(AFP) – US President Donald Trump expanded pressure on the Federal Reserve on Monday by moving to fire Governor Lisa Cook “effective immediately,” a step the independent central bank official said he had “no authority” to take. Trump’s decision against the first Black woman to serve on the central bank’s board cited allegations of false statements on her mortgage agreements.
Referring to the Federal Reserve Act as justification, Trump wrote in a letter addressed to Cook: “I have determined that there is sufficient cause to remove you from your position.” Cook rejected the president’s authority to do so, saying no cause exists. “I will not resign,” she said in a statement shared by her attorney Abbe Lowell with US media. “I will continue to carry out my duties to help the American economy.”
A US president is generally limited in their ability to remove officials from the central bank, with a Supreme Court order recently suggesting that Fed officials can only be removed for “cause,” which could be interpreted to mean malfeasance or dereliction of duty. But the US leader pointed to a criminal referral dated August 15 from the Federal Housing Finance Agency’s director — a staunch ally of Trump — to the US attorney general in his announcement that Cook would be removed from her role.
The referral, Trump said, provided “sufficient reason” to believe that Cook might have made “false statements” on one or more mortgage agreements. One of the alleged false statements was that Cook had claimed two primary residences, one in Michigan and another in Georgia. Earlier this month, Cook said in a statement that she had “no intention of being bullied to step down,” but would take questions about her financial history seriously.
The Fed did not immediately respond to media queries on Trump’s latest announcement. In his letter Monday, Trump said: “At a minimum, the conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator.”
– Court challenge? –
Trump’s effort to remove Cook is likely to set off a legal battle, and she could be allowed to remain in her position during this period. Senator Elizabeth Warren, the top Democrat on the Senate Banking Committee, called Trump’s move “an authoritarian power grab that blatantly violates the Federal Reserve Act.” She added in a statement that this “must be overturned in court.”
Trump has been ramping up pressure on the Fed this year, repeatedly criticizing its chief Jerome Powell for not lowering interest rates sooner despite benign inflation data. Fed policymakers have been cautious in cutting rates as they monitor the effects of Trump’s tariffs on prices. Trump has made no secret of his disdain for Powell, whom he has called a “numbskull” and “moron.” He also previously suggested that what he called an overly costly renovation of the Fed’s headquarters could be a reason to oust Powell, before backing off the threat.
Trump said this month he had tipped Stephen Miran, the leader of his White House economic panel, to fill a recently vacated seat on the Federal Reserve board. The president’s targeting of Cook, who sits on the Fed’s rate-setting committee too, comes after his repeated broadsides against Powell while the central bank kept the benchmark lending rate unchanged. Since its last reduction in December, the Fed has held rates at a range between 4.25 percent and 4.50 percent this year. Powell on Friday opened the door to lowering levels at the bank’s upcoming policy meeting in September.
Cook took office as a Fed governor in May 2022 and was reappointed to the board in September 2023. She was sworn in later that same month for a term ending in 2038. She has previously served on the Council of Economic Advisers under former president Barack Obama. The Trump administration has pursued allegations of mortgage fraud against high-profile Democrats who are seen as political adversaries of the president.
– Beiyi SEOW
© 2024 AFP
