WHAT IS ‘CAUSE’? AND WHY CAN’T THE PRESIDENT FIRE LISA COOK? Everybody knows President Donald Trump wants the Federal Reserve to lower interest rates. He’s been on a near-daily crusade against Fed chairman Jerome Powell for months. There have been rumors that Trump would fire Powell, but he hasn’t done it yet, and doesn’t seem likely to, mostly because Powell’s term expires next year anyway, and Trump will get to replace him then.
But Trump has taken action, and that is to fire Lisa Cook, who, up until a few days ago, was a member of the Fed’s seven-member board of governors. The members serve a long term, 14 years, and Cook was appointed in 2024 by then-President Joe Biden.
In a termination letter to Cook, Trump noted a criminal referral against Cook filed by the head of the Federal Housing Finance Agency and said that there is “sufficient reason” to believe Cook committed mortgage fraud by claiming two different houses as her primary residence. “There is sufficient reason to believe you may have made false statements on one or more mortgage agreements,” Trump wrote. “For example, as detailed in the criminal referral, you signed one document attesting that a property in Michigan would be your primary residence for the next year. Two weeks later, you signed another document for a property in Georgia stating that it would be your primary residence for the next year.”
“The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve,” Trump continued. “In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.” With that, Cook was out.
There appears to be significant evidence to support Trump’s accusation against Cook. But Cook responded by suing the president, arguing that he had no right to fire her. Cook’s lawsuit has become the latest test of the extent of presidential power in the Trump administration.
It is worth noting that in her 24-page lawsuit, Cook never once said whether she did or did not claim two houses as her primary residence. That rather key factor was left unaddressed. Instead, Cook argued that, even though the Federal Reserve Act states that the president can fire a governor for “cause,” the specific passage of the Act says that “each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the president.” Trump did not have an appropriate “cause” for firing Cook.
Cook argued that she could only be fired if she was found guilty of “inefficiency, neglect of duty, or malfeasance in office,” a standard taken from Humphrey’s Executor, a famous 1935 Supreme Court case concerning so-called independent federal agencies. In addition, Cook argued that even if she did anything wrong, and she’s not saying she did, it happened before she joined the Fed, and therefore, Trump could not use it to fire her.
Cook requested an emergency hearing in hopes that a friendly DC judge would stop Trump cold. In her motion for the hearing, her lawyers suggested the primary residence mess might have resulted from a “clerical error,” although they did not say who made the error. In any event, Cook got her hearing on Friday morning, but it did not result in any quick decision. Even though the case is being heard by Jia Cobb, a Biden-appointed judge, the Cook firing still stands, at least for now.
Cobb had questions for the government about whether Trump, who fired Cook via social media, gave Cook full due process. But it appears the judge had a more difficult question for Cook’s attorneys about what constitutes “cause,” a sufficient reason to fire Cook. For one thing, the judge pointed out that the Federal Reserve Act, quoted above, does not define “cause,” suggesting that it is up to the president to decide what that is.
When Cook’s lawyer, Abbe Lowell, argued that the real reason Trump fired Cook is that Trump wants control of the Fed to lower interest rates, and that Trump used the mortgage fraud accusation as a pretext for firing Cook. That is a key part of Cook’s case, but Lowell struggled when the judge asked what the applicable standard for a firing should be.
“It’s very difficult to come up with an 11-page definition of what it is,” Lowell said, according to an account by journalist Adam Klasfeld of @AllRiseNews. It is easier, Lowell explained, to come up with a one-page definition of “what it’s not.” “Whatever it is, it’s not this,” Lowell said of the standard for firing a Fed governor. “I don’t know what it is, but I know what it’s not.”
It wasn’t exactly a dazzling moment for Cook’s side. If the standard for firing is essentially unknowable, and given the wording of the Federal Reserve Act, which does not define “cause,” why wouldn’t a judge decide that the president has the power to determine “cause”? After all, Trump, not Abbe Lowell, has been elected President of the United States. That doesn’t mean Judge Cobb will ultimately rule in Trump’s favor, but it did expose a fundamental weakness of Cook’s case.
The Cook matter is just the latest in a series of lawsuits and legal tests of the president’s power, not Donald Trump’s power specifically, but the power of the presidency. Can an “independent” agency really be independent? If, in creating this or that board, Congress gave the president the authority to appoint members, why wouldn’t the president also have the power to remove them for whatever reason he sees fit? Somebody has to be able to fire presidential appointees. The Cook case will undoubtedly go to the Supreme Court, and maybe we’ll finally get some answers to some very old questions.