Category World News

The Supreme Court of the United States will hear arguments regarding Lisa Cook’s removal as governor of the Federal Reserve. Cook will continue in his current position until the court’s announcement.

On Wednesday, the high court made the decision public.

In the first attempt by a president to fire a Fed official, Cook has been attempting to leave, a unprecedented challenge to central bank independence.

While lower court litigation continues over the termination, the justices declined to decide the Department of Justice’s request to put a judge’s temporary suspension of the Republican president’s ability to remove Cook, an appointee of Democratic former president Joe Biden.

The case will be heard in January, according to the justices’ statements.

The Federal Reserve Act, a law passed by Congress in 1913 that protected the central bank from political interference, including allowing governors to be removed by president only “for cause,” despite the law’s definition and procedure for removal. In court, the law has never been put to the test.

On September 9, US District Judge Jia Cobb in Washington, DC, decided that Cook’s claims that he had made mortgage fraud before taking office, which Cook refuted, likely weren’t sufficient grounds for his removal under the Federal Reserve Act.

Trump announced on August 25 that he would appoint Cook to the Fed’s board of directors, citing allegations that she had falsified records to obtain favorable mortgage terms before joining the central bank in 2022. Her term is scheduled to end in 2038.

Soon after, Cook, the first Black woman governor of the Fed, filed a lawsuit against Trump. Cook claimed that Trump’s accusations against her served as a pretext to fire her because of her monetary policy stance.

The administration requested a delay in Cobb’s order, but the US Court of Appeals for the District of Columbia Circuit turned down that request on September 15.

Extensive analysis of presidential powers

Despite similar job protections for those positions, the Supreme Court has ruled in a number of recent decisions that the Supreme Court has allowed Trump to remove from various federal agencies that Congress had established as independent from direct presidential control. The court’s decision suggests that it may be ready to overturn a significant 1935 precedent that preserved these protections in a case involving the US Federal Trade Commission.

The court has since indicated that it can treat the Fed differently from other executive branch branches, noting in May that the Fed “is a uniquely structured, quasi-private entity” with a unique historical tradition in a case involving Trump’s dismissal of two Democratic members of federal labor boards.

Trump’s plan to fire Cook is a result of his broad assertions about presidential authority since he took office in January. Cook is given an “unreviewable discretion” as long as there is a cause for removal, according to the Department of Justice in a filing to the Supreme Court on September 18.

The filing stated that “the President may reasonably determine that a Governor who appears to have lied about facts relevant to the interest rates she secured for herself and who declines to explain the apparent lies.”

According to Cook’s attorneys, granting Trump’s request “would eviscerate the Federal Reserve’s longstanding independence, upend financial markets, and establish a blueprint for upcoming presidents to direct monetary policy based on their political agendas and election calendars,” according to Cook’s lawyers’ statement to the Supreme Court on September 25.

A group of 18 former US Federal Reserve officials, Treasury secretaries, and other top economic figures who served under both parties’ presidents urged the Supreme Court to stop Donald Trump from firing Cook.

Janet Yellen, Ben Bernanke, and Alan Greenspan, the previous three Fed chairs, were also present. They claimed in a brief to the court that allowing this dismissal would undermine public trust in the Fed and threaten its independence.

In September, the Fed convened its highly anticipated two-day meeting in Washington, DC, where the central bank decided to cut interest rates by a quarter of a percentage point as policymakers expressed concern about job market weakness. Cook a part of the group who voted in favor of the cut.

Fed under pressure

Concerns about the Fed’s separation from the White House’s monetary policy may have an impact on the world economy.

The case has implications for the Fed’s ability to regulate interest rates in accordance with political wills, which are widely believed to be essential for any central bank’s capacity to operate independently and carry out tasks like regulating inflation.

After Congress failed to pass a new spending bill, forcing operations that were deemed inescapable to close, the United States federal government shut down at 12:01 am East Coast time (4:01 GMT).

President Trump has threatened to use the impasse to force widespread federal employee layoffs.

Republicans and Democrats continue to disagree on spending priorities as they push for cuts to social programs, foreign aid, and healthcare.

Washington has not experienced this level of hostility before. Every US government shutdown since 1976, including how long they have existed, and which administration was in place, is depicted in the graphic below.

A government shutdown is what?

Parts of the federal government must close until a spending plan is approved in the event that Congress does not pass a budget agreement.

Because the government’s fiscal year runs from October 1 to September 30, shutdowns typically occur in October.

How frequently has the government been in office?

1976 was the start of the current budget process. The government has since experienced 20 funding gaps, which have caused 10 government shutdowns.

When Congress does not pass a budget or stopgap spending bill (also known as a continuing resolution), leaving the government without the authority to spend money, funding occurs.

• If temporary funding measures expire before a long-term agreement is reached, a single shutdown may result in multiple funding gaps.
• Only if the government’s operations actually cease as a result of this funding gap.

Prior to the 1980s, funding gaps did not typically result in shutdowns, and organizations continued to operate assuming funding would be restored soon.

Attorney General Benjamin Civiletti issued legal opinions after 1980 stating that agencies are required to spend money without the approval of Congress. Only essential services, such as law enforcement, air traffic control, and national security, could continue.

Since 1982, funding gaps have more frequently resulted in complete or partial government shutdowns until the standoff is resolved by Congress.

The last government shutdown occurred when?

After President Donald Trump, who was in his first term, and Democratic politicians reached a deadlock over the president’s request for $5 billion in funding for a wall along the US-Mexico border, a demand that Democrats opposed, the government shutdown occurred in December 2018 and January 2019.

What shutdown lasted the longest?

Trump announced he had reached a tentative agreement with congressional leaders to reopen the government for three weeks while border wall negotiations continued, making the shutdown 35 days long, the longest in US history.

What transpires during a shutdown?

Nonessential federal services are suspended or reduced while a government shutdown occurs, and many government employees are furloughed or given unpaid leave.

While essential personnel, such as those in the military, law enforcement, and air traffic controllers, are required to continue working, frequently without pay, until funding is restored.

How are government shutdowns ended?

When Congress passes a continuing resolution that provides short-term funding while continuing negotiations for a longer-term budget, shutdowns are typically resolved.

Every shutdown has come to an end with the passage of a continuing resolution since 1990.

What services are being discontinued?

Nonessential federal employees, as well as people and businesses that rely on government services, are the main victims of a shutdown.

The nation’s top employer is the federal government. According to Bureau of Labor Statistics data released by the Pew Research Center, it had a little more than 3 million workers as of November, or 1.9 percent of the civilian workforce.

About 750, 000 federal employees could be furloughed each day, according to the Congressional Budget Office, and their lost pay would add up to about $400 million per day if funding runs out in fiscal year 2026. Because some organizations may increase layoffs as the shutdown drags on longer while others may re-establish some employees, the exact number of furloughed workers may change over time.

Numerous services and organizations have been impacted by previous shutdowns, including:

• Monuments and national parks
• Federal museums
• Federal projects for research
• Processing of a number of government benefits
• IRS Taxpayer Services

What services are still in use?

Numerous essential government functions are still in operation even during a shutdown. Some continue because they are deemed necessary for public safety and welfare, while others are funded through self-sustaining or mandatory programs. Examples include:

• Medicare and Social Security benefits
• Federal law enforcement and the military
• US Postal Service
• Air traffic control
• US Passport Agency