A bipartisan group of former Treasury secretaries, Federal Reserve chairs and other experts urged the US Supreme Court not to let President Donald Trump fire Fed Governor Lisa Cook, arguing that the health of the economy is at stake.
Allowing Trump to oust Cook while she challenges her removal would erode the public’s trust in the Fed and undermine efforts to stabilize prices, increase employment and moderate long-term interest rates, the group said in a friend-of-the-court brief filed with the justices on Thursday.
“Doing so would expose the Federal Reserve to political influences, thereby eroding public confidence in the Fed’s independence and jeopardizing the credibility and efficacy of US monetary policy,” the group, which includes former Fed chairs Ben Bernanke, Alan Greenspan and Janet Yellen, said in the filing.
The Justice Department has asked the Supreme Court to let Trump remove Cook while the administration fights a lower court ruling that declared the economist likely to succeed in her lawsuit and barred the Fed from carrying it out. Cook has continued serving in her post since late August, when Trump announced he would remove her due to mortgage fraud allegations that she’s denied.
Cook’s lawyers are due to respond to the government’s request to the high court later on Thursday. The court set a fast schedule for written briefs but hasn’t said exactly when it intends to issue an order.
The Supreme Court this year has largely sided with Trump in other fights over his firing decisions, but the justices previously made a point of distinguishing the Fed as a “uniquely structured, quasi-private entity.”
The former officials who weighed in to support Cook is a Who’s Who of policymakers who have steered the world’s biggest economy over the past several decades, including those on both sides of the political party divide and those who advised both Republican and Democratic presidents.
The group warned that any erosion of Fed independence could lead to higher inflation.
“There is broad consensus among economists, based on decades of macroeconomic research, that a more independent central bank will lead to lower and more stable inflation without creating higher unemployment — thus helping to achieve the Federal Reserve’s statutory objective of price stability and maximum employment,” the group wrote.
In addition, the brief was joined by former Treasury Secretaries Timothy Geithner, Jacob Lew, Henry Paulson, Robert Rubin, Lawrence Summers and Yellen. Paulson served under the former Republican President George W. Bush; the other ex-secretaries were appointed by Democrats.
Trump’s first Treasury chief, Steven Mnuchin, was not listed on the brief.
The intervention also lays bare the level of concern there now is on the political threat to the Fed’s independence. In their argument, the former officials warned of the example of central bank’s that are not independent of government that prioritize short term gains that results in longer term harm. Critically, the former officials argue that removing Cook would erode both public confidence in the Fed’s independence and threaten the economy’s long term stability.
The former officials, who aren’t involved in the litigation, said that Trump’s attempt to dismiss Cook amid his calls for lower interest rates would undermine the Fed’s mission.
“The Fed’s ability to fight inflation is directly related not only to its actual insulation from short-term political pressures but also to the public’s perception of its independence,” they argued. “Because if the public and financial markets believe that the Federal Reserve is sufficiently insulated, they will act in accordance with that expectation, resulting in lower and more stable inflation, which is consistent with lower long-term interest rates.”
The group urged the justices to consider their expertise on the subject.
Their “practical experience with policy making in the United States and around the world — including with countries that have threatened or reduced central bank independence — also convinces them that reducing independence can result in higher inflation and higher borrowing costs.”
Trump said last month he was firing Cook after Federal Housing Finance Agency Director Bill Pulte accused her of fraudulently listing homes in Michigan and Georgia as a “primary residence” when she obtained mortgages in 2021 to secure more favorable terms on loans. Cook has denied committing mortgage fraud and has remained on the job.
The former officials said sectors that “pay close attention” to the Fed are watching the dispute closely “to judge how credible the Fed will be going forward.”
“Those audiences will be more skeptical of the Fed’s independence and commitment to long-term low-inflation policies if it appears that a member of the Board of Governors is being removed based on allegations that are actively under challenge in litigation,” they said in the brief.
The filing from the former economics officials was prepared by lawyers at Covington & Burling, one of the law firms that Trump has taken punitive actions against through executive orders.
With assistance from Greg Stohr and Michael McKee.
This article was generated from an automated news agency feed without modifications to text.
About the Author
