A U.S. Supreme Court argument Monday is likely to provide clues about the fate of Federal Reserve Governor Lisa Cook, whom President Donald Trump has tried to fire in his push for more control over the central bank.

The clash over Trump’s attempted ouster of Democrat Rebecca Kelly Slaughter from the Federal Trade Commission will be a prelude to Jan. 21 arguments over his bid to fire Cook. The two cases will test the carve-out the Supreme Court seemed to create for the Fed in May to protect central bank governors from being fired at a president’s whim.

The court called the Fed a “uniquely structured, quasi-private entity” unlike other independent agencies.

The FTC case would be a blockbuster even if it didn’t affect the Fed. The court’s conservative supermajority is considering overturning a 1935 ruling that let Congress set up independent agencies and insulate their leaders from presidential control. Toppling that decision would affect officials Trump has tried to remove from other government bodies that oversee labor relations, consumer product safety, transportation safety and employment discrimination.

The stakes are especially high for the Fed, whose independence in setting interest rates is considered a long-standing pillar of sound economic management, for the U.S. and the world. Federal law bars removal of governors except “for cause,” a provision that has ensured that they can set monetary policy without worrying about being fired by a disapproving president. Trump said he wanted to remove Cook over mortgage fraud allegations that she’s denied.

The central bank has drawn Trump’s ire this year for not moving quickly enough to lower interest rates, and the president has flirted with the idea of firing Chair Jerome Powell. Trump is set to announce his choice to replace Powell — whose term as chair expires in May — early next year and has made clear he’ll pick a successor who wants lower rates.

Trump already filled an open slot on the board this year with Stephen Miran, an ally who is pushing for rapid rate cuts. Removing Cook, whose term doesn’t expire until 2038, would give Trump another opportunity to reshape the Fed’s board.

The high court argument comes a day before the Federal Open Market Committee begins a two-day meeting that could produce a fresh rate cut.

Disputed carve-out

A key question is whether the Supreme Court will reinforce its suggestion that Fed officials can keep their job protections even if other leaders can’t.

That signal came in a May 22 decision that let Trump temporarily oust officials at two other agencies on the grounds that they appeared to perform executive-branch functions that belong to the president. In a brief aside, the court said the Fed wouldn’t necessarily be affected by the ruling.

It’s a distinction that people on both sides of the issue say makes little sense, given that the Fed also regulates banks — a duty that falls within conventional definitions of executive-branch functions.

“They’re issuing and enforcing regulations. They’re imposing fines,” said Jacob Huebert, a lawyer with the New Civil Liberties Alliance, a group that challenges what it sees as administrative overreach. “Those are all executive-branch things to do, the sort of thing that the executive branch should have control of.”

The court’s liberals have made clear they don’t see a distinction either, though they say the solution is to uphold the job protections Congress created for other agencies as well as for the Fed. When the court backed Trump in May, dissenting Justice Elena Kagan derided the carve-out, calling it a “bespoke Federal Reserve exception” crafted to avoid spooking the markets.

The Fed’s independence “rests on the same constitutional and analytic foundations” as that of other agencies, Kagan wrote for herself and fellow Democratic appointees Sonia Sotomayor and Ketanji Brown Jackson.

Slaughter said in an interview that she’s dubious as well.

“There is no ‘unless they are financial’ exception” in the Constitution, Slaughter said. “I also don’t think it makes sense as a substantive matter, because what the FTC does very much affects financial markets.”

For its part, the Trump administration is seeking to sidestep the topic. In court papers, U.S. Solicitor General D. John Sauer said the justices don’t need to resolve the Fed’s status in the FTC case. But he added that the administration “has not conceded the constitutionality of the Federal Reserve Board’s removal protections.”

Targeting Cook

Even if the court preserves the Fed’s “for cause” provision, the Cook case could give Trump an alternative avenue for controlling the central bank. The administration accuses Cook of fraudulently listing homes in Michigan and Georgia as a “primary residence” to secure more favorable terms on loans when she obtained mortgages in 2021.

“Cook’s significant, apparent, and unexplained misrepresentations on financial documents create a grave appearance of impropriety and undermine public confidence in her authority as a financial regulator,” Sauer argued.

Cook and her lawyers say the allegations are baseless, accusing the administration of cherry-picking snippets from documents and failing to show any intent to defraud. Cook also says that even if the allegations were true, they wouldn’t meet the “for cause” requirement, in part because they involve private conduct that took place before she took her seat on the Fed.

A ruling for Trump “would eviscerate the Federal Reserve’s longstanding independence, upend financial markets and create a blueprint for future presidents to direct monetary policy based on their political agendas and election calendars,” she argued.

Cook is among a number of mostly Democratic targets the Trump administration referred to the Justice Department over allegations of mortgage fraud.

A lower-profile issue in the FTC case could also affect Cook. The administration contends that federal judges lack the constitutional authority to prevent the removal of executive-branch officials. If the court were to accept that argument, it could doom Cook’s bid to stay in the job.

The connections between the cases all but guarantee the justices will be thinking about Cook and the Fed as they weigh Slaughter and the FTC.

“What I’m guessing is going to happen is that they’ll hear the Slaughter case, and they won’t decide until after they hear the Cook case, and then they’ll decide the two together,” said Scott Alvarez, who served for 13 years as the Fed’s general counsel. “Why answer the Slaughter case with a Fed exception before you’ve heard the arguments on the Fed exception?”

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(With assistance from Amara Omeokwe and Leah Nylen.)

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