence of any board similar to that of the Federal Reserve.
“I am glad to hear it, and do not doubt the majority’s intention to avoid imperiling the Fed.” – Justice Elena Kagan
Rebecca Kagan emphasized that today’s order poses challenging questions. These complications are mostly to do with the nature of the president/Federal Reserve board member relationship. She underscored that the Fed’s independence has the same underpinnings as other agencies. These are agencies like the National Labor Relations Board (NLRB) and the Merit Systems Protection Board (MSPB).
“But then, today’s order poses a puzzle,” Kagan stated, highlighting that the independence of these entities rests on constitutional principles comparable to those supporting the Federal Reserve.
The ruling affirmed Trump’s power to fire members of other federal agencies at will. Even more troubling was its implicit endorsement of presidential overreach on Federal Reserve board members. Chairman Jerome Powell has asserted that he cannot be removed by the president under current laws, noting that certain actions “are not permitted under the law.”
“The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” – The Supreme Court
The majority opinion suggested that any attempt by a president to dismiss a Federal Reserve board member would encounter substantial judicial resistance. Kagan strongly criticized this position. She further contended that it carves out a dangerous exemption for the Fed, eroding the long-standing expectation of equal application of this executive power to all other federal agencies.
Kagan acknowledged the majority’s effort to safeguard the Federal Reserve’s operational integrity. She pushed back on the rationale for separate treatment of federal agencies rooted in their historical origins.
“Congress, by statute, has protected members of the NLRB and MSPB (like Wilcox and Harris) from Presidential removal except for good cause.” – Justice Elena Kagan
This ruling brings forth new considerations for how federal executive power is exercised and underscores ongoing debates about agency independence in relation to presidential authority. The ruling does not directly prevent any future president from attempting to remove a Federal Reserve board member. Readers should not infer from the above that there would not be very powerful opposition to any such effort.
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