Will the Supreme Court empower Trump to sack the Fed’s boss?

OVER 14 seasons of “The Apprentice”, Donald Trump gleefully dispatched more than 200 contestants for botching a task or ruffling the wrong feather. In his second term as president, Mr Trump is discovering that axing federal-agency heads protected by “for-cause” removal statutes may require more than an imperious finger-point. In the latest of a series of emergency applications to the Supreme Court, he is asking the justices to grant him the unfettered power he once wielded on reality TV.

A precedent from the administration of Franklin Roosevelt—Humphrey’s Executor v United States—has been standing in Mr Trump’s way. In 1933 Roosevelt tried to sack William Humphrey, one of the five commissioners of the Federal Trade Commission, over disagreements on trade policy and Humphrey’s opposition to his New Deal programmes. Humphrey challenged his removal and, following his death the next year, won a victory at the Supreme Court in 1935. For decades Humphrey’s Executor stood for the idea that the president lacks an “illimitable power of removal”. It has protected the independence of executive agencies established by Congress that exercise “quasi-judicial” or “quasi-legislative” powers—from the Equal Employment Opportunity Commission to the Securities and Exchange Commission.

In line with Humphrey’s Executor, lower courts have ruled that Mr Trump lacked the constitutional authority to remove Cathy Harris, appointed by Joe Biden in 2022 to the Merit Systems Protection Board (MSPB), and Gwynne Wilcox, tapped by Mr Biden the previous year for a seat on the National Labour Relations Board (NLRB). By statute, members of the MSPB, which is meant to protect some government employees from partisan pressure, are subject to removal only for “inefficiency, neglect of duty or malfeasance in office”.

Their counterparts at the NLRB, which safeguards the right of private-sector workers to join a union, can be sacked “upon notice and hearing, for neglect of duty or malfeasance in office, but for no other cause”. Since Mr Trump gave no reason for removing these officials other than his belief that they would not support his policies, the courts reasoned, his actions were invalid. Mmes Harris and Wilcox, they said, must be reinstated. Their fate will be watched carefully by financial markets, and not because traders love the MSPB or NLRB.

In its emergency application to the Supreme Court, the Trump administration characterised these judicial moves as “untenable”. A president “should not be forced to delegate his executive power to agency heads who are demonstrably at odds with the administration’s policy objectives for a single day—much less for the months that it would likely take for the courts to resolve this litigation”. The brief points to recent decisions by the Supreme Court that have chipped away at Humphrey’s Executor. In 2020 Seila Law v Consumer Financial Protection Bureau (CFPB), made the head of the CFPB subject to at-will presidential removal without cause. The 5-4 decision said Humphrey’s Executor protects only heads of “multimember expert agencies that do not wield substantial executive power”—as opposed to agencies like the CFPB that are run by a single administrator.

Sai Prakash, a law professor at the University of Virginia, thinks Trump v Wilcox may be the final nail in the coffin of Humphrey’s Executor. The justices “have been nibbling at it for a decade”, he says, and lower courts “have been struggling to make sense of it”. Will Baude of the University of Chicago law school agrees that it is “almost certain” the justices will stamp out Humphrey’s Executor. But he doubts this significant move will happen in the express lane of the court’s emergency docket, where the justices are hesitant to make big changes. This may lead the justices to take the government’s suggestion of moving the case to their regular docket and holding a special oral argument in May so they can resolve the case before July.

The main obstacle to overruling Humphrey’s Executor, according to Stephen Vladeck, a law professor at Georgetown University, is “the potential impact such a ruling would have on the Federal Reserve”. The Fed and its chairs have never been free of political pressures. Richard Nixon leaned on Arthur Burns to lower interest rates before the 1972 election. During his first term Mr Trump lamented nominating Jerome Powell. More recently Mr Trump said he won’t try to replace Mr Powell before his term as chair ends in May 2026 (his term on the Board of Governors expires in 2028). But if Mr Trump sours on Mr Powell again, the demise of Humphrey’s Executor could smooth the way for him to sack the chair. The Fed’s independence under the Federal Reserve Act, Mr Vladeck notes, “rests on the same analytical and constitutional foundations” as the statutory protections for Mmes Harris and Wilcox.

Mr Prakash reckons that the Supreme Court will find a way to set the Fed apart from “garden-variety” agencies. “Everyone thinks the Fed is different,” he says. One possibility is for Congress to remove the Fed’s regulatory powers and cabin its authority to monetary policy. A refashioned Fed that lacks executive authority could keep the president off the chair’s back. Whether or not Congress acts, Mr Baude predicts, the court will find some way to avoid ruling on the Fed and could find a way to make an exception for it in a future case”.

But if the justices set Trump v Wilcox for full consideration in the coming weeks, the Supreme Court’s term will end for the second straight time with a Trump-related case that tests the bounds of presidential power. (Last year, in Trump v United States, the justices ruled 6-3 that presidents have broad protection from criminal prosecution.) If the conservative majority again sides with Mr Trump’s expansive vision of his office, the president may be tempted to keep exploring its outer limits. ■

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