The Department of Justice contended that President Donald Trump‘s dismissal of Federal Reserve Governor Lisa Cook due to purported misconduct would not trigger a “financial market disaster,” according to a Supreme Court filing on Friday.
Solicitor General D. John Sauer presented this claim, advocating for the high court to permit Trump’s efforts to terminate Cook while her lawsuit against the president moves forward.
Sauer asserted that Trump “endures irreparable harm” due to lower-court decisions mandating Cook’s temporary reinstatement.
Conversely, he maintained that “affirming the President’s authority to dismiss Governors for apparent financial misconduct would not jeopardize the Federal Reserve’s policy independence.”
“Additionally, removing Cook on those grounds would not lead to a financial market disaster,” he noted.
Trump sought to dismiss Cook in late August, referencing allegations of mortgage fraud brought forth by U.S. housing finance agency leader Bill Pulte. It is claimed that Cook purportedly indicated two properties as her primary residence on mortgage documents before her appointment to the Fed in 2022.
Cook has refuted the allegations of mortgage fraud.
In a Supreme Court filing on Thursday, Cook’s legal team contended that Trump’s plea for a “stay” to facilitate her removal essentially asks the justices “to intervene on an emergency basis to undermine the independence of the Federal Reserve Board.”
Although Trump is permitted to remove Fed governors, the Federal Reserve Act of 1913 stipulates that he can do so “for cause.”
Cook’s lawyers argued that Trump’s “fabricated charges” do not meet that standard, emphasizing they are “rooted in conduct that predates her term on the Board.”
They also stated, “A stay granted by this Court would signal to the financial markets that the Federal Reserve no longer possesses its traditional independence, leading to potential chaos and disruption.”
In his Supreme Court filing on Friday, Sauer responded, “It is unclear why financial markets would react negatively to removals for pre-confirmation issues but not for in-office financial misconduct, or why they would feel reassured by the idea that newly identified fraudsters could hold positions on the Federal Reserve Board as long as the statute of limitations had expired.”
