Lisa Cook may not have to go, although we can expect a big food fight before that gets settled.
As John noted last night, Donald Trump moved to fire the Federal Reserve governor, citing both his authority under Article II and the Federal Reserve Act of 1913. Trump claimed to have cause based on a criminal referral from the Federal Housing Finance Agency to the Department of Justice for alleged mortgage fraud, having signed nearly simultaneous homesteading claims in Michigan and Georgia.
Cook responded late yesterday by refusing to leave her position, claiming Trump has no authority to fire her. At issue is whether a criminal referral amounts to just cause, or at least that's what seems to be her point:
In a letter to Cook he posted on social media late Monday, Trump said he would seek to fire her immediately, citing his authority to remove Fed governors for cause, meaning malfeasance or some form of dereliction of duty.
The Trump administration has accused Cook of committing fraud in 2021 while seeking mortgages on two properties — on a home in Michigan and a condominium in Atlanta — by describing both of them as her primary residence.
Through a spokeswoman, Cook said in a statement late Monday: “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so.” A spokeswoman confirmed that Cook had hired an outside attorney.
First off, let's note that the Trump administration has taken a particular interest in the topic of mortgage fraud since returning to office, and the motive is very clear. New York Attorney General Letitia James tried to pillory Trump on similar types of charges in civil court, getting a crippling half-billion-dollar judgment against him that only got vacated last week on appeal. That case was absurd; a fraud case that had no victim, based on valuations that lenders largely ignored anyway on loans that got repaid fully as expected. Trump appears determined to show that the political establishment has a predilection for actual real estate fraud and potentially tax fraud as well, including James herself as well as Adam Schiff and now Cook.
Of course, it helps that the evidence is clear enough to strongly support the allegations that they lied on their mortgage applications. None of them can claim to be ignorant of the law or the process, especially Cook, whose business is literally banking and lending.
The question is, though, whether Trump has the authority to fire Cook. Trump cites Article II for authority, but the Federal Reserve exists under Article I's jurisdiction. The Constitution explicitly gives Congress authority and responsibility for monetary policy in Article I Section 8, not the executive branch in Article II. To the extent that Congress involved the executive at all in the formation of the Federal Reserve, it limited authority to nomination of officers, and only allows for presidential removal for just cause. The Supreme Court warned Trump about this in an otherwise resounding victory for the administration in Trump v Wilcox this past May, emphasis mine:
Finally, respondents Gwynne Wilcox and Cathy Harris contend that arguments in this case necessarily implicate the constitutionality of for-cause removal protections for members of the Federal Reserve’s Board of Governors or other members of the Federal Open Market Committee. See Response of Wilcox in Opposition to App. for Stay 2−3, 27−28; Response of Harris in Opposition to App. for Stay 3, 5−6, 16−17, 36, 40. We disagree. The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.
This still brings us to those for-cause removal protections, of course. Does a criminal referral amount to just cause for termination? Normally, that would not be the case in employment law; even an indictment might not be enough to fire an employee, under some circumstances, although it certainly would justify a mandatory leave from access and duties in many cases. One could argue that the public-policy nature of the Fed could justify a more stringent application of unconcluded investigations as 'just cause,' but (a) I doubt that standard is equally applied in the federal bureaucracies, and (b) the Supreme Court's citation of its "quasi-private" status would argue against that anyway.
So where does that leave Trump? He has an argument to make on just cause, but given the presumption of innocence on criminal matters (even after an indictment), I doubt a firing would stick in court -- for now. An indictment from the DoJ might strengthen the case, but it seems unlikely that a federal judge would allow the firing to stick. The Supreme Court already warned Trump that the Federal Reserve is a different issue than the so-called "independent" agencies in the executive branch. That's especially the case given Trump's repeated attacks on Fed monetary policy this year.
However, I'm not sure Cook is his real target anyway. Trump likely wants to draw attention to the Fed's monetary policy, plus the hypocrisy of the lawfare conducted against him over the last couple of years, especially in New York. If he can bully Jerome Powell into compromising on lower interest rates, so much the better for Trump, although one has to wonder what that precedent would bring in future administrations. In the end, though, it seems as though Trump wants retribution for the lawfare campaigns he endured by making his political opponents so miserable as to deter Democrats from ever trying those tactics again in the future.
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