A 90-year-old Supreme Court precedent protecting Fed independence is on its deathbed

• 90 years ago, the Supreme Court decided 9-0 that FTC leaders get “for cause” protection from firing.

• The decision has protected independent agency heads from political influence, including Fed leaders.

• The Supreme Court has been ignoring that precedent as Trump fires agency heads.

As President Donald Trump tries to force Lisa Cook out of her job at the Federal Reserve, her lawyers have pointed to a similar event in history — one where the president lost at the Supreme Court.

On October 7, 1933, President Franklin D. Roosevelt fired William E. Humphrey from his post at the Federal Trade Commission. The reason was purely political: The president wanted to replace Humphrey with someone else who could better advance his priorities. “I do not feel that your mind and my mind go along together,” Roosevelt told Humphrey in a letter.

Humphrey was no shrinking violet. He was a “boisterous man and a clamorous public official” who “often led with his fists” and “reveled in personal and political attacks” when dealing with politicians, according to an academic paper on the agency’s history. His term at the FTC was supposed to last until 1938. When Humphrey refused to resign, Roosevelt fired him.

Until his dying day, Humphrey maintained that he held his job and could, by law, only be fired for “inefficiency, neglect of duty, or malfeasance in office” — in other words, “for cause.”

His dying day turned out to be four months later, in 1934, following a stroke. His executor sued the Roosevelt administration, alleging it owed Humphrey’s estate back pay.

The case, known as Humphrey’s Executor, was decided 9-0 by the US Supreme Court. The decision recognized limits in the president’s ability to fire members of independent agencies like the FTC, which are designed to be “quasi-judicial and quasi-legislative, in order to safeguard its independence of political domination,” the Supreme Court wrote.

The court’s reasoning “extended beyond the specifics of the FTC,” said Jessica Levinson, a professor of constitutional law at Loyola Law School. Legal scholars and court decisions applied it to similarly constructed independent agencies, including the Federal Reserve.

“It’s a decision about the power of the president when it comes to executive agencies, period,” Levinson said.

The landmark case, decided in 1935, has come roaring back into the news in recent weeks as Trump has tried to fire Cook.

The Federal Reserve Act, signed into law in 1913, says Fed board members can be removed only “for cause.” Legal scholars understand “cause” to mean work-related misconduct, as the Supreme Court understood it for Humphrey 90 years ago.

While the Justice Department hasn’t asked any courts to overturn Humphrey’s Executor, Cook’s lawyers have repeatedly leaned on it to argue that she should be allowed to keep her job as a Federal Reserve governor. A district court judge cited the decision to rule that Trump’s attempt to fire Cook did not satisfy the “cause” standard. On Monday night, an appeals court upheld the decision, keeping Cook in her job ahead of this week’s Federal Reserve board meeting.

The Trump administration plans to appeal the decision to the Supreme Court.

“The President lawfully removed Lisa Cook for cause,” White House spokesperson Kush Desai told Business Insider on Tuesday. “The Administration will appeal this decision and looks forward to ultimate victory on the issue.”

Reserving space for the Federal Reserve

Over the decades, the Supreme Court has chipped away at Humphrey’s Executor.

Many conservative jurists and legal scholars who believe in the power of a unitary executive branch are skeptical that any federal agency could hold power independently of the president. In 2020, the Supreme Court stripped “for cause” protections from the director of the Consumer Financial Protection Bureau, another independent agency. Under the second Trump administration, the Justice Department said in court filings and letters to Congress that it wants the Supreme Court to “reconsider” Humphrey’s Executor altogether.

This year, as Trump fired leaders at several alphabet’s worth of independent agencies, the Supreme Court has largely sided with him. While Humphrey’s Executor remains the law, the high court has acted as if Humphrey’s Executor didn’t exist, signaling its demise, Levinson said.

Those decisions have been issued on its emergency docket, also called the “shadow docket.”

Ordinarily, the Supreme Court listens to each case’s merits and issues opinions, which sometimes exceed 100 pages in length.

But decisions on the emergency docket are issued quickly and often without any briefs or oral arguments. The majority opinions can be unsigned, meaning it isn’t always clear which justices support them. And because these decisions aren’t always accompanied by written opinions, lower courts don’t typically treat them as setting any precedents.

Trump has made aggressive use of the emergency docket. This year, his administration has so far filed about two dozen emergency appeals to the Supreme Court — far more than the Justice Department did during the entirety of Joe Biden’s and Barack Obama’s presidencies combined. In the emergency docket decisions for Trump’s firings of agency leaders, the Supreme Court has ruled that they shouldn’t be allowed to keep their jobs while full-blown legal battles play out.

Earlier in September, Chief Justice John Roberts allowed the firing of Federal Trade Commissioner Rebecca Slaughter, though Trump didn’t provide any “cause” reason for removing her. The decision appeared to contradict the precedent in Humphrey’s Executor.

But while the high court has greenlit many of Trump’s firings, it’s also blown a “protective bubble” around the Federal Reserve in particular, Levinson said. In a May decision, the majority of justices crafted what the dissenters called a “bespoke” carveout for the agency.

“The court has basically signaled that Humphrey’s is dead, but not for the Fed,” Levinson said.

In the unsigned opinion, the Supreme Court allowed Trump to fire members of the National Labor Relations Board and Merit Systems Protection Board, but said the decision doesn’t “necessarily implicate the constitutionality of for-cause removal protections” for Federal Reserve members. The majority opinion offered scant reasoning, Levinson said.

“The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” the majority wrote.

POTUS fired Humphrey; now SCOTUS may fire Humphrey’s Executor

In August, when Trump said he was firing Cook, whose term ends in 2038, he didn’t cite any political or policy disagreement. He cited a letter from Bill Pulte, the head of the Federal Housing Finance Agency, who sent a criminal referral over what he said were inconsistencies in Cook’s mortgage filings.

The backdrop, as Cook’s lawyers pointed out in court, was that Trump had relentlessly pressured the Federal Reserve to rapidly lower interest rates as he imposed tariffs on American companies. Trump has repeatedly hammered the board for not cutting rates faster. Before turning to Cook, Pulte led a campaign trying to oust Federal Reserve Chair Jerome Powell.

Claims of mortgage fraud were “unsubstantiated” and a mere excuse to get rid of Cook so that Trump could pack the board with his own picks, her lawyers argued.

In Cook’s case, the Justice Department argues that concerns about her mortgage filings amounted to “cause” because the Federal Reserve has a significant influence on mortgage rates. According to the Justice Department’s arguments, courts don’t have the power to second-guess the president’s reasoning in “for cause” firings.

By the time the Supreme Court hears the merits of Cook’s case, it may already be finished killing Humphrey’s Executor. The other independent agency leaders challenging their firings have given the court ample opportunities to deliver it a death blow.

The Supreme Court majority’s decision to allow the firing of NLRB and MSPB members is “impossible to square” with Humphrey’s Executor, Levinson said, making it a “clear signal” that it was on the chopping block.

While Humphrey’s Executor may have outlived William Humphrey, it’s now limping to its grave.

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