Federal Reserve Board Member Sues Trump Over Firing Attempt
Lisa Cook, a member of the US Federal Reserve Board, sued President Donald Trump on Thursday, alleging that he attempted to remove her from her position illegally.
After Trump tried to fire Cook on Monday because she had lied on a mortgage application, Cook filed the lawsuit in the US District Court for the District of Columbia. The complaint began by outlining the case’s significance:
This case challenges President Trump’s unlawful and unprecedented attempt to remove Governor Cook from her post, which would be the first time in the Board’s history that such an action is permitted.
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Legal Basis for Lisa Cook’s Lawsuit Against Trump’s Actions
An unsupported accusation about private mortgage applications made by Governor Cook before her Senate confirmation would violate the Federal Reserve Act (“FRA”), which expressly calls for a demonstration of “cause” for a governor’s removal.
According to the Federal Reserve Act of 1913, the president can dismiss the heads of several executive agencies “at will,” but he can only terminate Federal Reserve Board members “for cause.”
When board members commit misbehavior or malfeasance, this “for cause” requirement is usually satisfied. Trump claimed to have “good cause” to terminate Cook when the news broke.
The Federal Reserve Act and Presidential Power Over Board Members
Participating in the Federal Open Market Committee (FOMC), which sets interest rates through voting, is one of the primary duties of Federal Reserve Board members. Following the COVID-19 epidemic, the Federal Reserve raised interest rates in 2022 in response to rising inflation.
Since then, some economists contend that tariffs have contributed to the persistence of high inflation, which has kept interest rates higher than they were before the epidemic.
Trump has fought the Fed to cut interest rates, despite this, claiming the current path has hampered growth and harmed homeowners. Economists caution that cutting interest rates could hasten inflation even more.
Impact of Interest Rate Decisions on Economic Growth and Inflation
Over the past six months, Trump has removed the leaders of several administrative agencies, a move consistent with his attempts to fire them. Analysts predict that the case will reach the Supreme Court, where justices will likely scrutinize executive power and the president’s interpretation of “good cause.”