President Trump: Purported to fire Cook 'for cause' when no cause exists under the law

Abbe Lowell: Trump's move 'is flawed and his demands lack any proper process, basis or legal authority' President Trump: Purported to fire Cook 'for cause' when no cause exists under the law Abbe Lowell: Trump's move 'is flawed and his demands lack any proper process, basis or legal authority'

In a highly unusual move, U.S. President Donald Trump has announced his intention to remove Federal Reserve Governor Lisa Cook from her position, citing alleged improprieties in her mortgage loan applications [1]. This action, if pursued, would test the boundaries of presidential authority over the independent Federal Reserve and could have significant implications for monetary policy.

Trump's letter to Cook stated that he had "sufficient cause to remove you from your position" due to alleged deceitful and criminal conduct in financial matters. However, legal scholars have questioned the validity of these claims. Peter Conti-Brown, a scholar at the University of Pennsylvania, noted that the mortgage transactions in question predated Cook's appointment to the Fed and were in the public record during her Senate confirmation process [1].

Abbe Lowell, Cook's lawyer, responded that Trump's demands lack proper process, basis, or legal authority. He stated that no cause exists under the law for Cook's removal and that the move is flawed [1]. The Federal Reserve Act allows for the removal of a sitting governor "for cause," but this has never been tested in court.

The reaction to Trump's move has been swift, with a steepening U.S. Treasury yield curve reflecting market expectations that the Fed policy rate may drop, potentially at the expense of its commitment to thwart inflation [1]. Academic research has consistently shown that independent monetary policy is crucial for achieving better economic outcomes, a principle that may now be tested at the Federal Reserve [1].

This move comes as part of a broader effort by the Trump administration to target diversity, equity, and inclusion programs in the U.S. government, a process that has led to the departure of some prominent women and minorities [1]. The administration has also targeted other political opponents with similar accusations, raising concerns about the political motivations behind this action.

The Federal Reserve is set to hold a policy meeting on September 16-17, and it remains unclear how the matter might play out from here. The independence of the Federal Reserve is a cornerstone of U.S. monetary policy, and any attempt to undermine this independence could have significant economic and political consequences.

References:
[1] https://www.zawya.com/en/world/americas/trump-says-he-is-firing-feds-cook-over-mortgage-loan-allegations-c0qrc3zd