Yesterday Donald Trump said that he had fired Lisa Cook, a member of the Federal Reserve Board of Governors. My wording is advisable: He “said” that he had fired her. I’m not a lawyer, but it seems clear that he does not have the right to summarily fire Fed officials, certainly on tissue-thin allegations of mortgage fraud before she even went to the Fed.
Cook has said that she will not resign. So at this point the immediate onus is on Jerome Powell, the Fed chairman. He has the right — I would say the obligation — to say, “Show me the legal basis for this action.” If Trump’s officials can’t provide that basis, he should declare that as far as he is concerned, Cook is still a Fed governor.
If Powell caves, or the Supreme Court acts supine again and validates Trump’s illegal declaration, the implications will be profound and disastrous. The United States will be well on its way to becoming Turkey, where an authoritarian ruler imposed his crackpot economics on the central bank, sending inflation soaring to 80 percent:
And the damage will be felt far beyond the Fed. This will mark the destruction of professionalism and independent thinking throughout the federal government.
So, about the legal authority. The Supreme Court, shamefully, has said that Trump has the authority to fire officials at will throughout the federal government, effectively eviscerating the principle of a professional civil service. But even the Court specifically carved out protections for Fed governors, saying that they can only be removed “for cause.”
Normally “for cause” means neglect of one’s job or malfeasance on the job. Yet even Trump’s people have made no claims that Lisa Cook has failed to fulfil her duties at the Fed or done anything wrong in her role as governor.
So what is the complaint about Cook? Trump says that she committed mortgage fraud by taking out two mortgages, claiming both properties as her primary residence, back when she was a professor at Michigan State, before joining the Fed.
Even if true, this accusation wouldn’t meet the standard for immediate dismissal from the Fed.
Furthermore, there’s no reason to believe Trump’s assertions that she committed fraud. So far, the Justice Department hasn’t even made any formal charges, let alone won a conviction. And we have no clear evidence of wrongdoing. As far as I can tell, the only evidence seen by outsiders shows that she took out mortgages on two properties, and the security instruments associated with these mortgages say that both properties are “principal residences.”
But as Adam Levitin at Credit Slips, says, “principal” isn’t the same as “primary”: someone who has a home in the city and a second place in the country might well consider both “principal” residences. Furthermore, there is no evidence that Cook even knew what the security instruments said — she may have done nothing more than promise to make her mortgage payments.
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