Firestorm between president and the Fed continues to rumble on
The US Supreme Court has declined, for now, to grant President Donald Trump’s request to remove Federal Reserve Governor Lisa Cook, leaving her in place until the justices consider the matter in January.
The Court rejected an emergency application lodged by the administration to dismiss Cook immediately, despite Trump’s claim that her conduct justified removal. Instead, the justices set oral arguments for the new year, aligning the dispute with a parallel case on the president’s authority over leaders of independent agencies. That companion case, concerning the Federal Trade Commission, will be heard in December.
A question of presidential power
At the heart of the dispute lies a long-running constitutional tension: whether Congress can insulate members of independent regulatory bodies from presidential dismissal. The Supreme Court previously confirmed that the president may dismiss certain agency members at will, but it has also suggested that the central bank stands apart as a “uniquely structured, quasi-private entity.”
Cook, appointed in 2022 and the first Black woman to serve as a Fed governor, has resisted Trump’s dismissal effort, arguing that it is rooted not in ethics but in policy disagreements. Her legal team said the move risked “shock waves in the financial markets that could not easily be undone.”
Trump insists otherwise, asserting that Cook misrepresented mortgage applications by declaring multiple residences as “primary homes.” Cook has not been charged, and documents seen by Reuters show she described one property as a “vacation home.” Her lawyers argue the allegations are pretextual, noting the president’s repeated criticism of the Fed for prioritising long-term stability over short-term economic expansion.
Market independence at stake
For financial markets and the insurance sector, the case underscores the importance of regulatory predictability. The Fed’s seven-member board, created in 1913, was designed to operate at arm’s length from political influence, with members serving staggered 14-year terms. Its decisions on interest rates directly shape credit availability, borrowing costs, and, by extension, the risk environment for insurers and other financial institutions.
In their September filing, Cook’s lawyers warned: “An order from this Court allowing the removal of Governor Cook will thus threaten grave harm to the American economy.”
The administration counters that the statutory “for cause” provision is broad and gives the president wide latitude. “That the Federal Reserve Board plays a uniquely important role in the American economy,” Solicitor General John Sauer wrote, “only heightens the government’s and the public’s interest in ensuring that an ethically compromised member does not continue wielding its vast powers.”
What comes next
The justices will consider both the FTC and Fed cases within weeks of each other, setting up what could be a landmark ruling on the extent of presidential authority. For insurers and other market participants, the outcome may determine not only the stability of Fed leadership but also the precedent for how insulated financial regulators can remain from the Oval Office.
Until then, Lisa Cook retains her seat at the policy table, with the next Federal Open Market Committee meeting looming large for investors, lenders, and insurers alike.
