President Trump’s attempt to fire the Federal Reserve governor Lisa Cook is a grab for power in defiance of the nation’s laws, and if it succeeds, it will be to the detriment of the nation’s interests.
When Congress created the Fed in 1913, it gave the president the power to appoint the central bank’s governors, but it did not grant the power to remove them at will.
Mr. Trump does not appear to regard that law as a binding constraint.
He has made clear that he wants to replace the Fed’s leaders because they have resisted his demands to lower interest rates. In pursuit of this goal, he now says he is firing Ms. Cook because of “potentially criminal” behavior.
The law does allow the president to remove Fed governors “for cause,” and Mr. Trump has not presented any evidence of wrongdoing by Ms. Cook, an economist whom President Joe Biden appointed to the job three years ago.
Mr. Trump has asserted that she “may have made false statements on one or more mortgage agreements.”
We have two words for the president: Prove it.
In the absence of any finding of wrongdoing by a judge — or even presenting evidence to one — Mr. Trump is effectively asserting that the president gets to decide what counts as cause, which would render the standard meaningless.
If the courts allow him to get away with it, the Fed will be stripped of its insulation from political pressure.
Mr. Trump will be able to bully the central bank into delivering the economic sugar highs he craves, and we will all suffer the eventual consequences.
The Fed is charged with maintaining the health of the financial system and the stability of the broader economy. It tries to keep unemployment low and inflation steady. And it’s a thankless job. Maintaining a healthy economy can require the central bank to limit the pace of short-term growth, which inevitably incurs the anger of politicians.
To keep the Fed focused on the nation’s long-term interests, Congress created a board of seven members who are appointed to 14-year terms.
Both the Federal Reserve Act of 1913 and the Banking Act of 1935 decreed that the president could fire members of the Federal Reserve Board only “for cause.”
Adolph Miller, one of the first people appointed to the Fed’s board, insisted that this clause be restated in the 1935 bill, as he feared “political control” of the Fed. He believed the board should be independent, with members who considered their work as “a great public responsibility which runs to the public rather than to an official of the administration of the day.”
Those governors make mistakes. They have sometimes kept interest rates too high. They have sometimes kept rates too low. The president, along with every other American, is welcome to express his views on the current level of the Fed’s benchmark rate.
But Ms. Cook and her colleagues are the lawfully appointed representatives of the American people, experts performing the people’s business to the best of their ability. As we wrote last month, if Mr. Trump has an idea for a better system, he should speak it. But he must not be allowed to destroy the current system.
