United President Donald Trump has ordered the removal of Federal Reserve governor Lisa Cook amid unproven claims of mortgage fraud, an unprecedented move that immediately raised fears for the central bank’s independence.
In a letter posted on social media on Monday night, Trump said Cook, one of the seven members of the Fed’s Board of Governors, was being sacked “effective immediately” in accordance with his powers under the US Constitution and the 1913 Federal Reserve Act.
Citing claims aired last week by US federal mortgage regulator, Trump said there was “sufficient reason to believe you may have made false statements on one or more mortgage agreements”.
“The Federal Reserve has tremendous responsibility for setting interest rates and regulating reserve and members banks,” Trump said in the letter, which was shared on his platform Truth Social.
“The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.”
“At a minimum, the conduct that issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator,” Trump added.
Trump had on Friday threatened to fire Cook, a former Michigan State University professor who was appointed by former President Joe Biden, if she did not resign.
In response to inquiries by Al Jazeera, a spokesperson for the Federal Reserve said the bank had no comment at the moment but would “keep you posted”.
Trump’s extraordinary move is set to raise further questions about the independence of the US central bank, which has been under intense pressure from the president to lower interest rates.
The ability of the Fed to set interest rates, which affects the cost of borrowing for consumers and businesses, without being subject to political interference is widely considered a key plank of confidence in the US economy.
After Trump’s move, investors are facing the reality that “the latitude of the Fed to conduct monetary policy in relentless pursuit of price stability and maximum employment may not be as great as they thought yesterday,” David Wilcox, a senior fellow at the Peterson Institute for International Economics who served on the staff of the Federal Reserve Board, told Al Jazeera.
“The damage done to confidence in the US system will not be easily or quickly repaired,” Wilcox said.
Cook’s removal could also set off a series of protracted legal challenges.
“In all likelihood – because of the stakes involved and the absence of relevant case law in this area – it will be challenged in court,” Wilcox said.
“Unfortunately, that process will probably be lengthy – perhaps running for many months.”
Under the Federal Reserve Act and US Supreme Court precedent, the president must demonstrate “cause”, widely interpreted to mean malfeasance, to fire any of the central bank’s seven governors.
In a letter addressed to US Attorney General Pam Bondi and Department of Justice official Ed Martin earlier this month, Federal Housing Finance Agency director Bill Pulte, a staunch Trump ally, alleged that Cook had listed two properties, in Ann Arbor, Michigan and Atlanta, as her primary home addresses.
In the letter, which was shared on social media, Pulte said that Cook appeared to have “falsified bank documents and property records to acquire more favourable loan terms, potentially committing mortgage fraud under the criminal statute”.
Mortgage loans for primary residences typically have lower interest rates as they are considered lower risk than those for investment properties.
In response to Pulte’s letter, Cook said last week that she would gather information about her financial history “to answer any legitimate questions and provide the facts”, but that she had “no intention of being bullied to step down from my position because of some questions raised in a tweet”.
