The U.S. Supreme Court issued a significant ruling regarding the independence of Federal Reserve board members, suggesting strong protections against presidential termination. This ruling marks a significant milestone in the continuing legal debate. More broadly, it sheds light on changing power dynamics between the executive branch and federal agencies. On a Thursday no less, the ruling was issued. It’s little surprise as President Donald Trump continues to attempt to expel members from the public boards of several federal agencies.
The Supreme Court did a very big thing when it upheld the Federal Reserve’s independence by upholding this age-old principle. This has been the positive structure for close to 90 years, giving members the latitude to function free from presidential dominion. The Court’s ruling lays the groundwork for Trump to fire similar members from other federal agencies. Now he has the power to fire Gwynne Wilcox and the other unnamed member, reversing a family court judge district court judge’s prior prohibition.
Justice Elena Kagan, writing for the dissent along with two other liberal justices, underscored the peril of the Court’s ruling. She argued that under existing law, “Trump has no legal right to relief” regarding the reinstatement of Wilcox and her colleague while their case progresses through the legal system.
The Supreme Court issued a last-minute order that granted a stay on that earlier ruling. This unexpected ruling would have forced Wilcox and her board colleague back on the board. The Federal Reserve Chairman Jerome Powell had an unequivocal line. He averred that the president has no authority to fire him or any other members of the Federal Reserve Board. Powell stressed that independent actions by the president are “absolutely forbidden under the law.” About the Authors This comment bolsters Federal Reserve independence.
This ruling creates some complicated new questions regarding the separation of powers between the executive branch and Federal Reserve board members. Justice Kagan gave voice to her worries, saying, “Then, today’s order raises a riddle. Independence.” She stressed that the Federal Reserve’s independence has deep constitutional roots. This foundation is similar to that of other independent agencies, like the National Labor Relations Board (NLRB) and the independent Merit Systems Protection Board (MSPB).
As for the majority opinion, Justice Kagan was unforgiving in her criticism. She made clear that the ruling gives the Federal Reserve an exemption of questionable legal footing. She stated, “The majority has to offer a different story: The Federal Reserve, it submits, is a ‘uniquely structured’ entity with a ‘distinct historical tradition.’” To show how special this claimed sort of uniqueness really is, Kagan quoted language from footnote 8 of an earlier Supreme Court decision.
The Supreme Court’s majority opinion acknowledged the Federal Reserve as a “uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” Such a characterization would represent a significant move away from prevailing understandings of executive power with respect to agency oversight and termination.
Kagan stressed that Congress has legislated to shield members of agencies such as Wilcox and Harris from being removed by the president without cause. This raises questions about the limits on Trump’s power for these positions. She emphasized that “Congress, by statute, has protected members of the NLRB and MSPB (like Wilcox and Harris) from Presidential removal except for good cause.”
In her dissent, Kagan opinion, she highlighted the constitutional foundation that grants exclusive executive power to the president. She quoted from the majority ruling, which stated, “Because the Constitution vests the executive power in the President … he may remove without cause executive officers who exercise that power on his behalf, subject to narrow exceptions recognized by our precedents.”
The Supreme Court’s decision creates a serious precedent that will likely limit what future presidents can do with regard to the members of the Federal Reserve board. It doesn’t unambiguously prohibit any president from firing a board member. It cautions that this move is likely to meet fierce resistance from the country’s supremest court.