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The US Supreme Court on Thursday stressed that the Federal Reserve would not be affected by its granting of President Donald Trump’s emergency request to fire Joe Biden’s appointees in key independent agencies at will.
Not everyone is convinced.
Some legal experts are interpreting the conservative majority’s comments as an attempt to keep the markets calm after a series of disruptions were triggered by the White House’s attempts to rein in the central bank’s independence — including comments by Trump about firing Federal Reserve Chair Jerome Powell, which he later clawed back.
“The court is just trying to calm markets without necessarily telegraphing how it might rule in a future case involving the Federal Reserve,” Brian Knight, senior counsel at the conservative Alliance Defending Freedom, said.
Todd Phillips, assistant professor of legal studies at Georgia State University, agreed: “They were clearly just putting that paragraph about the Fed in to ensure that markets don’t freak.”
The underlying case revolves around a decades-old precedent, known as Humphrey’s Executor, that prevents the president from firing officials at most independent agencies without cause. Trump won some key concessions from the Supreme Court in 2020, when he was permitted to fire the head of the Consumer Financial Protection Bureau. But efforts ramped up in his second term, sparking concerns that future rulings could hand Trump more tools to rein in the Fed’s independence. Already, his Treasury Department has pursued greater control over the central bank’s supervisory policies.
However, the majority wrote that Thursday’s order does not sweep in Fed officials because the central bank 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 minority wrote that the cited opinion “provides no support” for that argument.
“This is a judicial fairyland,” said Aaron Klein, senior fellow at the Brookings Institution. He likened it to Harry Reid’s argument that the only judicial nominees subject to the filibuster should be Supreme Court justices: “It’s an untenable carveout.”
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Powell said last month that he did not think the NLRB case would impact the Fed. Still, “we’re monitoring very carefully,” he said.
Some, including former Fed Gov. Dan Tarullo, say the Supreme Court can strike down Humphrey’s Executor without affecting the central bank — including by referring back to “its arguable ancestry,” as Tarullo describes it, the way the majority did on Thursday. But others say that argument is a blunt instrument that fails to address the specific question of whether Trump can fire Fed officials.
“The Federal Reserve is a very different organization than those institutions,” Knight said. “So earlier precedent holding those banks to be constitutional, while relevant, is not necessarily dispositive.”
Knight and others expect the Supreme Court to provide more details on how it plans to treat the Fed in its final ruling. Its order will remain in place until then.
“There will likely be another opportunity for them to further explain their thinking and how the Fed can be carved out,” Phillips said. “That being said, I don’t see how they can do it — and the breadcrumbs they laid yesterday show that they’re not going to be very legal about it.”