The U.S. Supreme Court recently expressed skepticism regarding the Trump administration’s efforts to remove Lisa Cook, a Federal Reserve governor, amid allegations of mortgage fraud. The case has drawn unprecedented media attention. It would have drastic ramifications for both Cook’s career and for President Trump’s control of the Federal Reserve.
The Trump administration’s legal team is asking the court to authorize them to rely on this approval. They want President Trump to remove Cook, who was appointed to the Federal Reserve well before the problematic mortgage filers. Her confirmation was far from guaranteed, as lower courts had earlier thwarted the administration’s efforts to have her removed while legal challenges played out. Cook’s legal representatives have repeatedly denied allegations of misconduct asserting that Cook’s removal is an act of political retaliation.
Back in August, President Trump alleged that Cook was guilty of mortgage fraud. Her lawyers have forcefully disputed this assertion. They argued that the allegations were based on “cherry-picked, incomplete snippets of the full documents” related to her mortgage application for an apartment in Alabama. They pointed out that there was a “one stray reference to primary residence,” which they contend does not constitute fraud.
Cook’s lawyers assert that the file contains “truthful and more specific disclosures about the property’s use.” They contend that Cook has not been given a fair opportunity to contest the allegations asserted against her. Either way, the situation puts serious integrity into the question about whether the Federal Reserve is truly independent from political pressure.
Federal Reserve defenders claim that the allegations serve as a pretext for the Trump administration to exert greater control over the central bank. The court’s deliberations come amid a broader debate regarding the Trump administration’s attitude towards the Federal Reserve and its governors.
In fact, during oral arguments, most of the justices, from both the conservative and liberal wings of the court, expressed skepticism with the administration’s strategy. Both Justice Sonia Sotomayor and Justice Samuel Alito, although Justice Amy Coney Barrett and Justice Brett Kavanaugh asked pointed questions. Their preference was to not sanction a dismissal without some consideration of underlying problems.
Justice Barrett asked, “Doesn’t that counsel… caution on our part?” reflecting a sense of hesitation among some justices about moving forward with Cook’s removal. As Justice Kavanaugh observed, the implications of permitting this dismissal to proceed could be far-reaching. He cautioned that it would “weaken, if not shatter, the independence of the Federal Reserve.”
John Sauer stressed the scandalous nature of Cook’s firing in his advocacy on the case. In particular, he called out a social media post by Trump that gave Cook the 24-hour notice of her imminent removal. He stressed, “There was a government social media post. This shocking revelation has only stoked the flames of controversy over the removal process’s lack of due process and transparency.
The stakes of this case are high. Even worse, a ruling in favor of the Trump administration would set a dangerous precedent. This would set the dangerous precedent for future tries to politicize Federal Reserve governors. A ruling in favor of Cook would bolster the perception that Federal Reserve officials are impervious to political pressure. This ruling could underscore the value of their own independence in decision-making.