By CHRISTOPHER RUGABER, Associated Press Economics Writer
WASHINGTON (AP) — Federal Reserve Governor Lisa Cook has sued the Trump administration in an effort to overturn the president’s attempt to fire her, launching an unprecedented legal battle that could significantly reshape the Fed’s longstanding political independence.
No president has sought to fire a Fed governor in the institution’s 112-year history until Trump posted a letter on his Truth Social media platform late Monday saying that Cook was fired. Trump said the reason for her removal were allegations that she committed mortgage fraud in 2021, before she was appointed to the board.
The Supreme Court has signaled that the president can’t fire Fed officials over policy differences, but he can do so “for cause,” typically meaning misconduct or neglect of duty. Most legal experts say that a “for cause” removal requires some type of process that would allow Cook to respond to the charges, which hasn’t happened. Cook has not been charged with any crime.
The president’s decision comes as he has repeatedly attacked Fed Chair Jerome Powell and the other members of the Fed’s interest-rate setting committee for not cutting the short-term interest rate they control more quickly. It currently stands at 4.3%, after Fed policymakers reduced it by a full percentage point late last year.
Powell signaled last week that the central bank was leaning toward cutting its rate at its next meeting Sept. 16-17.
Those attacks have opened up the White House to the criticism that its firing of Cook over alleged mortgage fraud is just a pretext to open up another seat on the board for a Trump loyalist. Trump has said he will only appoint people to the Fed who will support lower rates.
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