Fed Governor Cook Sues President Trump Over Firing
Commentary by Steven Lofchie
Federal Reserve Governor Lisa D. Cook sued President Donald J. Trump, seeking to void her termination and confirm her continued service on the Federal Reserve Board of Governors.
President Trump announced the termination in a letter posted on Truth Social. The letter cited a criminal referral from Federal Housing Finance Agency Director William Pulte, which included allegations that Ms. Cook committed mortgage fraud in 2021, before her Senate confirmation. (See previous coverage.)
In the Complaint, filed in the US District Court for the District of Columbia, Ms. Cook alleged that the motivation behind her firing was the President's public frustration with the Fed's refusal to lower interest rates. She said the lawsuit was a strategic move by President Trump to remove a governor who opposed the calls for lower interest rates and replace her with a nominee more aligned with his political agenda. She also alleged that the action was part of President Trump's efforts to (i) undermine the Federal Reserve's operational independence and (ii) take greater control of the central bank. The Complaint cited President Trump's repeated public attacks on the Fed and Chair Jerome Powell.
Ms. Cook argued that the allegations did not meet the Federal Reserve Act's strict "for cause" removal standard, which is limited to misconduct such as inefficiency, neglect of duty, or malfeasance in office. She also argued that the termination violated her statutory rights by denying her notice and an opportunity to be heard, and violated the Fifth Amendment's Due Process Clause by depriving her of her property interest in her position without due process.
Ms. Cook sought immediate declaratory and injunctive relief to nullify the firing and prevent the Federal Reserve Board from effectuating her removal.
In an official statement, the Fed said it would abide by the Court's decision.
FHFA Director Pulte posted a claim that Ms. Cook made false representations as to another mortgage, which she described as a "second home," but which Mr. Pulte alleges is an investment property.
Commentary
Governor Cook makes several claims in her Complaint.
Foremost is her allegation that she was dismissed because she has been opposed to reducing interest rates; (i.e., that she is being fired because they disagree on policy, and that the allegation of fraud is simply a pretext.)
As to the question of whether the existence of "independent agencies" is consistent with the Constitution, she does not address the issue directly, but rather argues that of all the independent agencies, the Federal Reserve Board is the most independent, and thus the meaning of the term "cause," as in dismissal for cause, must be extremely limited.
As to the allegation of whether Governor Cook actually committed mortgage fraud, the Complaint is silent. The two points made in this regard are that (i) Ms. Cook had not been given the opportunity to defend herself against the charge of fraud, and (ii) that the alleged misconduct occurred before she joined the Federal Reserve Board. Notably, the recent post on X by Mr. Pulte involves conduct subsequent to her joining the Federal Reserve Board.
One interesting claim in the Complaint is that Ms. Cook has a "property" interest in her job. In the private sector, this would translate to an economic claim, for example, that Ms. Cook has the right to be paid what she would have earned as Governor for the rest of her term. It's not obvious how such a property interest translates (or should translate) to a senior role in the US Government; does it allow a person to maintain power? Can someone claim a property interest in the right to set, or participate in setting, interest rates for the country that can be enforced by the courts ordering that this power cannot be taken from her (or compensated by money damages)? If a Board Governor has a "property" interest in the job that cannot be satisfied by a money payment, and if the allegations of misconduct do not constitute "cause," would that mean that neither the Senate nor the President could remove the Governor even if they both agreed that it was appropriate?
On a lighter note, this battle seems like a good contest for a listed event contract.