Fed governor sues Trump for trying to fire her
The US president had used a maneuver of dubious legality to justify his dismissal and Cook refused to leave office.
WashingtonFed Governor Lisa Cook filed a lawsuit against Donald Trump on Thursday. to try to stop her with a maneuver of dubious legalityIn the complaint, Cook asks the court to issue an injunction blocking his removal, claiming that the mortgage fraud allegations cited by the president do not meet the legal standard for his dismissal. Now that the case is entering the judicial circuit, it will likely end up before the Supreme Court, which in previous rulings has noted the importance of the Federal Reserve's independence within the government.
Trump invoked the powers granted to him by the Fed's charter to remove any member found to have committed professional negligence or a crime. Once again, the president defied the limits of his power by using only the allegations against Cook to remove her. Trump is attempting to create a much more lenient reinterpretation of the rule that would give him greater power in the future to do the same to other Fed members who do not conform to his demands.
In previous rulings, the Supreme Court has held that the separation of powers required by the Constitution prohibits Congress from shielding most executive branch officials from presidential control. But the high court has also said that the Fed's case is special. It is a single-power institution whose independence requires the president to have justifiable cause to remove its leaders. Now, Trump wants to bend this principle to set a judicial precedent and be able to remove all those members of the board of governors who bother him.
Trump's strategy is to claim that there was "sufficient cause" to remove the Fed, as he outlined in the letter he published Monday announcing Cook's dismissal. In doing so, he puts the spotlight on the standard for determining what constitutes "sufficient cause."
The dismissal, beyond being a despotic action, is also an unusual gesture and is part of the harassment campaign that the president has led against the Federal Reserve to lower interest rates. Cook's dismissal not only adds pressure, but also shakes the independence of the US central bank and pushes the economy into uncharted territory.
The accusations against Cook were made a few days ago by the director of the Federal Housing Finance Agency, Bill Pulte, who claimed that Cook had committed fraud in the mortgage application for two properties in 2021. One house was listed in Michigan and the other in Achichi, and the other in Achichi, and the other in Achichi, principal in the documents filed for each case fourteen days apart. After launching the accusation, Pulte assured that he would present the information to the Department of Justice in a criminal referral.
Despite Cook's statement that he will not resign and that the case must be resolved in court, Trump is already looking for his replacement. According to sources familiar with the talks in the Wall Street Journal, the president is reportedly considering appointing Stephen Miran, a sympathetic economic advisor whom he had already nominated for the vacancy left on the board of governors by Adriane Kugler earlier this month. Trump is reportedly reconsidering moving him to Cook's seat, as his term is longer and expires in 2038. Another name Trump has considered is former World Bank president David Malpass, another ally of the magnate and critic of the Fed.
Trump has done nothing but threaten the Fed's independence since he began his pressure campaign against the US central bank's chairman, Jerome Powell, whom he has repeatedly threatened to fire if he doesn't lower rates. One of the reasons Trump wants the Fed to lower the price of money is to make the cost of US debt cheaper.
This August, the Treasury Department placed public debt at a record high: $37 trillion. Even with the revenue Trump projects from tariffs, the country is still likely to run a deficit of about 6% this year.
Last week, for the first time, the Fed chairmantimidly opened up to lowering ratesAt the conference in Jackson Hole, Powell noted that the economy "could justify" interest rate cuts in the future, but did not say when. The economist also warned thattariffsand the US president's deportation campaign threaten to trigger inflation, which is already around 2.7%.
