The Supreme Court debated Trump's “right to dismiss”, and the “last line of defense” for the independence of the Federal Reserve may be in a hurry

The Zhitong Finance App learned that a key US Supreme Court justice said he wanted to protect the independence of the Federal Reserve. Meanwhile, the conservative-majority Supreme Court is considering whether to give President Donald Trump the power to fire members of the Federal Trade Commission and other similarly independent agency officials.

During Monday's debate, Justice Brett Kavanaugh raised questions relating to the Federal Reserve several times. He asked the administration's chief attorney and US Deputy Attorney General John Saul to respond to objectors' arguments that if Trump's right to dismiss is interpreted broadly in the FTC case, it will ultimately damage the independence of the Federal Reserve.

“I have the same concerns,” said Justice Kavanaugh, who was appointed by Trump during his first term.

The Supreme Court indicated on Monday that its 6-3 conservative majority is likely to support the administration's side in this case, overturning a 90 year old case precedent, which could allow Trump to fire the heads of dozens of traditionally independent federal agencies. However, there are also some signs that the government will face difficulties if it wants to dismiss members of the Federal Reserve without proper reason.

The justices won't hear another independent case challenging Trump's attempt to remove Federal Reserve Governor Lisa Cook until January 21 next year, but the future of the relationship between the Federal Reserve and the White House is already overshadowed by Monday's hearings.

Sole admits that the Supreme Court has indicated before that it sees the Federal Reserve as a special case when it comes to allowing the president to dismiss members without reason. He told Kavanaugh that the government is not directly challenging the “just cause” protections established by Congress for the Federal Reserve. The Department of Justice's argument is that the court cannot later challenge how the President exercised that power of dismissal.

However, several liberal-leaning Supreme Court justices pressured Sol to question how the mechanism that excludes certain institutions (such as the Federal Reserve) would work based on the government's broad assertion in the FTC case that “Congress cannot limit the ability of the president to control officials to perform executive functions.”

Kavanaugh said he also had “serious doubts” about the government's position that judges had no right to reinstate wrongly dismissed officials. He said this would be a kind of “circumvention” of potential exceptions to the president's power to dismiss (such as against the Federal Reserve and certain specialized courts dealing with tax and money claims involving the US government).

Sole responded that the Supreme Court had agreed with the view that the harm caused by forcing the government to re-accept an official who was vetoed by the president outweighed the personal interests of that official.

An agency's “special case”

The Supreme Court mostly supported the White House in this year's series of dismissal cases, but in May it indicated that the Federal Reserve was a different entity within the US government. In an unsigned court order, the justices described the Federal Reserve as “a uniquely structured, quasi-private entity that follows the unique historical traditions of America's First and Second Banks.”

In October, justices rejected Trump's request to immediately remove Cook (Cook denied accusations of mortgage fraud), while the legal battle over his removal continued. This is in contrast to other Supreme Court orders issued by the conservative majority this year, which allowed Trump's dismissal of other agency officials to take effect while the case is being tried.

Former Federal Reserve officials warned that making it easier for the president to fire members could disrupt the US economy because the Fed's decision on interest rates should not be affected by short-term political considerations.

In the FTC case, the Department of Justice argued that the Supreme Court need not touch on the issue of the Federal Reserve's status. The government said in a written briefing that it did not recognize the Federal Reserve's “just cause” protection clause as constitutional, but if the justices were inclined to support it, “it would be an agency-specific 'exception.”

Lawyers for dismissed FTC members countered that if the Federal Reserve constituted a “historic exception” to the president's power to dismiss agency heads, then there may also be other “also historically based” exceptions, including the Federal Trade Commission.

The hearing was held the day before the Federal Reserve's last policy meeting of the year began. Outsiders expect Federal Reserve officials to cut interest rates for the third time in a row at this meeting. Trump has put tremendous pressure on the Federal Reserve this year to cut interest rates drastically, often in the form of insulting and judging Federal Reserve Chairman Jerome Powell. Trump has also publicly stated that he hopes to have a majority of members appointed by him on the Federal Reserve Board of Governors — a prospect that would be closer to reality if Cook is removed.

Powell emphasized the importance of the independence of the Federal Reserve many times this year, while insisting that the Federal Reserve does not participate in partisan considerations when formulating policies. The Federal Reserve said it would respect any court ruling on Cook.

Cook didn't miss a single policy meeting this year, and she voted for interest rate cuts at both meetings held by the Federal Reserve after Trump tried to fire her. Last month, she gave her first public speech after the attempted recall incident, explaining the economic outlook and financial stability issues.