Nation’s Top Court to Test Executive Power Over Central Bank Leadership

The country’s leader, who reportedly made “you’re fired” a national catchphrase from his television program, now faces a constitutional test of presidential authority as the nation’s highest court prepares to examine his power to unilaterally remove key government officials.

At the center of the latest institutional showdown is Lisa Cook, who serves on the central bank’s powerful governing board amid growing tensions between the executive branch and the monetary authority.

The head of state claims broad authority to force Cook from her leadership position on the central bank, free from judicial review, with his administration alleging she committed private mortgage fraud—charges she strongly denies.

Oral arguments will be conducted by the nine justices, who will hear separately from lawyers representing Cook and government prosecutors.

As the elected leader, the head of state believes federal law allows him unqualified discretion to fire “for cause” any officer on the central bank’s governing board. Critics note this represents a significant departure from the traditional independence of the monetary authority.

But Cook will tell the court the central bank was created by the legislature in 1913 as a wholly independent entity, designed to insulate it from political influence and prevent any one leader from “stacking the deck” with their own nominees.

She claims to be a political pawn in the leader’s very public efforts to dictate the central bank’s economic policies, by exploiting what she calls “manufactured charges” of wrongdoing.

This appeal comes as tensions between the executive branch and the monetary authority have expanded, after its chairman, Jerome Powell, disclosed recently the agency was subpoenaed by prosecutors for allegations he lied to the legislature about a controversial multimillion-dollar renovation of the agency’s headquarters.

The high court will have at least four opportunities this term to define the limits of the leader’s aggressive view of his authority, including import tariffs and birthright citizenship.

“A big fraction of the highest court’s docket will present the question, can the leader do: fill in the blank? And that could be imposed tariffs. Fire board members. Remove illegal aliens,” said Thomas Dupree, a former top government attorney and leading appellate lawyer. “The leader is pushing at every limit and the highest court this term is going to be telling us whether he’s exceeded those limits.”

The conservative-leaning court has allowed much of the leader’s challenged executive actions to be enforced at least temporarily – and will now decide whether the central bank’s special mandate statutorily protects its governing members from removal.

The justices last month heard arguments in a separate case, on the leader’s efforts to remove a member appointed by the previous administration from the Federal Trade Commission, which like the central bank is a legislatively created independent, multi-member regulatory agency.

The 6-3 conservative majority in that petition appeared ready to rule for the executive when it involves semi-autonomous agencies.

One justice at argument accused the administration of trying to “destroy the structure of government,” while another countered that “there is no such thing in our constitutional order as a fourth branch of government that’s quasi-judicial and quasi-legislative.”

Both the targeted officials were named to their current staggered terms by the former leader, but are now reportedly not allowed to continue serving while their lawsuits are decided.

In Cook’s case, lower courts ruled she did not receive due process when the executive tried to fire her.

Observers note the current dispute centers on whether the leader can remove Cook temporarily while the case continues, rather than the broader constitutional questions about removal restrictions.

A federal judge had issued a preliminary injunction against the administration, which then sought relief from the highest court on the limited enforcement issue.

The nine-member bench now has the option of ruling narrowly on the injunction question or deciding the larger constitutional matters—a choice that legal experts say could reshape executive power for years to come.

One key argument reportedly centers on whether the central bank has some administrative connection to the executive branch, which could put it under limited presidential control.

Though its leaders are appointed by the executive and confirmed by the upper chamber, the seven-member board is considered an independent government agency, since its monetary policy decisions do not need executive or legislative approval. However, the agency does provide the legislature with regular reports on its work.

It also does not receive federal funding, and the terms of board members span multiple executive and legislative cycles—a structure designed to insulate monetary policy from political pressures.

Under law, the central bank’s leadership has a three-fold mandate: “maximum employment, stable prices, and moderate long-term interest rates.”

The 12 regional banks are not part of the federal government, but set up like private corporations and located across the country.

The justices, in an unsigned order in a separate case, had suggested the central bank operates differently from other independent federal boards, since it is not funded through normal appropriations, but uses interest on securities acquired through market operations.

“The central bank is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the nation’s first central banks,” the highest court noted.

After paying its expenses, the central bank hands the rest of its earnings over to the national treasury.

The leader has repeatedly criticized Powell and the monetary authority over reluctance to lower benchmark interest rates as aggressively as the executive wants, reflecting a fundamental disagreement over prudent ways to stimulate the national economy.

Like Cook, Powell in an extraordinary video statement accused the executive of investigating him as “pretexts” for “political pressure or intimidation.”

“The threat of criminal charges is a consequence of the central bank setting interest rates based on our best assessment of what will serve the public, rather than following the preferences of the leader,” he said.

The head of state on Tuesday called Powell “either incompetent or crooked.”

Powell’s term as chairman ends in May, but he has the option of remaining on the governing board for another two years. The leader has been conducting what observers describe as a transparent interview campaign with candidates to succeed Powell.

The high court will attempt to focus on what shapes up as a major test of executive and judicial power, setting aside the political drama in the capital.

The central banking law says the executive can only remove members “for cause.” The exact parameters of that standard were not spelled out in the original law, and never fully tested in the courts.

Cook—appointed for a 14-year term by the previous administration in 2023—will remain on the job at least until the court decides the current legal questions.

No leader has fired a sitting central bank governor in the law’s 112-year history, making this case unprecedented.

“Put simply, the leader may reasonably determine that interest rates paid by citizens should not be set by a governor who appears to have lied about facts material to the interest rates she secured for herself,” said the government’s top legal representative in the administration’s appeal.

Government prosecutors will argue that removal protection power is discretionary and unenforceable.

But Cook’s lawyers counter that “Granting that relief would dramatically alter the status quo, ignore centuries of history, and transform the central bank into a body subservient to the executive’s will.”

The court’s decision to take up the case comes after a district judge issued a preliminary injunction blocking the leader from firing Cook while the case continued.

A federal appeals court voted 2-1 to deny the administration’s request for intervention, prompting officials to make their case to the highest court for emergency review.

The development comes as the leader has for months pressured the monetary authority to slash interest rates, in a bid to help spur the nation’s economic growth—a common tension between executives and central banks in developing democracies.

His attempt to fire Cook for alleged mortgage fraud violations, which she has denied, has created a first-of-its-kind judicial clash that could have profound impacts on the central bank itself.

She strongly denies accusations of falsely claiming two homes as her primary residence to secure better mortgage terms. She has not been charged with any crime.

Cook’s legal team sued the leader for attempting to fire her, arguing it violated her due process rights as well as her statutory right to notice and a hearing.

The next monetary policy meeting is scheduled for late January, with an expected interest rate decision. Both Powell and Cook are each set to participate.

Financial markets, private banks, businesses and investors will be closely watching what the highest court does in the central bank dispute, and a separate pending appeal over the leader’s sweeping reciprocal global tariffs.

A written ruling in the import tax case, which was argued by the justices in November, could come at any time.

A decision in the central bank case could come relatively quickly within weeks, or potentially as late as early summer—timing that will be closely watched by observers of the nation’s ongoing institutional tensions.