The Supreme Court protected the Federal Reserve Thursday even as it allowed President Trump to fire the board members of two other independent agencies, potentially insulating central bank officials such as chair Jerome Powell against any immediate removal by the White House.
The nation’s highest court on Thursday let firings stand at the National Labor Relations Board and the Merit Systems Protection Board while legal challenges to those removals work their way through the US Court of Appeals for the District of Columbia.
But it said “we disagree” with arguments made by members of the National Labor Relations Board and the Merit Systems Protection Board that their legal challenges “necessarily implicate the constitutionality of for-cause removal protections for members of the Federal Reserve’s Board of Governors or other members of the Federal Open Market Committee.”
The central bank, the court added, “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 only language in law pertaining specifically to the removal of Fed board members can be found in Section 10 of the Federal Reserve Act. The law states that each member of the board shall hold office for 14 years “unless sooner removed for cause by the President.”
The statute doesn’t have any language that specifically addresses the chairman of the Board of Governors, nor does it detail what exactly constitutes “for cause.” The term has been interpreted in legal rulings to mean “inefficiency, neglect of duty, or malfeasance.”
The court went out of its way to distinguish the Fed from the two agencies at issue, stating that the government would likely be able to show that both the NLRB and MSPB “exercise considerable executive power.”
What Trump is trying to challenge is a 90-year-old Supreme Court precedent limiting the power of the president to dismiss independent agency board members except in cases of neglect or malfeasance.
If that precedent eventually falls, a Powell firing could be easier to pull off at the Fed.
Trump has also delivered pink slips to leaders of other federal agencies, including the Federal Trade Commission and the Federal Election Commission, and those firings are also being challenged in lower courts.
“There is no legal difference between Jerome Powell and me,” one FTC board member let go by Trump told Bloomberg earlier this year. “If the president can legally remove me, he can legally remove Jerome Powell.”
