While Trump is allowed to fire Cook \u201cfor cause,\u201d it\u2019ll have to be adjudicated in court whether that applies in this case.<\/b>
\nKey Facts
Cook\u2019s attorney Abbe Lowell said Tuesday the Fed governor \u201cwill be filing a lawsuit challenging this illegal action,\u201d claiming Trump\u2019s decision to fire Cook \u201clacks any factual or legal basis.\u201d
Trump released a letter Monday night announcing he was firing Cook, citing allegations that she made false statements on her mortgage agreements and saying that \u201ccalls into question [her] competence and trustworthiness as a federal regulator.\u201d
Cook has pushed back against her firing, saying in a statement Monday night she will not resign and arguing Trump \u201cpurported to fire me \u2018for cause\u2019 when no cause exists under the law, and he has no authority to do so.\u201d
The Federal Reserve Act allows presidents to appoint governors to the Federal Reserve board, and also gives them limited authority to fire them, saying the president can only terminate a board member \u201cfor cause\u201d\u2014which typically refers to gross misconduct.
While Trump cited the mortgage allegations as a reason to fire Cook, legal experts have questioned whether that actually constitutes \u201cjust cause\u201d under the law, as any allegations would typically have to be investigated first, and the governor being probed would have an opportunity to present evidence in their defense.
Columbia University law professor Lev Menand also told the Associated Press that \u201cjust cause\u201d typically refers to misconduct that happens while on the job, and Cook \u201cis not someone who is not carrying out their duties.\u201dWhat To Watch For
It\u2019s unclear when Cook\u2019s lawsuit against Trump will formally be filed, or how long any legal battle will take to play out. It\u2019s also still murky what will happen in the meantime, given Cook\u2019s refusal to resign, and the Federal Reserve has so far not commented on whether Cook was working Tuesday following Trump\u2019s letter.Who Is Lisa Cook?
Cook is serving a term on the Federal Reserve board that\u2019s scheduled to expire in 2038. Appointed to the board by former President Joe Biden, Cook is the first Black woman to serve as a governor on the board. Prior to joining the Fed, Cook taught at Michigan State University and Harvard University, and she served in the Obama administration as a senior economist on the Council of Economic Advisers. She also served as a director of the American Economic Association Summer Training Program, as a research associate for the National Bureau of Economic Research and as a senior adviser on finance and development in the Treasury Department’s Office of International Affairs.What Is A Federal Reserve Governor, And Why Does Trump Firing Lisa Cook Matter?
The Federal Reserve is the central bank of the U.S. and makes decisions about the nation\u2019s monetary policy, including whether to raise or lower interest rates. The Fed is governed by a seven-person board, with members being nominated by the president for 14-year terms. Having an independent Federal Reserve that\u2019s free from political influence has long been considered to be of great importance to the U.S.\u2019 economy, but Trump has thrown that independence into doubt in recent months, as he\u2019s repeatedly threatened to fire Fed Chair Jerome Powell for refusing to lower interest rates. Trump\u2019s decision to fire Cook marks the first time a president has tried to fire a Fed governor, according to the AP, and her leaving the board would pave the way for Trump to have appointed a majority of the board, allowing him to better influence the Fed\u2019s decision-making. What Does The Federal Reserve Act Say?
The Federal Reserve Act says only that members of the Federal Reserve\u2019s Board of Governors \u201cshall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.\u201dIs Trump Firing Lisa Cook \u2018for Cause\u2019?
Being fired \u201cfor cause\u201d or with \u201cjust cause\u201d is a phrase commonly used in employment law, which refers to an employer having a good reason to fire the employee, typically for some kind of gross misconduct. The alternative is \u201cat-will\u201d employment, in which employers are able to terminate workers without needing any justification. The Federal Reserve Act doesn\u2019t define \u201cfor cause\u201d at all, making it a legal gray area whether Trump actually has cause under the law to fire Cook. But legal experts have so far been doubtful. \u201cIt\u2019s not cause if someone made an allegation that\u2019s untrue,\u201d Scott Alvarez, former general counsel for the Federal Reserve, told CNBC. \u201cTo be for cause she has to have an opportunity to explain her side of the story.\u201d Peter Conti-Brown, who specializes at the University of Pennsylvania in the Fed\u2019s history, also argued to Reuters any \u201cpast conduct\u201d in a political appointee\u2019s personal life, like the mortgage allegations, would come under the scope of what the president and Congress are supposed to vet when nominees are appointed and confirmed, rather than something they can be punished for later while they\u2019re on the job. \u201cThe idea that you can then reach back \u2026 and say, you know, \u2018All these things that have happened before now constitute fireable offenses from your official position,\u2019 is, to me, incongruous with the entire concept of for cause removal,\u201d Conti-Brown told Reuters.How Could The Supreme Court Rule?
The dispute over Cook\u2019s firing could ultimately be determined by the Supreme Court. Prior to Trump\u2019s second administration, the Supreme Court historically restricted presidents\u2019 ability to fire members of independent boards\u2014like the Federal Trade Commission or National Labor Relations Board\u2014without good reason. A 1935 ruling by the court established the precedent that presidents can only fire such officials for \u201cinefficiency, neglect of duty, or malfeasance in office.\u201d The 6-3 conservative court has been more willing to let Trump get rid of appointees who would typically have more independence, however, ruling 6-3 in May to let Trump fire a member of the National Labor Relations Board and a member of the Merit Systems Protection Board. Justices suggested they would not be so willing to greenlight any terminations on the Federal Reserve board, however, disagreeing with the officials\u2019 arguments that letting Trump fire them would also pave the way for him to make cuts at the Fed. The Federal Reserve is \u201ca uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,\u201d the court\u2019s conservative majority wrote.What Are The Mortgage Fraud Allegations Against Lisa Cook?
Trump\u2019s letter to Cook on Monday cited allegations that she listed two different properties, in Michigan and Georgia, as being her \u201cprimary\u201d residence on mortgage documents. The disclosures took place in 2021, according to Bill Pulte, the director of the Federal Housing Finance Agency, which is prior to Cook\u2019s nomination to the Fed board in 2022. Naming a property as being a \u201cprimary\u201d residence can result in getting a lower interest rate for a mortgage than if a property is a vacation home or investment property, The New York Times notes. Pulte publicly accused Cook of falsifying mortgage documents in a letter last week, which also claimed he was referring the matter to the Justice Department for a criminal inquiry. Cook has so far not been charged with any crimes, however, and experts cited by the Times noted the evidence that Pulte’s released so far is not enough to determine whether Cook actually did anything wrong. \u201cThere\u2019s nothing in what they have provided here that would form the basis of a fraud charge,\u201d Suffolk University Law School professor Kathleen Engel told the Times, noting fraud charges have \u201ca lot of elements,\u201d including requiring prosecutors to show the defendant had an \u201cintent\u201d to commit fraud. Cook has so far not commented substantially on the allegations against her, saying only that she takes \u201cany questions about my financial history seriously as a member of the Federal Reserve, and so I am gathering the accurate information to answer any legitimate questions and provide the facts.\u201d<\/p>\n