The governor of the federal reserve, Lisa Cook, continued President Donald Trump for his attempt to dismiss, setting up a potential legal battle with implications for the autonomy of the American Central Bank.
Cook asked the court to declare the illegal and zero “Trump” dismissal order, and also appointed the president of the Fed, Jerome Powell, as a defendant.
Trump said that there was “sufficient reason” to believe that Cook had made false statements on his mortgage and cited the constitutional powers which, according to him, allowed him to withdraw it. Cook previously declared that “no cause exists under the law” to dismiss it.
The president expressed increasing pressure on the Fed on what he considers a reluctance to reduce interest rates.
Cook is part of the board of directors responsible for setting interest rates in the United States.
Thursday’s trial is likely to raise a certain number of judicial disputes that could be at the United States Supreme Court.
“This case calls into question the unprecedented and illegal attempt by President Trump to withdraw Governor Cook from his position which, if it is authorized to perform, would be the first of its kind in the history of the Council,” wrote Abbe Lowell, Cook’s lawyer, in the trial.
“This would strengthen the law on the federal reserve … which explicitly requires a demonstration of” cause “of the revocation of a governor, that a allegation not based on private mortgage demands submitted by Governor Cook before his confirmation of the Senate is not,” wrote Lowell.
White House spokesman Kush Desai told the BBC that the president “had exercised his legal power to withdraw” the cook.
“The president determined that there was a cause to withdraw a governor who was crediblely accused of lying in financial documents of a very sensitive position supervising financial institutions,” he said. “The abolition of a governor for cause improves the responsibility and credibility of the Federal Reserve Board for the markets and the Americans.”
The Federal Reserve Act does not give the President the power to withdraw an official from the Fed at will, but as Trump said, it allows him to do so “for good”.
The allegations against Cook were made for the first time in a public letter from the housing financing regulator, Bill Pulte, an ally of Trump. In the letter, he accused cook of falsification of the files to obtain a mortgage.
The letter alleged that she signed two documents, two weeks apart, attracting that two houses in different states were both her main residence. No accusation has been made against Cook and it is not clear if it is the subject of an investigation for these allegations.
Cook’s trial does not deal with these allegations.
She previously denied that there was a cause to dismiss and legal experts showed skepticism in Trump’s position.
She is one of the seven members of the Fed Governors’ Council and, in this position, sits on the Committee of 12 members who is responsible for setting interest rates in the United States.
Since his return to Washington, Trump has expressed growing pressure on the Fed – especially Powell – on interest rates.
The American president appoints candidates for this role, therefore the elimination of Cook would mean that he could be replaced by a person more favorable to the drop in interest rates and the economic agenda of Trump.
The Fed decision affects the rate to which Americans can borrow money as well as savings rates on their bank accounts. American interest rates are also closely monitored by central banks that have established a monetary policy in other countries.
Cook voted alongside Powell and most of the other members of the Committee to maintain American interest rates at the last Fed meeting at the end of July.
