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Kuttner on TAP |
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How John Roberts can help Trump control the Fed |
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Trump didn’t give a reason for firing other members of independent agencies. Roberts can say he gave one here. |
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The Federal Reserve’s response to Donald Trump’s attempted firing of Fed governor Lisa Cook was, in a word, feeble. Through an anonymous spokesperson, the Fed claimed its independence but added that it would defer to the courts. The governors’ fixed terms “serve as a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people,” the statement said, but added that the Fed would obey any court decision concerning Cook’s “ability to continue to fulfill her responsibilities as a Senate-confirmed member.”
The statement was surely cleared with Fed Chair Jay Powell if not drafted by him, but Powell himself has been conspicuously silent. This is almost an invitation for Trump and Chief Justice John Roberts to do their worst. Powell is willing to fight to conduct his own monetary policy but not to defend his institution.
The Court has to contend with its absurd ruling in Trump v. Wilcox, which considers Fed appointees as sacrosanct, unlike other independent agencies where a president, according to them, can replace even term appointees. That was predicated on no real logic but just the protection of prerogatives asserted by Wall Street to maintain control over economic management.
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Roberts could seek to align his Court’s previous statement with a ruling in favor of firing Cook by employing the statutory rule that presidents can fire Fed board members “for cause.” No president has ever done so, but Trump asserted that he was firing Cook due to a Federal Housing Finance Agency criminal referral for alleged, unproven mortgage fraud. In his other firings of independent agency members, no reasons were given. Roberts can say that Trump gets to decide what constitutes “for cause” and leave it at that.
But that means that the cause itself, the allegation of mortgage fraud, could be justiciable. Cook’s lawyer, Abbe Lowell, meanwhile, is filing a lawsuit to block Trump’s action. This could produce some interesting revelations, since Lowell could use discovery to probe just how FHFA director Bill Pulte was able to fish through mortgage applications looking for a pretext for a hit job. The lawsuit should have been filed by the Fed.
Cook has made clear that she is not going anywhere. “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” she said. “I will not resign.” She also said that she is “gathering the accurate information to answer any legitimate questions” about her mortgages.
Investors have been passive, with stocks rising the past two days. Nathan Tankus suggests that this is because markets are “conventional wisdom processors,” and they still at this late date feel that Trump will “chicken out” and act in their best interests. Markets have served as a check on Trump’s tariffs on economic grounds, but they are poor checks on the breakdown of the very structure of U.S. democracy. Their bet could be very right up until it is very wrong.
David Dayen contributed reporting.
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~ ROBERT KUTTNER |
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Follow Robert Kuttner on Bluesky |
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