Banking and Finance Law Daily Wrap Up, FEDERAL RESERVE SYSTEM—Brookings research finds Trump v. Cook ‘largely affirms’ legal basis for Fed’s independence, (Jul 21, 2026)

By Suzanne Cosgrove

However, the Supreme Court decision does not bar a future effort by a president to remove a Fed governor for cause.

New research by Daniel Tarullo, a nonresident senior fellow in economic studies at Harvard Law School, suggests the Supreme Court’s decision in Trump v. Cook has far-reaching, mostly favorable implications for the independence of the Federal Reserve.

Most importantly, Tarullo writes in an analysis for the Brookings Institution, on the same day the Court mandated that the president can remove members of traditionally independent agencies such as the Federal Trade Commission, it made clear that the Board of Governors of the Federal Reserve is an exception to the rule. They may be removed only, as the Federal Reserve Act says, “for cause.”

Although the Court did not preclude the president from trying again to remove Fed Governor Lisa Cook from office if he provides her with some explanation of the evidence for her removal and an opportunity to respond, the Court’s interpretation of the “for cause” requirement in the Federal Reserve Act makes the case against her a difficult one to win.

Background. On Aug. 20, 2025, President Donald Trump posted a message on social media stating that, “Cook must resign, now!!!” Linked to his comment was a news report that the director of the Federal Housing Finance Agency had called for an investigation of Cook for possible criminal fraud in connection with her applications for mortgages on residential properties.

Neither the government, Cook, nor the courts have made any formal submissions or findings of the facts underlying the allegations of mortgage fraud, Tarullo noted.

Cook filed suit in Federal District Court in Washington, D.C., contesting Trump’s action and seeking a temporary restraining order to keep her in place during the pendency of the litigation. The District Court granted a preliminary injunction to that effect and a divided U.S. Court of Appeals in Washington upheld the injunction. After a request for a stay of the injunction by the government, the Supreme Court set the matter for an oral argument.

In a 5-4 opinion, written by Chief Justice John Roberts in June, the U.S. Supreme Court denied an application filed by Trump to stay an injunction preventing him from firing Cook for cause under the Federal Reserve Act (see Banking and Finance Law Daily, June 29, 2026).

For cause. Tarullo notes the Court’s version of a Unitary Executive Theory – the idea that the Constitution requires any government official engaged in “executive” action to be subject to the president’s control – would seem to include the Federal Reserve.

“Yet even as expectations grew in recent years that the Court would eventually embrace that theory, there arose a belief that the Fed would be spared,” he said. The chief justice confirmed that exception in his Cook opinion, “though without very extensive reasoning.”

Roberts pointed to the Fed’s history as the decisive factor that makes the Fed different, Tarullo noted. Roberts described as “de facto” central banks the First and Second Banks of the United States. Congress chartered those institutions to be independent of political control. The entities were not central banks per se. But “what matters,” Roberts said, is that the Federal Reserve remains “‘consistent with the principles that underpin’ the First and Second Banks – namely, that monetary policy should not be subject to political interference.”

A second factor in the Court’s standard for establishing “cause” is noteworthy, Tarullo said: “The key issue is whether ‘[t]he cause assigned’ truly ‘impl[ies] an unfitness for the place’—or whether it simply represents an effort to secure a ‘more congenial’ replacement.”

Given the chief justice’s reluctance in other recent cases to look behind the President’s stated reason for taking a particular action, “his openness to doing so in cases involving the Fed may reflect a particular sensitivity to the importance of Fed independence,” Tarullo said.

Questions raised. While the Court’s opinion in Trump v. Cook was favorable to Cook and to the continued independence of the Fed, the attempt to remove her may not be over, Tarullo noted. The administration could restart the effort by conducting the kind of process required by the Court. Similar efforts might be directed against other Fed governors in the future, which raises the question of what process is required for removal.

Chief Justice Roberts was aware of the implications of the Court’s decision for monetary policy independence. He addressed the issue, but only in a footnote. “In upholding the constitutionality of the Federal Reserve as currently structured and with its existing enforcement authorities, we do not suggest that Congress could assign the Federal Reserve additional regulatory powers that are attenuated from monetary policy,” Roberts said.

A durable ruling? “Does either the closeness of the vote [5-4] or the asserted thinness of the legal logic in the majority opinion suggest that the Court’s support for Fed independence may be unsustainable?” Tarullo asked.

“In practical terms, that support should continue for the foreseeable future,” he said. “The ruling – including the chief justice’s explanation of the Fed’s constitutionality and the for-cause standard – has largely affirmed the firm legal basis for the Fed’s independence intended by Congress.”

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