Posted  originally on Aug 14, 2025 by Martin Armstrong |  

President Donald Trump has threatened Federal Reserve Chairman Jerome Powell with a “major lawsuit.” Could the sitting president sue the head of the central bank that acts independently of the Fed? It depends on the context as there are two issues—interest rates and the Federal Reserve headquarters operation.

The Federal Open Market Committee, the voting branch of the Federal Reserve, is protected by sovereign-immunity. The only exception would be a congressional waiver which simply would never happen. The plaintiff would need to present clear statutory cause of action and a waiver of immunity. Coercing the independent branch of the Federal Reserve to lower interest rates is not cause for legal action and would be dismissed immediately.

As for the new Federal Reserve headquarters, Trump could attempt to file an injunction claim against mismanagement or fraud, and would once again need a clear cause of action and a waiver of sovereign immunity.

The Federal Reserve operates on a self-funding mechanism, allegedly, using revenue it generates from interest on government securities and other services such as payment processing. Yet, that interest is generated from public funds. However, the Federal Reserve does not need approval from Congress to finance internal costs as it manages to bypass the federal budget. Powell has documented justification for the rising cost of the project, and there is no evidence of fraud or mismanagement. Congress would never consent to a waiver of sovereign immunity. The legal system would immediately overturn the claim as there is no actionable legal violation, especially against Powell personally.

The plaintiff, Trump, could attempt to pursue a private civil case against Powell, but again, that would also be immediately dismissed as the Fed chair has not attacked Trump, defrauded the government, or manipulated rates for political reasons. The prospect of suing the chairman of the central bank is absolutely absurd and a clear overreach of federal power. The Federal Reserve MUST have the ability to act independently of political pressure.

Now, the Supreme Court once ruled that the branches of the fed are “creatures of the Federal Reserve Act,” and fall under federal jurisdiction. The Supreme Court’s Cooper v. Federal Reserve Bank of Richmond (1984) regarded discrimination claims against a regional branch under Title VII and 42 U.S.C. § 1981. The Equal Employment Opportunity Commission (EEOC) accused the bank of violating the Civil Rights Act.

The legal reasoning behind the Supreme Court’s decision in Cooper v. Federal Reserve Bank of Richmond centered on the principle of res judicata (claim preclusion) and how it applies to class action lawsuits, which is different than Trump v. Powell. The Court examined whether the judgment in the prior class action suit, which found no widespread discrimination, barred individual class members who had opted out from pursuing their own separate discrimination claims. the Supreme Court ultimately ruled that the employees had the right to bring their individual claims against the Federal Reserve Bank of Richmond, permitting individual employees to proceed with individual lawsuits. Again, this is a separate matter that was not a direct lawsuit against the Federal Reserve for monetary policy decisions.

The majority of cases filed against the Fed involved employment issues. Vannoy v. Federal Reserve Bank of Richmond in 2016 accused the same branch of violating the Family Medical Leave Act (FMLA) and discrimination under the Americans with Disabilities Act (ADA). The central bank granted Vannoy medical leave, but he claimed he was not properly notified of his FMLA rights and returned to work early to avoid losing his job, which actually led to his termination. The case went to a higher court and ultimately allowed Vannoy to file his claim of FMLA interference. Again, these cases are based on employment at the Fed rather than policy or against an individual member of the central bank.

There have been lawsuits over policy, such as cases against the Fed’s stress tests in 2024, and challenges to emergency lending programs during financial crises. It is rare for the court to rule against the Fed, but it has happened. In 2011, the Fed was sued for the “swipe fees” regulation (Regulation II) that capped the fees banks could charge merchants. The court ruled that the Fed did not have the authority to issue a uniform cap when Congress required issuer and transaction-specific regulations.

The challenger must show clear illegal overreach and a blatant disregard for administrative procedures. Jerome Powell has not violated the law by maintaining interest rates or overseeing the creation of the Fed headquarters. Trump’s threats hold no weight as no court would take his claims seriously.