(AFP) – The US Supreme Court was hearing arguments Wednesday over President Donald Trump’s attempt to fire a Federal Reserve governor, a case that could have far-reaching consequences for the independence of the central bank. Trump sought in August to dismiss Fed governor Lisa Cook, a key official serving on the bank’s interest rate-setting committee, accusing her of mortgage fraud. She denies the charges.
“Deceit or gross negligence by a financial regulator in financial transactions is cause for removal,” Solicitor General John Sauer said. “The American people should not have their interest rates determined by someone who was, at best, grossly negligent in obtaining favorable interest rates for herself,” Sauer said. Fed officials can only be removed by the president for “cause,” which could be interpreted to mean malfeasance or dereliction of duty.
The conservative-dominated Supreme Court barred Trump from immediately removing Cook, allowing her to remain in her post until it could hear the case contesting her dismissal. Justice Brett Kavanaugh expressed concern that setting a “very low bar for cause” could allow presidents to dismiss Fed governors at will and “weaken, if not shatter, the independence of the Federal Reserve.” “All of the current president’s appointees would likely be removed for cause on January 20, 2029 if there’s a Democratic president,” Kavanaugh said, referring to the next inauguration day.
In a sign of the significance of the case and public support for Cook, Fed Chair Jerome Powell was expected to personally attend Wednesday’s Supreme Court hearing. Powell’s attendance comes as the Trump administration intensifies its pressure campaign targeting the central bank, including the opening of a criminal investigation into the Fed chief. Earlier this month, Powell revealed that US prosecutors had launched an inquiry into him over an ongoing renovation of the Fed’s headquarters. Powell has dismissed the investigation as a politically motivated attempt to influence the central bank’s interest rate setting.
Trump’s bid to fire Cook, the first Black woman to serve on the central bank’s board of governors, and the probe into Powell are a dramatic escalation of the president’s efforts to control the Fed. Trump has repeatedly criticized the Fed for spurning his demands to slash interest rates more aggressively. By ousting Cook, the Republican president could potentially add another voice to the Fed’s board to try and shift interest rates in his favored direction.
The Supreme Court has overwhelmingly sided with Trump since he returned to office, allowing mass firing of federal workers, the withholding of funds appropriated by Congress, and racial profiling in his sweeping immigration crackdown. The court recently allowed Trump to fire members of other independent government boards but created a carveout for the Fed in its ruling.
In his announcement removing Cook, Trump said there was “sufficient reason” to believe she may have made false statements on one or more mortgage agreements, allegedly claiming two primary residences, one in Michigan and another in Georgia. Cook has not been charged with a crime, and the alleged false statements occurred before she was in her current position. She took office as a Fed governor in 2022 and was reappointed to the board in 2023.
– Chris Lefkow
© 2024 AFP
