President Donald Trump does not have the power to fire Federal Reserve governors at will, as he does members of the National Labor Relations Board. But he has fired governor Lisa Cook for cause, which is allowed under statute, alleging she made false statements on a mortgage application in 2021. The evidence that Cook made false statements is substantial, and incompetence is no defense for someone with her financial regulatory powers. The public simply cannot and should not stand for a government that allows the rich and powerful to game the financial system with impunity.
Trump announced Cook’s dismissal unceremoniously on social media last week after Federal Housing Finance Agency Director William Pulte alleged Cook had claimed primary residences on mortgage applications, one in Michigan and another in Georgia, in 2021 in order to get better mortgage terms.
“The American people must have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve,” Trump wrote. “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.”
Multiple outlets have since confirmed that Cook did claim two separate properties as her primary residence within days of each other in 2021. First, on June 18, Cook signed a mortgage agreement with a credit union on a Michigan property she claimed as a primary residence. Then, just two weeks later, she signed another mortgage agreement with a different credit union on a Georgia property she claimed as a primary residence. Both contracts contained identical language requiring Cook to affirm she would “occupy the property as borrower’s principal residence for at least one year after the date of occupancy.”
Cook has not denied the authenticity of the mortgage documents, nor has she explained how, in just two weeks, she changed her mind about which property would be her primary residence. Mortgage fraud is rarely prosecuted, but when it does happen, defendants often claim ignorance and blame the complexity of the mortgage process for falsely claiming two primary residences. Such an ignorance defense may help keep Cook out of jail, but it would be damning for her challenge to her dismissal. If Cook isn’t sophisticated enough to follow a simple mortgage application, she has no business voting on whether or not the Fed should lower or raise interest rates.
Trump’s firing of Cook comes in the context of his pressure campaign on the Fed to lower interest rates, a decision Trump believes would help grow the economy and make housing more affordable, in particular by lowering interest rates on mortgages. Opponents of lower rates understandably argue such a move could send inflation rising. Some economists worry that if Trump succeeds in firing Cook, the independence of the Fed would be in doubt. These concerns are overblown.
Unlike Trump’s recent at-will firing of NLRB members, Trump dismissed Cook “for cause,” which the statute that created the Fed allows. Trump is not arguing that the Fed is completely under his control as part of the executive branch, an argument he did make to justify his NLRB firings. Trump is essentially affirming that the Fed is a “uniquely structured, quasi-private entity,” as the Supreme Court said earlier this year. That is why markets have reacted negatively to Cook’s dismissal.
That Cook’s dismissal comes after Pulte made similar criminal referrals for Sen. Adam Schiff (D-CA) and New York Attorney General Letitia James is immaterial. Those arguing that mortgage fraud is common and should therefore be ignored don’t realize how out of touch they sound or how their arguments only fuel the populism that brought Trump to power.
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Most young people can’t afford one mortgage right now, let alone two. Claiming a second home as a primary residence is not a crime most Americans are in a financial position to make. If rich people are gaming the system by claiming primary residence status to secure more favorable mortgage terms, they should be prosecuted, not coddled.
If Cook has some other explanation for claiming two properties as her primary residence just days apart, she should make it now, publicly. Otherwise, she has lost the trust of the public and should resign.