Court Halts Attempt to Dismiss Federal Reserve Governor
A US court of appeal has halted an attempt by the President to dismiss Lisa Cook from her role at the Federal Reserve amidst allegations of fraud. The ruling significantly hinders the President's plans and allows Cook to maintain her position for the time being.
In a verdict that ended with a 2-1 split, the court ruled that the President's administration had not provided enough evidence to overrule a previous decision made by a lower court. This original ruling stated that Cook should remain in her role while the grounds for her dismissal are explored and validated.
Crucial Monetary Decisions Loom
This development occurs just as the Federal Reserve's rate-setting committee is set to start a two-day session to discuss the potential reduction of interest rates. It is widely anticipated that the committee will opt to decrease the benchmark interest rate by at least a quarter of a percent.
Legal Basis for the Ruling
Circuit Judge Bradley Garcia, writing for the majority, found that Cook’s claim that she had been denied due process was "very likely meritorious" and had a "strong likelihood of success". Garcia noted that the President's administration did not contest that it had not given Cook sufficient notice or a chance to respond to the allegations against her.
The only argument put forth was that Cook had not explained what difference a hearing would have made. However, Garcia argued that Cook's right to due process was separate from whether a hearing would have resulted in a different outcome.
Unprecedented Actions Raise Concerns
The President's move to dismiss Cook, a member of the Federal Reserve's seven-member board of governors, was seen as unusual and raised worries regarding the autonomy of the US central bank. The President, who has been advocating for the lowering of interest rates for months, justified his actions with claims that Cook had made false statements on a mortgage application. Cook has countered these allegations, asserting that her dismissal was unlawful and has begun legal proceedings.
As per the Federal Reserve Act and US Supreme Court precedent, the President must demonstrate "cause", generally understood to mean wrongdoing, to dismiss any of the central bank's governors. In the bank's 111-year history, no President has ever dismissed a governor.
Further Developments
In a separate event, the US Senate confirmed Stephen Miran, the chair of the President's Council of Economic Advisers, to the Federal Reserve's board of governors with a narrow 48-47 vote. This decision has raised eyebrows among Democrats, who have expressed concerns about Miran's independence given his refusal to step down from his White House role and instead opting for a leave of absence.