In a legal dispute that threatens the US Federal Reserve’s independence, President Donald Trump’s administration requested that the US Supreme Court allow him to proceed with firing Federal Reserve Governor Lisa Cook, a move unprecedented since the institution’s founding in 1913.
The Justices were instructed on Thursday to overturn US District Judge Jia Cobb’s September 9 order, which temporarily prevented the Republican president from appointing Cook, a former top aide to Democratic President Joe Biden.
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According to Cobb, Cook’s claims that Cook made mortgage fraud before taking office, which Cook refuted, were likely insufficient to be removed under the terms of the Fed’s original constitution.
The Justice Department claimed in the filing that “this application is yet another instance of improper judicial interference with the President’s removal authority” and that it “interfered with the President’s authority to remove members from the Federal Reserve Board of Governors without cause.”
As a result of policymakers’ concerns about a weak job market, the Fed held its highly anticipated two-day meeting in Washington on Tuesday and Wednesday, where the central bank cut interest rates by a quarter of a percentage point. Cook was one of the people who cast ballots in favor of the Wednesday announcement.
A request for comment was not immediately addressed by the Fed. It has previously stated that it will follow a court’s order, and Cook will continue to work.
The administration requested a delay in Cobb’s order, but the US Court of Appeals for the District of Columbia Circuit denied it in a 2-1 decision on Monday.
The Fed’s creation provisions were included in the law’s creation that were included by Congress. Fed governors may only be removed by a president “for cause” under that law, though the law does not specify the term or establish removal procedures. No president has ever revoked a Fed governor, and the law has never been upheld in court.
a pretext to criticize monetary policy
In August, the president announced that he would remove her, and Cook, the first Black woman governor, filed a lawsuit against Trump. Cook claimed that Trump’s accusations against her served as a pretext to fire her because of her monetary policy stance.
Trump’s plan to fire Cook is in line with his broad assertions about the president’s authority since he took office in January. The Justice Department stated in the filing on Thursday that the president has “unreviewable discretion” as long as he finds a cause for removal.
The filing stated that “the President may reasonably determine that a Governor who appears to have lied about facts relevant to the interest rates she secured for herself and who declines to explain the apparent lies.”
A request for comment was not immediately received by Cook’s lawyer’s spokesperson.
Concerns about the Fed’s ability to regulate monetary policy independently from the president may affect the global economy.
The Cook legal case has implications for the Fed’s ability to regulate interest rates in accordance with political wills, which are widely believed to be essential for any central bank’s capacity to operate independently and maintain inflation control.
Trump has criticized Fed Chair Jerome Powell for his stance on monetary policy as the central bank’s focus was on reducing inflation in recent years and has demanded that the Fed aggressively cut rates. Trump has described Powell as a “stubborn moron,” “incompetent,” and “numbskull.”
This year, the administration has repeatedly requested that the Supreme Court intervene in order to stop lower courts from enforcing Trump’s policies. In almost every case it has been asked to review this year, the Supreme Court, which has a 6-3 conservative majority, has sided with the administration.
For instance, the Supreme Court has allowed Trump to remove various federal agency representatives from direct presidential control, as authorized by the Constitution.
However, it signaled that it saw the Fed as distinct from other executive branch branches in a May order, in which case Trump fired two Democratic members of labor boards. The Fed, according to the Supreme Court, has a “uniquely structured, quasi-private entity” with a unique historical tradition.
“Insufficient process”
Trump announced on August 25 that he would appoint Cook to the Fed’s board of directors, citing allegations that she had falsified records to obtain favorable mortgage terms before joining the central bank in 2022.
The judge determined that the 1913 law only permits a Fed governor to be removed for misconduct while in office, preventing Cook’s removal. Cook’s actions did not result in her being confirmed to the Senate in 2022, according to the mortgage fraud claims.
In a 2-1 decision, a three-judge DC Circuit panel agreed with Cook and decided that she likely faced a Fifth Amendment violation.
In an opinion joined by Judge J Michelle Childs, Judge Bradley Garcia wrote, “Before this court, the government does not contest that it gave Cook no meaningful notice or opportunity to respond to the allegations against her.” Biden appointed both judges. Trump appointee Gregory Katsas disagreed.
According to the Justice Department’s filing on Thursday, “The President notified Cook of the charges against her and waited five days for her to respond before removing her.” Cook can’t complain about insufficient process because he has declined to bring any defense to the President’s attention or to dispute any significant facts.
Trump and his appointee, the director of the Federal Housing Finance Agency, have claimed that Cook incorrectly described three distinct properties on mortgage applications, which might have slashed her chances of getting lower interest rates and tax credits.
According to documents obtained by Reuters and a source with knowledge of the situation, Trump’s Justice Department has also begun a criminal mortgage fraud investigation into Cook and has issued grand jury subpoenas out of both Georgia and Michigan.
According to a document reviewed by Reuters, a loan estimate for a Cook-purchased Atlanta home reveals that she had declared the property as a “vacation home,” which would appear to contradict the allegations made against her.
