Cook Says Allowing Trump To Fire Her From Fed Would Destroy Fed Independence

Allowing President Trump to fire Lisa D. Cook from the Fed would "signal to the financial markets that the Federal Reserve no longer enjoys its traditional independence, risking chaos and disruption," Cook told the Supreme Court, in her opposition for a stay in her case.

"For decades, the Board's insulation from direct presidential control has allowed the American markets and economy to thrive," she wrote, adding, "the legislative record is abundantly clear that Congress did not mean for Federal Reserve Board governors to serve at the President's pleasure."

The administration has asked the Supreme Court for a stay of a preliminary injunction issued by the U.S. District Court for the District of Columbia that allowed Cook to keep her job and that was upheld by a panel of the U.S. Court of Appeals for the District of Columbia. The administration also asked for an administrative stay in the case.

The Trump Administration alleges that "As her removal notice observed, before taking office, Cook had made contradictory representations in two mortgage agreements a short time apart, claiming that both a property in Michigan and a property in Georgia would simultaneously serve as her principal residence." The applications were filed before Cook was nominated to the Board by President Biden. The administration has referred the case to the Justice Department for investigation of whether Cook should be charged with a crime.

Lawyers for Cook assert that "in fact, reports confirm that Governor Cook properly declared her Michigan home as her principal residence. And they also show that as part of her mortgage application, Governor Cook accurately described the Georgia property in question as a "vacation home," "show[ing] that she had told the lender that the Atlanta property wouldn't be her primary residence."" (Footnotes omitted.) The Washington Post reports that it has (1) the Loan Estimate for the loan on the Georgia property and that the Loan Estimate identifies the property as a "vacation home" and (2) a form that Cook submitted to the Biden Administration in connection with her nomination to the Fed, and that the form lists the Georgia property as a second home under a question about vacation homes and other "additional" properties.

The District Court and the D.C. Circuit Court ruled that the firing was illegal, in part because Cook's mortgage applications occurred before she joined the Fed and also because she was not afforded due process.

In her opposition for a stay, Cook said that reports confirm that she properly declared her Michigan home as her principal residence and that as part of her mortgage application, she described the Georgia property as a vacation home. She said when the record is compiled it will demonstrate that she never acted improperly.

She charged that Trump purported to remove her only after repeatedly criticizing her and her colleagues for failing to make monetary-policy choices that would prioritize short-term growth over long-term stability.

"The President based his decision on a referral by a subordinate, who openly sought to alter the composition of the Federal Reserve Board by alleging that multiple governors whose policy decisions sometimes ran counter to the President's preferences—including Chair Powell—committed wrongdoing.," Cook alleged.

She said that the "breakneck pace" of the litigation has not permitted her to provide a "full-throated rebuttal of the President's false accusations."

When that record is compiled, it will demonstrate that Governor Cook never acted improperly with respect to her mortgages and thus will eliminate the President's stated ground for her purported removal, Cook said.

In addition to Cook's brief, 18 former Treasury Secretaries, Federal Reserve Board Chairs and Governors, Council of Economic Advisers Chairs and Economists filed a brief warning against Cook's firing.

"There is broad consensus among economists, based on decades of macroeconomic research, that a more independent central bank will lead to lower and more stable inflation without creating higher unemployment—thus helping to achieve the Federal Reserve's statutory objective of price stability and maximum employment," they wrote.

Allowing Trump to fire Cook "would expose the Federal Reserve to political influences, thereby eroding public confidence in the Fed's independence," they said.

They added that the Fed's ability to fight inflation is linked to the public's perception of its independence. Sectors that pay close attention to the Fed are watching the current dispute to judge how credible the Fed will be going forward, according to the former officials and economists.

"Those audiences will be more skeptical of the Fed's independence and commitment to long-term low-inflation policies if it appears that a member of the Board of Governors is being removed based on allegations that are actively under challenge in litigation," they wrote.

Former officials and economists signing the brief were:

• Ben S. Bernanke, former Chair of the Board of Governors of the Fed.
• Jared Bernstein, former Chair of the Council of Economic Advisers.
• John H. Cochrane, the Rose-Marie and Jack Anderson Senior Fellow at Stanford University's Hoover Institution.
• Jason Furman, former Chair of the Council of Economic Advisers.
• Timothy F. Geithner, former Secretary of the Treasury.
• Former Senate Banking Chairman Sen. Phil Gramm, R-Texas.
• Alan Greenspan former Chair of the Board of Governors of the Fed.
• Glenn Hubbard, former Chair of the Council of Economic Advisers.
• Jacob J. Lew, former Secretary of the Treasury.
• N. Gregory Mankiw, former Chair of the Council of Economic Advisers.
• Henry M. Paulson, former Secretary of the Treasury.
• Kenneth Rogoff, Maurits C. Boas Professor of International Economics at Harvard University and former chief economist of the International Monetary Fund.
• Christina Romer, former Chair of the Council of Economic Advisers.
• Cecilia Rouse, former Chair of the Council of Economic Advisers.
• Robert E. Rubin, former Secretary of the Treasury.
• Lawrence H. Summers, former Secretary of the Treasury.
• Daniel Tarullo, former member of the Board of Governors of the Fed.
• Janet Yellen, former Secretary of the Treasury and former Chair and Vice Chair of the Board of Governors of the Fed,

The Attorney General of Florida, on behalf of the state of Florida, 21 other states and the Arizona Legislature, filed an amicus brief supporting the Trump Administration's request for a stay. The amici assert that, as explained by the Trump Administration, the Court of Appeals erred on the merits. The amici also assert that there was error regarding the injunction directing the Fed to allow Cook to continue to operate as a member of the Fed during the pendency of the litigation. The amici state:

"The district court lacked this authority. Federal courts cannot use their equitable powers to remedy unlawful removals absent an act of Congress. See, e.g., 42 U.S.C. § 2000e-5(g) (authorizing courts to "reinstate" employees who suffer discrimination). No statute authorizes injunctive relief here. To the contrary, Congress has channeled right-to-office claims into the quo warranto process, D.C. Code § 16-3501 et seq., which affords "the exclusive remedy" for "direct[ly] attack[ing]" one's removal, Andrade v. Lauer, 729 F.2d 1475, 1497 (D.C. Cir. 1984). Cook ignored this remedy. This Court should therefore grant the government's stay application."

In addition to Florida and the Arizona legislature, the states are Alabama, Alaska, Arkansas, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, Montana, Nebraska, North Dakota, Oklahoma, South Carolina, South Dakota, Tennessee, Texas and West Virginia.

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