On Monday, President Donald Trump initiated the process to fire Lisa Cook, a member of the Federal Reserve appointed by Biden. The reason? Well, it appears to stem from allegations of mortgage fraud. Specifically, Cook supposedly misrepresented her primary residence to secure better interest rates.
This marks the first occasion where Trump has sought to dismiss a Fed governor for a stated cause, and, predictably, his critics have jumped on this, suggesting it violates existing norms. However, Trump’s actions are arguably within his constitutional rights—he does have the legal authority to remove Cook, regardless of the “cause” cited.
Now, let’s dig into some principles. Modern administrative states, in a way, operate as a fourth branch of government—separate from direct political accountability. Their existence often seems to clash with the founding fathers’ vision of a distinct separation of powers among Congress, the executive, and the judiciary.
Article 2 of the Constitution grants the President “executive power,” including the authority to remove executive officials, as established by former President Taft in the Myers v. United States case in 1926. While Humphrey’s Executor v. United States in 1935 introduced an exception for certain “independent” institutions, many constitutional scholars view that as an anomaly.
Indeed, the Supreme Court has curbed that idea. In Seila Law v. Consumer Financial Protection Bureau (2020), the Court ruled that Congress cannot prevent a president from firing the head of an executive department. Similarly, Collins v. Yellen (2021) reinforced that restrictions on the President’s power to remove the head of the FHFA were unconstitutional.
In Trump v. Wilcox, the court acknowledged Trump’s authority in firing a Biden-appointed member of the National Labor Relations Commission earlier this year, but it didn’t necessarily clarify the implications for members of federal commissions like the Fed, which is described as “uniquely structured.”
But can we question that uniqueness? Members of the Fed’s governing board are appointed by the president and confirmed by the Senate, and they make significant decisions affecting the economy, interest rates, and the value of the dollar. That certainly seems to involve enforcement powers.
More critically, if the Fed isn’t part of the executive branch, how can the president wield full removal authority? It certainly isn’t Congress or the judiciary.
Wilcox’s order mentioned that the Fed “follows historical traditions” of earlier U.S. banks, but that’s a stretch. The initial U.S. banks didn’t function like today’s central banks. The Fed, created in 1913, was largely influenced by Woodrow Wilson, a pivotal figure in establishing the modern administrative state.
If the president can’t fire Fed members, what does that say about the constitutionality of the Fed itself? There seems to be no middle ground on this issue.
What about the laws that authorized the Fed? The Federal Reserve Act of 1913 established a 14-year term for governors and didn’t explicitly state conditions for removal. Critics, including Cook’s lawyer, argue that a “cause” for removal should involve a conviction for a crime. However, Congress didn’t clearly define what counts as valid “cause.”
This vagueness essentially creates a subjective standard. With serious fraud allegations on the table, it raises questions about the Fed’s legitimacy. Maintaining that legitimacy is in the nation’s best interest.
It’s also worth noting that a term length doesn’t equate to job security. Saying a governor serves “14 years” doesn’t mean they can’t be dismissed within that period. Past court rulings have made this distinction clear—think of James Comey’s firing as FBI Director, for instance.
A lawsuit is inevitable. These conflicts are necessary. During Trump’s first term, he faced significant obstruction from bureaucrats and officials resistant to his agenda. It’s crucial that this doesn’t repeat itself in his second term. Dismissing a sitting Fed governor would send a strong message about reclaiming governmental authority through an elected president.
