Federal Reserve Governor Lisa Cook has filed a lawsuit against President Donald Trump, arguing that he has no authority to remove her from her position.
The lawsuit comes after Trump published a letter stating that Cook was removed from her job due to allegations of mortgage fraud.
Cook’s lawyers claim that Trump’s actions are both unprecedented and illegal, and that the president’s attempt to remove her violates federal law.
The Federal Reserve Act of 1913 states that presidents may only remove a Federal Reserve governor “for cause,” which is generally understood to mean grave misconduct or dereliction of duty.
Cook’s lawsuit argues that Trump’s allegations against her do not meet this standard, and that she has done nothing to warrant removal from office.
“Neither the type of ‘offense’ the President cited nor the threadbare evidence against Governor Cook would constitute ’cause’ for removal even if the President’s allegations were true – which they are not,” her lawyers wrote.
Trump has accused Cook of committing mortgage fraud in 2021, a year before she joined the Federal Reserve’s governing body. However, Cook’s mortgages were in the public record when she was vetted and confirmed by the Senate in 2022.
Some experts have questioned whether transactions that preceded Cook’s appointment to the Federal Reserve would be adequate cause to remove her.
The lawsuit is likely to head to the Supreme Court, where a conservative majority has at least tentatively allowed Trump to fire officials from other agencies. However, the court recently signaled that the Federal Reserve may qualify for a rare exception.
In its May decision in the case Trump v Wilcox, the Supreme Court argued that Federal Reserve governors are distinct from other federal employees, because the bank “is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”
Cook’s departure from the Federal Reserve would allow Trump to name his fourth pick to the bank’s seven-member board. The president has repeatedly berated Federal Reserve Chair Jerome Powell for not lowering interest rates and for his alleged mishandling of a multibillion-dollar renovation project.
While Trump has previously threatened to remove Powell before his term ends in May, he has since backed away from those remarks.
Sameera Fazili, the former deputy director of the National Economic Council, believes that Trump’s attempt to fire Cook is adding uncertainty and chaos to the US economy. “An economy needs stable and predictable laws to function smoothly.
That’s how you earn investor trust and raise capital for your businesses,” she said, adding: “I applaud Dr Cook for standing up and fighting for the rule of law.”
The lawsuit also argues that the president violated Cook’s right to due process by attempting to terminate her position without notice.
Trump’s actions have raised concerns about the independence of the Federal Reserve and the potential impact on the US economy. The US dollar stumbled against other major currencies after Trump first said he would remove Cook.
In a statement, White House spokesman Kush Desai said, “the President determined there was cause to remove a governor who was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions.”
However, Cook’s lawyers argue that Trump’s demands lack any proper process, basis, or legal authority.
The outcome of this lawsuit could have significant implications for the Federal Reserve’s independence and the US economy.
As the country’s central banking system, the Federal Reserve is considered independent from political branches of government, allowing it to set monetary policy without political influence.
However, Trump’s actions have raised concerns about whether the Fed can maintain its independence from the White House.