Fed Governor Cook 'fired' over mortgage fraud claims

NEW YORK/WASHINGTON — US President Donald Trump on Monday said he was firing Federal Reserve Governor Lisa Cook over alleged improprieties in obtaining mortgage loans, an unprecedented step that could test the boundaries of presidential power over the independent monetary policy body should it be challenged in court.

Trump said in a letter to Cook, the first African-American woman to serve on the Federal Reserve's governing body, that he had "sufficient cause to remove you from your position" because in 2021, Cook indicated on documents for separate mortgage loans on properties in Michigan and Georgia that both were primary residences where she intended to live.

Cook responded several hours later in a statement emailed to reporters through the law office of lawyer Abbe Lowell, saying of Trump that "no causes exist under the law, and he has no authority" to remove her from the job she was appointed to by former president Joe Biden in 2022. "I will continue to carry out my duties to help the American economy."

Lowell said that Trump's "demands lack any proper process, basis or legal authority. We will take whatever actions are needed to prevent this attempted legal action."

Questions about Cook's mortgages were first raised last week by US Federal Housing Finance Agency director William Pulte, who referred the matter to Attorney General Pam Bondi for investigation.

Though the terms of Fed governors are structured so they outlast the term of a given president, with Cook's term lasting until 2038, the Federal Reserve Act does allow removal of a sitting governor "for cause".

That has never been tested by presidents who, particularly since the 1970s, largely have taken a hands-off approach to Fed matters as a way to ensure confidence in US monetary policy.

Legal challenge

Legal scholars and historians said the thicket of issues that could be raised in a legal challenge would span questions around executive power, the Fed's unique quasi-private nature and history, as well as whether anything Cook did amounted to cause for removal.

Peter Conti-Brown, a scholar of the Fed's history at the University of Pennsylvania, noted that the mortgage transactions preceded her appointment to the Fed, and were in the public record when she was vetted and confirmed by the Senate.

"These officials have been vetted by our President and our Senate, that means that all things that they had done during their times as a private citizen were already vetted," Conti-Brown said.

"So the idea that you can then reach back, turn the clock backward… is to me incongruous with the entire concept of 'for cause' removal."

Academic research has consistently found that policymakers allowed to manage inflation independent of political influence generally achieve better outcomes, a principle that may now be tested at the US central bank.

Agencies via Xinhua