In the case of the Federal Reserve, the Supreme Court appears to draw an ambiguous exception

WASHINGTON (AP) — For the past year, the Supreme Court has repeatedly allowed President Donald Trump to fire the heads of independent agencies, but it appears to have drawn a line with the Federal Reserve.

The court has signaled for months that it sees the Fed in a different light. It says the president can fire the directors of other agencies for any reason, but can remove Fed governors “for cause,” which usually means dereliction of duty or misconduct.

Last year, the court allowed President Donald Trump to fire — at least temporarily — National Labor Relations Board member Gwen Wilcox and Merit Systems Protection Board member Kathy Harris, but that made a difference for the Fed. The two officials argued that if Trump could fire them, he could also fire members of the Fed’s board of governors.

“We disagree,” the court said then. “The Federal Reserve is a uniquely structured, quasi-private institution that follows in the distinctive historical tradition of the first and second banks of the United States.”

That is now up for trial in a case before the Supreme Court related to Trump’s attempt to oust Fed Governor Lisa Cook. During oral arguments Wednesday, the court expressed its desire to keep Cook in his job.

Allowing Cook’s firing to go forward “would undermine, if not shatter, the independence of the Federal Reserve,” said Justice Brett Cavanaugh, one of three Trump appointees to the nation’s Supreme Court.

But the court largely touched on one key issue: What, exactly, is the legal principle that protects the Fed, but not other agencies?

According to some legal scholars, the judges are in disarray. The Fed, they argue, is similar in many ways to the Federal Trade Commission or the National Labor Relations Board, agencies Congress wanted to be independent but whose officials Trump has been able to fire without pushback from the Supreme Court.

“There is no historical basis to distinguish the Fed from other independent agencies designed by Congress,” said Jane Manners, a law professor at Fordham University. “The whole argument was based on the idea that the Fed is different. They haven’t explained exactly why.”

“As a legal scholar and as a historian I think the distinction is hocus pocus,” added Peter Conti-Brown, a professor of financial regulation at the University of Pennsylvania.

Just last month, the court indicated in a separate oral argument that it would allow Trump to fire FTC Commissioner Rebecca Slaughter. The court’s conservative majority also suggested it would overturn 90-year-old precedent that sharply limits the president’s ability to fire top officials at independent agencies.

Chief Justice John Roberts and many of his colleagues support the “unitary executive” doctrine, which holds that the president should have complete control over the staffing of agencies in the executive branch.

Agency directors, like Slaughter, are “exerting enormous power over personal freedoms and billion-dollar industries” without accountability to anyone, Kavanaugh said at a December oral argument.

With the Federal Reserve, however, conservative Supreme Court justices have applied a different view: that the Fed’s monetary policy—the setting of short-term interest rates and the management of the money supply—has not historically been overseen by the executive branch.

Some legal experts have also drawn a distinction between the Fed and other independent agencies. In a brief filed in Cook’s case, University of Texas law professor and former top Texas government attorney Aaron Nielsen wrote that, “While the modern FTC undeniably exercises executive power, the Fed’s primary function is monetary policy, which does not require executive power and often does not.”

The First and Second Banks of the United States were nationwide banks that were the closest the United States had to a central bank in the first few decades after the nation’s founding, and both “conducted initial monetary policy,” Nielsen wrote, but were not executive branch agencies.

But Lev Menand, a law professor at Columbia University and author of a book about the Fed, argued that the Fed exercises executive power when it regulates the banking system. And monetary policy, when it adjusts the money supply, is part of that regulation, he said.

There are also three types of government authority, Menand argues: legislative, executive, and judicial, and the Fed falls into the executive category.

“There is no fourth kind of government power,” Menand said. “There is no other place to find the Fed.”

Still, the justices neglected to address why the Fed differed during Wednesday’s oral arguments, in part, Menand noted, because neither side pushed it. Cook’s lawyers had no reason to question the apparent difference in their favor.

And the government’s own Supreme Court lawyer, D. John Sauer also acknowledged that Trump can only fire Cook “for cause,” while in other cases the White House has sought to remove officials for any reason, including policy differences. This difference made it difficult for the White House to argue that Cook should be removed from office immediately.

“There is a long tradition of using this exercise of monetary policy independently of executive influence,” Sauer said. “And we don’t dispute what Congress was doing.”

Paul Clement, one of Cook’s lawyers, told the justices, “Why this case is problematic for the government, I think, is because they could come in here and say, you know, the Fed, schmed, it’s no different. It’s the same as the FTC.”

Instead, Clement added, “they come in and say, no, we’re going to accept that the Fed is different, at least for the purposes of this case.”

The Supreme Court will initially rule on the narrow question of whether Cook can remain in his post while a larger dispute over his dismissal is fought out in lower courts. Still, at some point it may have to issue more comprehensive decisions that include a fuller explanation of why the justices see the Fed differently.

For now, the Fed’s size and influence over financial markets may be providing it with a measure of safety.

“I don’t mean to disparage any other agency, but there is a reason monetary policy has been handled differently over the years,” Clement said. “And there’s a reason why markets look at the Fed a little more closely than they really do at any other agency of the government.”