Trump shoots Governor Lisa Cook, opening the new front in the fight for the control of the Central Bank

Trump said in a letter published on his real social platform that he is eliminating Cook with immediate effect due to accusations that she committed mortgage fraud.

Cook said Monday night that he would not give up. “President Trump intended to say goodbye ‘for cause’ when there is no cause under the law, and has no authority to do so,” he said in a statement sent by email. “I will not give up.”

Bill Abute, a Trump designated to the agency that regulates the giants of mortgages Fannie Mae and Freddie Mac, made the accusations last week. About claimed that Cook had claimed two main residences, in Ann Arbor, Michigan and Atlanta, in 2021 to obtain better mortgage terms. Mortgage rates are often higher in the second houses or those bought to rent.

It is likely that Trump’s movement initiates an extensive legal battle that will probably go to the Supreme Court and could interrupt financial markets. Actions futures decreased a little on Monday night, as well as the dollar against other important currencies.

If Trump manages to eliminate Cook from the Board, he could erode the political independence of the Fed, which is considered critical for his ability to combat inflation because it allows him to take unpopular measures such as increasing interest rates. If bond investors begin to lose the faith that the Fed can control inflation, they will demand higher rates to have bonds, increasing the costs of loans for mortgages, loans for cars and commercial loans.

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Cook has retained Abbe Lowell, a prominent lawyer from Washington. Lowell said that Trump’s “reflex of Bully is defective and that his demands lack any proper process, basis or legal authority,” he added: “We will take the necessary actions to avoid its attempt at illegal action.”

Cook was appointed for the Fed Board by then President Joe Biden in 2022 and is the first black woman to serve as governor. She was a Marshall academic and received titles from the University of Oxford and Spelman College, and has taught at Michigan State University and the Kennedy Government School of Harvard University.

The majority of the Senate Republicans opposed their nomination, and was approved with a 50-50 vote with the draw broken by the then Vice President Kamala Harris.

Questions about the shot of ‘For Cause’

The law allows a president to fire a governor of the Fed “for cause”, which generally means some type of irregularities or abandonment of duty. The president cannot say goodbye to a governor simply due to differences on the policy of interest rates.

Establishing a cause of cause generally requires some type of procedure that allows Cook to respond the current charges and evidence, legal experts say, which has not happened in this case.

“This is an invalid procedure elimination under the statute,” said Lev Menand, a law professor at the Law Faculty of Columbia and author of “The Fed Unbound”, a book on Fed’s actions during the Covid-19 pandemic.

Menand also said that the shots due to cause are generally related to misconduct while they are in office, instead of based on private misconduct before the appointment of an official.

“This is not someone convicted of a crime,” said Menand. “This is not someone who is not carrying out their duties.”

The governors of the FED vote the interest rate decisions of the Central Bank and on financial regulation issues. While they are appointed by the president and confirmed by the Senate, they are not like the secretaries of the Cabinet, which serve as the president’s pleasure. They serve 14 years that are staggered in an effort to isolate the Fed of political influence.

Unprecedented presidential

While the presidents have faced the Fed chairs, no president has tried to say goodbye to a governor of the Fed. In recent decades, the presidents of both parties have greatly respected the independence of the Fed, although Richard Nixon and Lyndon Johnson exerted great pressure on the Fed during their presidencies, mainly behind closed doors. Even so, this pressure behind the scene to keep interest rates, the same goal sought by Trump, has been widely blamed for deactivating unbridled inflation in the late sixties and seventies.

President Harry Truman pushed Thomas McCabe to stop his position as a fed chair in 1951, although that happened behind the scene.

The Supreme Court pointed out in a recent decision that Fed officials have greater legal protections to shoot than other independent agencies, but it is not clear if that extends to this case.

Menand said that the conservative majority of the court has had a very expansive vision of presidential power, saying: “We are in unknown waters in the sense that it is very difficult to predict that if Lisa Cook goes to court what will happen.”

Sarah Binder, the main member of the Brookings Institution, said that the use of the president of the “for cause” provision is probably an effort to mask his true intention. “It looks like a fig tree to get what we want, which is musculating someone on the board at lower rates,” he said.

A fight for interest rates

Trump has said that he would only appoint Fed officials who would support the lowest indebted costs. Recently he appointed Stephen Miran, an economic advisor to the White House, to replace another governor, Adriana Kugler, who resigned about five months before his mandate officially ended on August 1.

Trump appointed two governors in his first term, Christopher Waller and Michelle Bowman, so replaceing Cook would give those named Trump a majority of 4-3 at the Fed Board.

“The American people must have full confidence in the honesty of the members who are trusted to establish a policy and supervise the Federal Reserve,” Trump wrote in a letter addressed to Cook, a copy of which he published online. “In the light of their deceptive and potentially criminal conduct in a financial issue, they cannot and do not have so much confidence in their integrity.”

Trump argued that shooting Cook was constitutional. “I have determined that faithfully promulgate the law requires its immediate removal of the position,” the president wrote.

Cook will have to fight the legal battle, such as the wounded party, instead of the Fed.

Trump’s announcement attracted Swift Reprorates from defenders and former Fed officials.

Senator Elizabeth Warren, D-Mass., He called Trump’s attempt to fire Cook illegal, “the last example of a desperate president who seeks an scapegoat to cover his own failure in the costs of lower costs for the Americans. It is an authoritarian power that blatantly violates the performance of the Federal Reserve and must be revoked in the Court.”

Trump has repeatedly attacked the Fed chair, Jerome Powell, for not reducing his short -term interest rate, and even threatened to fire him.

Forcing Cook to the Fed Board of Directors would provide Trump with the opportunity to name a loyal. Trump has said that he would only appoint officials who would support the cutting rates.

Powell pointed out last week that Fed can reduce rates soon, even when inflation risks remain moderate. Meanwhile, Trump can replace Powell in May 2026, when the Powell term expires. However, 12 members of the FED interest rate configuration committee have a vote on whether to increase or reduce interest rates, so even replace the president may not guarantee that the Fed policy changes the way Trump wants.

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News writer Fatima Hussein contributed.