UBS straightforwardly states that this trial is a matter of life and death for the independence of the Federal Reserve. If the court rules to allow the White House to dismiss Lisa Cook “for cause,” then the legal door to removing Powell will be completely kicked open, and data-driven monetary policy logic could collapse instantly. This article is based on a piece by Wallstreet.cn, organized, translated, and written by Foresight News.
(Background: Bloomberg: Fed pushes back, Trump faces setbacks, takeover plan for the Fed may change)
(Additional context: Trump prints $200 billion to rescue the housing market! Ignores the Fed’s “mini QE” repurchase of MBS mortgage bonds: lowering interest rates with less burden)

Table of Contents

• The “Judgment Day” that determines the fate of the Federal Reserve
• Can the Supreme Court’s “Special Immunity” continue?
• Department of Justice subpoenas and “Renovation Gate”

This Tuesday, the U.S. Supreme Court will hear the “Trump vs Cook” case (docket number 25A312). This is not just a personnel dispute but a “Judgment Day” for whether the Federal Reserve, as an independent central bank, is about to end.

According to information from Foresight News, UBS directly states in its report on the 16th that this trial concerns the survival of the Federal Reserve’s independence. If the court rules to allow the White House to bypass the “for cause” removal protections in the Federal Reserve Act to dismiss Lisa Cook, the legal door to removing Powell will be thoroughly opened.

This means that data-based monetary policy logic could instantly collapse, replaced by politically driven rate-cutting directives. Once the defense line is breached, the pricing systems of the dollar, U.S. Treasuries, and U.S. stocks will face a long-term structural reassessment. UBS warns that the market in 2026 is destined to be “turbulent,” and this week is the epicenter of that turbulence.

The “Judgment Day” that determines the fate of the Federal Reserve

This week, the Supreme Court’s hearing (case number 25A312) will decide whether Lisa Cook can continue to serve as a Federal Reserve Board member.

Previously, the Trump administration accused Cook of suspected fraud in mortgage applications (raised by William Pulte, Director of the Federal Housing Finance Agency), and announced her dismissal via social media. Cook immediately sued and obtained a preliminary injunction from the court to block her removal.

UBS’s report points out that this case directly challenges the protections in the Federal Reserve Act that restrict removal of Board members to “for cause.”

The White House believes that the President has broad authority, and even with “statutory removal protection,” can dismiss officials for administrative reasons.

As the American Bar Association states, if the President’s logic prevails, it will “substantially hollow out” the independence of the Federal Reserve. If Cook cannot vote due to administrative charges, then any future officials whose votes oppose the President’s wishes could be removed under various pretexts.

Can the Supreme Court’s “Special Immunity” continue?

UBS emphasizes that the Supreme Court has precedent in weakening protections for independent agencies, but the Federal Reserve might be an exception.

In last year’s “Trump vs Wilcox” case, the court supported the President’s authority to dismiss members of the National Labor Relations Board (NLRB). However, Chief Justice Roberts specifically left a “firewall” for the Federal Reserve in the ruling. The majority opinion clearly states that the Federal Reserve is a “structurally unique quasi-private entity,” different from other administrative agencies. Justice Kagan also confirmed this in dissent, stating that the court does not intend to jeopardize the Federal Reserve.

This week’s hearing will test whether this “firewall” remains strong. If the court fails to reaffirm that the Federal Reserve is “different from others,” the market must prepare for a full administrative takeover of monetary policy.

Department of Justice subpoenas and “Renovation Gate”

Beyond courtroom battles, tensions between the U.S. executive branch and the Federal Reserve have escalated into an open “battle.”

Previously, the Department of Justice issued grand jury subpoenas to the Fed and Powell, investigating whether there was any misrepresentation in the renovation project management at the Fed’s headquarters and congressional testimonies. UBS analysts believe this may be a prelude to the White House seeking Powell’s removal. Powell’s chairmanship ends on May 15, 2026, but his Board term continues until January 31, 2028.

Analysts believe that if the government insists on criminal charges and Senate Republicans (such as Senator Thom Tillis, who claims to block nominations) refuse to advance new nominations, the FOMC is likely to allow Powell to remain as a Board member after his term ends, and possibly continue to be re-elected as FOMC Chair, serving as a barrier against Trump’s radical rate cuts.

UBS warns that investors are in a “turbulent 2026.” If the ruling in the Cook case this week is unfavorable, or Powell is further cornered, the market’s faith in the independence of the Federal Reserve will collapse. This week is not only a legal contest but also a stress test on the underlying logic of dollar assets. The market’s reaction is already quite clear—dollar down, U.S. stocks down, U.S. Treasuries down.