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On Wednesday, Donald Trump once again indicated that he was on the verge of firing Jerome Powell, chairman of the Federal Reserve, over Powell’s refusal to cut interest rates in the midst of stubborn inflation. The markets promptly nosedived, only to recover again once the president backed off, but only after his lawyers warned the move would be illegal. The Trump administration and its congressional allies have continued to lay the groundwork for Powell’s eventual removal—and they seem to think the Supreme Court could be cajoled, or hoodwinked, or just bullied into approving this flagrantly unlawful action.
Dahlia Lithwick and Mark Joseph Stern discussed Trump’s latest threats toward the Fed chair—as well as the Supreme Court’s likely response if the president pulls the trigger—on this week’s Slate Plus bonus episode of Amicus. A preview of their conversation, below, has been edited and condensed for clarity.
Dahlia Lithwick: This is a political story and also a markets story. But it’s also a galactic game of chicken being played out between the Roberts court and the White House. In order to fully unpack why that is, can you remind us whether Donald Trump actually can fire the boss of the Fed?
Mark Joseph Stern: Under federal law, Trump cannot remove Powell over a policy disagreement. Federal law expressly allows for the removal of the Fed’s board members only for “cause”—something like abuse of office or malfeasance. That means Trump can’t just sack Powell because Trump wants to slash rates and Powell wants to keep them steady.
Ninety years ago, in a case called Humphrey’s Executor, the Supreme Court unanimously upheld this kind of protection against removal. But this administration rejects the validity of that precedent and has already fired a bunch of agency heads who are also protected from removal under federal law. The current Supreme Court rewarded him for doing that back in May when, by a 6–3 vote, the majority greenlit Trump’s illegal removal of Democratic members serving on two very important federal agencies. That decision seemingly signaled that Humphrey’s Executor is dead and that this Supreme Court has fully embraced the ahistorical fiction of a “unitary executive” who can fire pretty much any official within the executive branch, for any reason. But in that very ruling, the majority also randomly declared that the Federal Reserve is somehow different from every other agency, and that its members alone can still be protected from presidential termination. So based on the whispers that the Supreme Court is passing down to us, it sure seems like Trump shouldn’t be able to fire Powell.
Let’s read exactly what the court said, because it’s hilarious: “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” That’s the totality of the explanation for why the Fed alone gets independence. There is no coherent logic here!
Absolutely not. This carve-out doesn’t make any sense; the Fed’s members clearly exercise as much executive power as other agencies, and the board of governors is not actually “quasi-private.” There is no precedent that indicates there is some secret, special reason why the Fed’s members—and nobody else—should be insulated from partisan removal. So the caveat reads like the conservative justices begging Trump: “Please, please, please don’t mess with the Fed and fire Powell because we don’t want you to tank our 401(k)s.” But I think that Trump reads that opinion as a dare to see just how far he can push the conservative majority. And maybe he sees it as an opportunity to prove that the conservative justices will stand down in a direct conflict with his administration. Even if they’ve puffed up their feathers and put on a show of defending independence, Trump can just barrel them over. And that is probably an accurate read of the situation.
This really does drive home the unifying theory of why the Roberts Court Six continues to give way to Trump’s lawlessness. The theory goes that they’re holding their power in check, doing a carefully calibrated dance in which both sides are daring each other to cross some line while clinging to their own prerogatives and power. The court says: OK Mr. President, we’re going to give you 96.2 percent of what you want, but we are really cutting you off there. And the Fed is a red line. But it feels as though Donald Trump doesn’t care.
I do think this is a game of chicken, and I think Trump will win. Here’s the problem the Supreme Court has created for itself. Federal law, as I said, allows removal of Fed members for “cause.” And Trump keeps reminding us that Powell is overseeing a renovation of the Fed’s headquarters in D.C. that’s gone way over budget. Trump claims there may be fraud, though there’s no evidence of it. His allies are planting this seed: Congressional Republicans have been grilling Powell over the renovation, and Russell Vought—director of the Office of Management and Budget—has been pushing Powell to explain himself. Powell has done everything he can, even asking the Fed’s inspector general to review the project.
But if Trump does fire Powell, he’ll probably cite the Fed’s expensive renovation as pretext, say it’s proof of malfeasance and mismanagement, call that sufficient “cause,” and then dare the courts to say he’s lying. That would cause a huge headache for the Supreme Court because the justices will know it’s bogus pretext. But in a little decision called Trump v. United States, the presidential immunity case from last term, the same conservative justices already ruled that courts cannot probe a president’s true motivations or subjective intentions when he commits an official act. And then they said that firing executive officials is an official act! So the majority has already given Trump a path to pretend to fire Powell for cause, then insulate its decision from judicial review. I think the majority has really boxed itself in with this self-defeating jurisprudence, claiming that the president can’t fire the Fed chair over policy disagreements, then giving him the tools to do just that.
In case that weren’t enough, we have a new decision that puts Humphrey’s Executor right back at the Supreme Court.
Yes: On Thursday, a federal judge held that Trump cannot fire a Democratic member of the Federal Trade Commission. That’s the exact agency that the Supreme Court looked at in Humphrey’s Executor and ruled that the president cannot fire its members without cause! This case is going to barrel up to the Supreme Court. And the justices are going to tie themselves in knots to explain why Trump can fire someone who is directly protected from removal under precedent but cannot fire someone who exercises even more executive power at an even more important agency because the justices don’t want their 401(k)s in the toilet.
I am reminded of my favorite footnote in the birthright citizenship case, Trump v. CASA, where Justice Amy Coney Barrett wrote that “the Solicitor General represented that the government will respect both the judgments and the opinions of this Court.” And it’s another one of those winking things where the only citation is Solicitor General John Sauer sort of saying as much in oral arguments in that case. I love these back-and-forths where the justices are like, “No, we have a side deal that nobody knows about, and we’re just going to wink and nod and hope that it all works out.” And it’s such a sad system of bargaining. This is where we’re at? The court winks and nods and says “Don’t fire the Fed chair” or “Don’t violate court orders,” and democracy rests on this administration keeping its promise?
I think that leaves us with the burning question you and I are now asking every week: Are the justices really that naive and credulous? Or are they just pretending to be to let Trump get away with whatever he wants?
