May showdown? Can Trump take the opportunity to fire Federal Reserve Chairman Powell?

Source: Jin10

According to The Economist, in the 14 seasons of the reality show “The Apprentice,” Trump happily fired over 200 contestants simply for failing tasks or offending the wrong people.

During his second term as president, Trump found that firing federal agency heads protected by the “just cause for termination” regulations was not as easy as pointing a finger like it is on television.

Recently, he urgently submitted an application to the U.S. Supreme Court, hoping that the justices would grant him the unrestricted right to dismiss in real life just like on television.

What hinders him is a case from the administration of Franklin D. Roosevelt - “Humphrey’s Executor v United States”.

In 1933, Roosevelt attempted to dismiss William Humphrey, one of the five commissioners of the Federal Trade Commission, due to differences in trade policy and opposition to the “New Deal” plan.

Humphrey sued Roosevelt, and although he passed away the following year, in 1935, the Supreme Court ruled in his favor. For decades, the “Humphrey’s Case” established a principle: the president does not have unlimited firing authority.

This ruling protects the independence of administrative agencies established by Congress that possess “quasi-judicial” or “quasi-legislative” powers, such as the Equal Employment Opportunity Commission and the Securities and Exchange Commission.

According to the spirit of the “Humphrey’s Executor” case, the district court ruled that Trump lacked the authority to fire two officials appointed by Biden in 2021 and 2022: Cathy Harris (a member of the Merit Systems Protection Board (MSPB)) and Gwynne Wilcox (a member of the National Labor Relations Board (NLRB)).

According to the law, MSPB members can only be dismissed for “inefficiency, dereliction of duty, or gross misconduct.” NLRB members, on the other hand, must go through formal notification and hearing procedures, and can only be dismissed for “dereliction of duty or gross misconduct.”

The court ruled his actions invalid because Trump did not provide any of these reasons, but simply believed that the two would not support his policies.

The court stated that Harris and Wilcox must be reinstated. The financial markets are also closely watching their fate, although not because there is much enthusiasm for these two institutions.

In an emergency application submitted to the Supreme Court, Trump’s side claimed that these court rulings “do not hold water.” The application stated that the President “should not be forced to hand over executive power to heads of agencies that are contrary to government policy, even for just one day—let alone the months required for the court to adjudicate this case.”

The document also points out that in recent years, some rulings by the Supreme Court are gradually undermining the authority of the “Humphrey’s Executor case”.

For example, in the 2020 case “Seila Law v CFPB”, the court ruled that the president can dismiss the head of the Consumer Financial Protection Bureau without cause. This 5-4 decision held that the “Humphrey’s Executor case” only applies to those “multimember agencies that do not wield significant executive power,” and does not apply to agencies managed by a single head who has real authority.

Sai Prakash, a law professor at the University of Virginia, believes that the “Trump v. Wilcox case” could completely end the legal status of the “Humphrey’s Executor case”.

Will Baude from the University of Chicago Law School also stated that the Supreme Court “will almost certainly” end the “Humphrey’s Executor case.”

However, he also pointed out that such a significant change is unlikely to be completed directly through the emergency review channel of the Supreme Court, as the justices are usually reluctant to make far-reaching changes under such procedures. This means the court may adopt the government’s suggestion to transfer the case to the regular review process and schedule a special oral argument in May in order to make a ruling before July.

Georgetown University law professor Stephen Vladeck believes that the biggest obstacle to the courts overturning the “Humphrey’s Executor case” is the status of the Federal Reserve, as such a ruling would have potential implications for the Federal Reserve.

The Fed and its chairmen have never been completely away from political influence, such as Nixon’s demand that Chairman Burns cut interest rates before the 1972 election. Trump also regretted nominating Powell as Fed chairman during his tenure. Recently, Trump also said that he would not replace Powell until the end of Powell’s term in May 2026 (his term on the council ends in 2028). But if Trump is unhappy with Powell again and the Humphrey case is overturned, then he has more room to fire the Fed chairman.

Vladek pointed out that the independence of the Federal Reserve is based on the Federal Reserve Act, and the legal basis for this independence is the same as that of the protections afforded to Harris and Wilcox under the Constitution.

Professor Prakash believes that the Supreme Court may find a way to differentiate the Federal Reserve from other “ordinary institutions.” “Everyone feels that the Federal Reserve is an exception,” he said.

One possible approach is that Congress could strip the Federal Reserve of its regulatory powers, retaining only its monetary policy functions. A “de-regulated” Federal Reserve might be able to avoid presidential interference with its chair.

The University of Chicago’s Baude predicts that, whether or not Congress takes action, the courts may find some way to avoid making a direct ruling on the Federal Reserve and even set special exceptions for it in future cases.

However, if the Supreme Court officially lists the “Trump v. Wilkox case” for hearing in the coming weeks, it will mark the second consecutive year that the Supreme Court concludes its term with a Trump case, discussing the limits of presidential power. (Last year, in “Trump v. United States”, the justices ruled 6 to 3 that the president enjoys broad immunity from criminal prosecution in many instances.)

If the conservative majority justices again support Trump’s expansive ambitions for presidential powers, he may further explore just how far the boundaries of presidential authority extend.