Senate Can Stop Fed Packing

On Wednesday, the Supreme Court heard arguments regarding Trump vs. Cook. This case explores whether President Trump can dismiss Federal Reserve Governor Lisa Cook based on allegations of mortgage fraud. Justice Brett Kavanaugh raised concerns, suggesting that giving the president too much leeway in firing decisions could undermine the Federal Reserve Act’s requirement for “just cause.”

However, Kavanaugh’s worries seem to overlook a crucial mechanism to prevent presidential overreach: the Senate confirmation process.

The “for cause” standard isn’t meaningless just because courts have to consider the president’s stated reasons for a dismissal. This requirement guides the president to recognize that Fed directors can’t be removed simply due to policy disagreements. The president must provide a genuine reason related to conduct, competency, or suitability for the position. This approach differentiates firings at the Fed from typical at-will appointments and encourages a more thoughtful consideration of firing powers.

Yet, the principal safeguard against unjust removals isn’t actually judicial review. Instead, it lies in the Senate’s confirmation authority. The president can only replace a Fed director if the Senate approves the nominee. So, if the president tries to stack the Fed with allies and unjustly fires a governor, the Senate can simply refuse to confirm their successor. This way, the president’s influence on monetary policy is curtailed without requiring a judicial analysis of the firing’s justification.

Powell’s Confusion Highlights Senate’s Authority

We’ve seen this framework in action. Recently, when the Justice Department subpoenaed Federal Reserve Chairman Jerome Powell, at least two Republican senators quickly announced they’d refuse to confirm any Trump nominees for the Fed. The message was clear to the President. No need for a hearing to assess if the subpoenas applied undue pressure or to discuss the Fed’s independence; the potential for withheld confirmation spoke volumes.

This method aligns with the Constitution’s design of checks and balances and the structure outlined in the Federal Reserve Act. The Constitution assigns the Senate the role of vetting appointments to important government positions, ensuring political accountability for these choices. The framers recognized that the strongest constraints on executive power often come from within the political system itself, rather than from the judiciary. The Fed Act mandates this involvement.

If courts get involved in determining whether a specific complaint justifies a removal, judges end up in a tricky position. They would have to second-guess management decisions; possibly adjudicating ongoing conflicts between the president and Fed directors. This risks turning the judiciary into a Personnel Review Board, a function not clearly intended by the Constitution and ill-suited for the Court. It could also pressure Fed officials to forge relationships with judges to ensure job security, which could corrupt both the Fed and the judiciary.

On the other hand, the Senate holds the power to make an overall assessment regarding the president’s actions, upholding institutional norms about Fed independence. Senators don’t need to validate the mortgage fraud allegations or determine if past actions justify a dismissal. Their central question is whether the president is attempting to politicize monetary policy. If the answer is affirmative, they can withhold confirmation until the president shifts direction.

This doesn’t imply that the Senate is always bound to fulfill this role. But the same holds true within any constitutional setup. What’s essential is figuring out which branch of government is authorized by the Constitution and law to act as a check, and the language is explicit: the Senate advises and consents to appointments.

While the administration points out that the broad “for the greater good” phrasing in the Federal Reserve Act offers significant discretionary power to the president, this discretion exists within a constitutional framework that deters abuse. The president must articulate a reason, and the Senate must approve a replacement. If patterns of presidential removals suggest an effort to dominate monetary policy via personnel changes, the Senate can deny necessary confirmations.

Justice Kavanaugh’s concerns regarding discretionary removal powers are valid. However, the constitutional answer isn’t to push for extensive judicial review of removal decisions. The government relies on the Senate to fulfill its designated role in checking the president’s efforts to fill the Fed with supporters. That check is not only present but also substantive, and it has proven to work.

Regrettably, Attorney General John Sauer didn’t mention this point during oral arguments, but it’s something the justices should consider.