President Donald Trump’s bid to dismiss one of the seven Federal Reserve governors is expected to end up in court, potentially clarifying the president’s legal authority over the traditionally autonomous body.
Legal specialists argue that the Republican president’s assertion that he can remove Lisa Cook, appointed by Democratic President Joe Biden, stands on unstable legal ground. However, such a move is unprecedented in court, and this year, the Supreme Court appears more open to allowing presidential discretion in dismissing agency officials than before.
If Trump manages to oust Cook from the board, it might undermine the Fed’s political independence, crucial for combating inflation. This independence enables the Fed to implement unpopular measures, like raising interest rates. A less-independent Fed could lead to higher costs for mortgages, car loans, and business loans due to investors demanding higher rates for bonds to counter greater inflation, thereby escalating borrowing costs across the economy.
“It’s an illegal firing, but the president’s going to argue, ‘The Constitution lets me do it,'” stated Lev Menand, a Columbia University law professor and Fed author. “And that argument’s worked in a few other cases so far this year.”
Menand said the Supreme Court construes the Constitution’s meaning, and “it can make new constitutional law in this case.”
Cook, appointed to the Fed’s board in 2022, is likely to seek an injunction against Trump’s directive, allowing her to continue in her role as governor. Nevertheless, this situation presents a challenge for the Fed.
“They have their own legal obligation to follow the law,” Menand noted. “And that does not mean do whatever the president says. … The Fed is under an independent duty to reach its own conclusions about the legality of Lisa Cook’s removal.”
Trump said in a letter posted on his Truth Social platform late Monday that he was removing Cook effective immediately because of allegations she committed mortgage fraud.
Cook said Monday night that she would not step down. “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” she said in an emailed statement. “I will not resign.”
Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, made the accusations last week. Pulte alleged that Cook had claimed two primary residences — in Ann Arbor, Michigan, and in Atlanta — in 2021 to get better mortgage terms. Mortgage rates are often higher on second homes or those bought to rent.
Cook has retained Abbe Lowell, a prominent Washington attorney. Lowell said Trump’s “reflex to bully is flawed and his demands lack any proper process, basis or legal authority,” adding, “We will take whatever actions are needed to prevent his attempted illegal action.”
Cook is the first Black woman to serve as a governor. She was a Marshall Scholar and received degrees from Oxford University and Spelman College, and she has taught at Michigan State University and Harvard University’s Kennedy School of Government.
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