US Supreme Court Protects Federal Reserve from Trump Policies

The US Supreme Court has protected the Federal Reserve from Donald Trump’s efforts to fire senior officials at independent federal agencies, in a decision likely to allay concerns about the possibility of firing Chairman Jerome Powell.

In a ruling issued Thursday that allowed Trump to fire officials at two other agencies, the court said its ruling did not apply to the Federal Reserve, describing it as a “semi-private entity with a unique structure.”

According to Bloomberg, this decision provides some clarity regarding Powell’s job security after a period of uncertainty. Trump sent mixed signals last month, tweeting on April 17 that “terminating Powell cannot come soon enough!” before telling reporters on April 22 that he “does not intend to fire him.” This unsigned ruling, granting Trump’s request, means that National Labor Relations Board member Gwen Wilcox and Merit Systems Protection Board member Kathy Harris cannot return to their jobs while their legal challenges continue.

This decision extends a temporary injunction issued by Chief Justice John Roberts on April 9, which allowed Trump to fire the officials and bypass the job protections Congress established for both positions to insulate them from White House control. Wilcox and Harris, both Democrats, had argued that allowing Trump to fire them would jeopardize Powell, as well as the independence of the Federal Reserve.

In its unsigned order, the court said it disagreed with Wilcox and Harris’s claim that “the arguments in this case necessarily point to the constitutionality of the justifiable removal protection for members of the Federal Reserve Board of Governors or other members of the Federal Open Market Committee.”

The court added that it had not issued a final decision in the Wilcox and Harris cases because the litigation is still in its early stages. But the majority said the president “may remove officials exercising executive authority without cause, subject to limited exceptions.” While the decision protects the Federal Reserve, it likely strengthens Trump’s ability to remove officials at other agencies, including the Federal Trade Commission and the Federal Communications Commission. The administration is separately defending a lawsuit filed by two FTC commissioners fired by Trump.

The case tests a 1935 Supreme Court ruling known as the “Humphrey Execution,” which allowed Congress to protect senior officials from removal, paving the way for the independent agencies now spreading throughout the U.S. government.

Writing for three liberal dissenting justices, Justice Elena Kagan criticized the court’s decision to allow the removals as “extraordinary,” saying it “allows the president to overrule Humphrey’s decision by judicial order.” She added that the decision forced the majority to create “a dedicated exception for the Federal Reserve.”

“I’m glad to hear this, and I don’t doubt the majority’s intent to avoid putting the Federal Reserve at risk,” Kagan said. But she added, “If the idea was to reassure markets, the simplest—and most legal—approach would have been to deny the president’s request to suspend Humphrey’s continued authority.”

Fed watchers are eagerly awaiting the Supreme Court’s decision to see if it will uphold an exception for the central bank.

Trump’s criticism of the Fed for not cutting interest rates and his threats to fire Powell reached fever pitch in markets last month, when the president’s repeated statements exacerbated the bond selloff. After Trump insisted he had no plans to fire the Fed chairman, markets calmed down.

Powell has repeatedly insisted that firing him would be illegal, and in April he said he did not believe the Supreme Court’s rulings in the National Labor Relations Board (NLRB) and Public Service Standards Board (MSPB) cases would apply to the Fed.