Next Tuesday, the Supreme Court will hear oral arguments in one of the most consequential cases for monetary policy in American history. Trump v. Cook will determine whether President Donald Trump can remove Federal Reserve Governor Lisa Cook from her position—and by extension, whether any president can reshape the Federal Reserve Board to align with their policy preferences.

The case arrives at a moment of unprecedented tension between the executive branch and the central bank, with implications that extend far beyond the fate of a single Fed governor.

The Case Background

In late August 2025, President Trump posted on Truth Social a screenshot of a letter informing Lisa Cook that she had been fired from the Federal Reserve Board. The letter cited allegations that Cook had committed mortgage fraud before joining the board by designating both a house in Michigan and a condominium in Atlanta as her "primary residence" when obtaining loans.

Cook immediately denied the allegations, and news organizations subsequently reported on financial documents that appeared to undermine the accusations. She filed a lawsuit against President Trump, the Federal Reserve Board, and Chair Jerome Powell, arguing that her removal violated the Federal Reserve Act's "for cause" provision.

Lower Court Rulings

On September 9, 2025, U.S. District Court Judge Jia Cobb issued a preliminary injunction preventing Cook's removal. Judge Cobb wrote that "the Court finds that Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Act's 'for cause' provision."

The D.C. Circuit Court of Appeals subsequently rejected the Trump administration's emergency appeal to remove Cook before the September 2025 Federal Open Market Committee meeting, leaving the injunction in place.

What's at Stake

No president has ever fired a sitting Federal Reserve governor in the central bank's 112-year history. The Federal Reserve Act specifies that governors can only be removed "for cause"—a standard traditionally interpreted to require malfeasance, neglect of duty, or similar serious misconduct.

The Trump administration's argument challenges this understanding, asserting broader presidential authority to remove officials from independent agencies. This position aligns with a legal theory that has gained traction among conservative jurists: that the Constitution's vesting of executive power in the president includes the authority to control all executive branch officials.

"The White House campaign to unseat Cook marks an unprecedented bid to reshape the Fed board. No president has fired a sitting Fed governor in the Fed's 112-year history."

— Legal analysis of Trump v. Cook

The Humphrey's Executor Question

At the heart of the case lies the 1935 Supreme Court precedent Humphrey's Executor v. United States, which established that Congress can limit the president's ability to remove officials from independent agencies. This precedent has protected Federal Reserve governors and other regulators from political pressure for nearly nine decades.

A related case, Slaughter v. Trump involving the Federal Trade Commission, is scheduled for Supreme Court argument in December. Together, these cases could overturn or significantly limit Humphrey's Executor, potentially giving presidents far greater control over agencies traditionally insulated from political influence.

Market Implications

Financial markets are watching the case closely. The Federal Reserve's independence is considered essential to its credibility in fighting inflation and maintaining stable prices. If presidents could fire governors who disagree with their policy preferences, the central bank might face pressure to pursue politically expedient policies rather than sound monetary policy.

Why Fed Independence Matters

  • Inflation credibility: Markets trust the Fed to prioritize price stability over political considerations
  • Long-term planning: Monetary policy operates with long lags; independence allows the Fed to make decisions that may be unpopular in the short term
  • Global confidence: The dollar's status as the world's reserve currency depends partly on confidence in American monetary institutions
  • Financial stability: An independent Fed can act as a lender of last resort without political interference

Central Bankers Rally Behind Powell and Cook

The case has drawn international attention. On January 12, 2026, fourteen central bank heads from around the world issued a statement expressing solidarity with the Federal Reserve and Chair Powell. This unprecedented display reflects global concern about potential erosion of central bank independence.

The statement came just days after Fed Chair Jerome Powell revealed that "the Department of Justice served the Federal Reserve with grand jury subpoenas, threatening a criminal indictment related to my testimony before the Senate Banking Committee last June."

The Broader Context

The Supreme Court's handling of the Cook case has been notably different from other Trump-era removal cases. In previous instances involving officials at the Consumer Financial Protection Bureau and National Labor Relations Board, the justices showed deference to Trump's assertion of removal authority on an interim basis.

By contrast, the Court allowed Cook to remain in her position while the case proceeds, suggesting at least some justices may view the Federal Reserve differently from other independent agencies.

What to Watch on January 21

During oral arguments, observers will be looking for signals about how the justices view several key questions:

  • Does the "for cause" standard in the Federal Reserve Act have constitutional significance?
  • Are there distinctions between the Fed and other independent agencies that warrant different treatment?
  • How do the justices weigh concerns about monetary policy independence against presidential authority?
  • Will the Court issue a narrow ruling specific to these facts, or a broader decision affecting all independent agencies?

A decision is expected before the Court's term ends in late June. Whatever the outcome, Trump v. Cook will shape the relationship between the executive branch and the Federal Reserve for years to come—and potentially transform the landscape of independent regulatory agencies across the federal government.