Lisa Cook, a member of the Federal Reserve’s Board, has garnered significant support from every living former chair of the Federal Reserve in her ongoing legal battle against President Donald Trump. Retired former chairs Alan Greenspan, Ben Bernanke, and Janet Yellen have recently sounded the alarm. Perhaps more than anything, they fear that Trump’s court-packing effort to remove Cook could threaten the entire central bank’s independence.
The conflict arises from yet again unfounded accusations of mortgage fraud leveled at Cook. It is President Trump’s stated desire to fire her that drives these claims. The court has not yet proven them out. Washington – Cook was sworn in at her confirmation hearing in front of the Senate Banking Committee on June 21, 2023. Her role is more important than ever to the Fed’s leadership.
Cook’s legal challenges have emerged amid Trump’s broader strategy to reshape the Fed’s top ranks. An appeals court has stepped in to ensure that Cook remains in her post via a preliminary injunction while her lawsuit moves forward. The administration has since appealed this decision to the Supreme Court, which is still considering that appeal.
While the legal process plays out, Cook has remained hard at work carrying out her duties at the Fed. Recently, she deliberated on economic policy alongside Stephen Miran, the newest Fed Governor and a top economic adviser to President Trump. As a result, Miran took an unpaid leave of absence from his advisory role to become a central bank Board of Governors member. He was sworn in only an hour before the Fed’s September 16-17 meeting.
The brief submitted by the former Fed chairs outlines the critical importance of maintaining the Fed’s policy decisions free from political influence. If the Fed is going to look after our long-term inflation expectations, it must have substantive independence. It has to make sure the public believes its independence is real.
“The Fed’s ability to fight inflation is directly related not only to its actual insulation from short-term political pressures but also to the public’s perception of its independence—because if the public and financial markets believe that the Federal Reserve is sufficiently insulated, they will act in accordance with that expectation, resulting in lower and more stable inflation, which is consistent with lower long-term interest rates,” – [the brief].
The brief, as a whole, received support from several notable Republicans, including former U.S. Prominent leaders such as former Treasury Secretary Henry Paulson and former Council of Economic Advisers Chair Glenn Hubbard have joined them. All As have signed on to that statement of support for Cook.
The Supreme Court is currently considering the administration’s appeal of Cook’s ruling. At the same time, economists and policymakers have been warning about the potential long-term impact of this on the independence of the Federal Reserve. The costs continue to be dynamic, with both legal and economic consequences expected to continue evolving in the coming months.