RPT-BREAKINGVIEWS-Court battle shows the Fed needs law, not markets

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By Gabriel Rubin

WASHINGTON, Jan 21 (Reuters Breakingviews) - U.S. Supreme Court justices are the ultimate generalists, ruling on matters that affect the health, freedoms, and welfare of citizens. On matters of the Federal Reserve, however, the justices say they must defer to economists and their superior technical knowledge. Even the court’s conservative justices who control the majority voiced skepticism in Wednesday’s oral arguments over President Trump's firing of Fed governor Lisa Cook, who faces White House allegations of mortgage fraud that she denies. The court, which has steadily expanded executive power, appears keen to protect financial markets from Trump’s whims, regardless of whether it makes for a coherent legal argument.

The high court heard arguments in December over the dismissal of other Senate-approved officials, such as Federal Trade Commission members previously thought to be insulated from executive-branch meddling. The court seems likely to rule in favor of President Trump’s argument in that case, making the Fed’s situation all the more unusual. Indeed, the court is “uniquely structured” in the annals of American law, according to Cook’s lawyer, an argument the court seemed prepared to accept.

The maintenance of central-bank independence seems to be sacrosanct to the justices. While the ends might justify the means, it’s a shoddy way to make law, and calls into question the court’s other decisions made without deference to specialists’ opinions. While former Fed chairs including Alan Greenspan, Ben Bernanke and Janet Yellen, along with other economic luminaries, warned the court ominously of the inflationary effects of a captured central bank, surely one could make a similar case for the warnings of scientists or doctors in cases about fossil fuel emissions or abortion.

This case is “irregular,” as more than one justice noted. The court considered the way in which Cook was notified—via Truth Social post from Trump, without a chance to defend herself—as well as whether the reasons given for her firing were mere pretexts for resolving disputes over monetary policy. The dominant takeaway was clear, though: the justices are loath to fiddle with the Fed’s immense power. “I don’t want to be responsible for quantifying that risk,” Trump-appointed Justice Amy Coney Barrett told the administration’s lawyer. “I’m not an economist.” It may be the right conclusion to reach, but the reasons for doing so don’t reflect well on the court’s commitment to legal consistency.

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CONTEXT NEWS

The U.S. Supreme Court heard arguments on January 21 over President Trump’s attempted dismissal of Federal Reserve Governor Lisa Cook over allegations of mortgage fraud.

The high court is expected to rule soon on Trump’s use of emergency power to impose broad tariffs on U.S. trading partners.

(Editing by Robert Cyran; Production by Maya Nandhini)

((For previous columns by the author, Reuters customers can click on RUBIN/gabriel.rubin@thomsonreuters.com))