Can a President Fire a Federal Reserve Governor? A Legal Breakdown of the “For Cause” Rule

Imagine this headline flashes across your screen: “President Fires Federal Reserve Governor.” The financial world would erupt in debate. But could it actually happen—and would it be legal? This isn’t just a theoretical question. It goes to the heart of American governance: how much power does a president have, and how independent are our financial institutions? Using a hypothetical scenario—like a president attempting to remove a governor such as Lisa Cook—this post explores the law, key court cases, and why the answer matters for the economy and the Constitution.

The Law: The Federal Reserve Act and “For Cause” Removal

The Federal Reserve Act of 1913 created the Federal Reserve’s Board of Governors. While it gives the president authority to appoint governors, it also imposes a strict limit on removal: members may only be dismissed “for cause.”

So, what qualifies as “cause”?

Courts and legal scholars have long interpreted it to mean proven misconduct, not mere disagreement over policy. Commonly cited examples include:

• Neglect of official duties

• Commission of a crime or corruption

• Serious misconduct or incapacity

In other words, a president cannot fire a governor simply because they dislike their views on interest rates. Allegations alone, without findings of fact, likely would not meet this legal threshold.

The Landmark Case:  Humphrey’s Executor v. United States (1935)

The most important precedent here is Humphrey’s Executor v. United States. In 1935, the Supreme Court held that President Franklin Roosevelt could not remove a Federal Trade Commission member solely over policy disagreements.

The Court’s ruling established that Congress can insulate independent agency officials from at-will removal. That decision has protected agencies like the Fed for nearly a century, reinforcing their independence and ensuring they operate above partisan politics.

A Shifting Judicial Landscape

While Humphrey’s Executor remains good law, the Supreme Court has shifted in recent years.

In Seila Law v. CFPB (2020) and Collins v. Yellen (2021), the Court struck down limits on presidential removal power for single-director agencies, reasoning that too much insulation from the president violates the Constitution’s separation of powers.

But the Court has also drawn a distinction: the Federal Reserve is a multi-member board. This structure spreads authority across several governors, making it harder for any one individual to dominate policy. Courts may view this as a key reason the Fed’s protections should remain stronger than those for single-director agencies.

Why Fed Independence Matters

This is not just about constitutional theory. The Fed’s independence is central to economic stability. It allows governors to make tough, sometimes unpopular decisions—like raising interest rates to combat inflation—without fear of immediate political retaliation.

If presidents could fire governors at will, monetary policy could quickly become another political tool, undermining both domestic stability and international confidence in U.S. markets.

A ruling in favor of a removed governor would reaffirm the Fed’s independence. A ruling for the president could tilt monetary policy into the political arena, reshaping the balance of power between the White House and the nation’s most important financial institution.

Frequently Asked Questions (FAQs)

Can the president fire a Federal Reserve governor for any reason?

No. The Federal Reserve Act requires a showing of “cause,” which is a high legal standard.

What does “for cause” mean legally?

It means serious, proven misconduct such as corruption, incapacity, or neglect of duty—not policy disagreements.

What is the most important precedent on this issue?

Humphrey’s Executor v. United States (1935) confirmed that Congress can protect independent agency officials from at-will removal.

Why is the Federal Reserve designed to be independent?

To insulate monetary policy from short-term politics, ensuring stability, credibility, and global confidence in U.S. markets.

What would happen if a governor won a hypothetical removal case?

It would reaffirm the Fed’s independence and preserve existing legal limits on presidential power.

What if the president won?

It would expand presidential authority, potentially allowing political influence over monetary policy and weakening the Fed’s credibility.