Ruling expands presidential firing power but carves out explicit exception for the Federal Reserve, freeing incoming Fed chair from political pressure

The US Supreme Court's decision to limit the president's power to remove Federal Reserve board members gives Fed Chair Kevin Warsh room to conduct monetary policy free from political pressure. [UPI]
The US Supreme Court's decision to limit the president's power to remove Federal Reserve board members gives Fed Chair Kevin Warsh room to conduct monetary policy free from political pressure. [UPI]

The US Supreme Court broadly expanded the president's power to dismiss officials at independent federal agencies — but drew a clear line at the Federal Reserve, analysts say, effectively shielding Fed Chair Kevin Warsh from political interference in monetary policy.

The court ruled Monday that the dismissal of Rebecca Kelly Slaughter, a Democratic appointee to the Federal Trade Commission, was lawful. The 6-3 decision overturned a 1935 precedent holding that the president could not remove officials at independent agencies without cause — such as misconduct or neglect of duty. Donald Trump fired Slaughter in March last year, citing policy disagreements and saying her continued service was "inconsistent with the current administration's priorities." Slaughter challenged the dismissal in court, but the majority sided with the administration.

The ruling means the president can remove officials at independent agencies even without cause. The New York Times said the decision could ripple across more than 20 independent bodies — including the Consumer Product Safety Commission and the Nuclear Regulatory Commission — where officials could now face dismissal simply for holding views at odds with the current administration. Trump celebrated on Truth Social, calling it a "historic victory."

The court was explicit, however, that the Federal Reserve stands apart. Chief Justice John Roberts wrote that the Fed plays a "unique role" and that the majority's reasoning permitting removal of independent agency heads should not extend to it. Roberts said that in designing the Fed, it matters not only that the institution is independent but that it is perceived to be independent. "There is no reason to leave the public uncertain or skeptical about the status of the Federal Reserve — one of the most important financial institutions in the United States, and in the world," he added.

The ruling has drawn criticism for what some see as an internal contradiction: the court broadly curtailed the independence of other agencies while emphasizing the importance of the Fed's autonomy.

The New York Times ran an editorial asking whether "the law protecting the Fed from political interference is worth protecting while the law that created the FTC is not," and noted that Justice Amy Coney Barrett herself flagged the two rulings as a serious contradiction.

The Wall Street Journal said the biggest beneficiary of the ruling is Warsh. With the president now effectively blocked from freely replacing Fed board members, Warsh will be able to conduct monetary policy with considerably less political pressure.

The threat of replacing the Fed chair or board members is the most direct tool an administration has to influence monetary policy. By foreclosing that option, the court has given the Fed chair greater freedom to set policy on his own terms.

The Journal noted that the ruling came immediately after Warsh took office. Unlike Trump's repeated demands that former Chair Jerome Powell cut interest rates, Warsh appears set to operate in a more independent environment.

Mark Spindel, an investment firm chief executive and author who has studied the relationship between the Fed and the White House, told the Journal: "The more political support a central bank has outside the White House, the better." He added that if the president could pack the Fed board with loyalists, "Warsh would have had to spend more time on politics than on monetary policy."


kate01@heraldcorp.com