The U.S. Supreme Court is shown March 17, 2025 in Washington, DC.
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President Donald Trump's unprecedented attempt to fire Federal Reserve Board Governor Lisa Cook will likely end up in the hands of the Supreme Court, according to Wall Street economists and analysts.
Trump on Monday evening claimed to fire Cook “for cause” effectively immediately over allegations she made false statements on applications for home mortgages.
It is the first time a president has attempted to fire a Fed governor since Congress established the central bank in 1913, Evercore ISI told clients in a note Tuesday.
“Although we think it could go either way, our guess is that SCOTUS will uphold this move,” Wolfe Research head of U.S. policy and politics Tobin Marcus told clients Tuesday. “The legal protections for the Fed chair and for non-chair governors are the same, so a SCOTUS ratification of this move would sharply erode Fed independence, and even the attempt to fire Cook raises obvious concerns.”
For cause, or not for cause
Cook said she would not leave her post, arguing that Trump had no cause under the law to fire her. Cook's lawyer Abbe Lowell said Tuesday that they “will be filing a lawsuit challenging this illegal action.”
The case will likely wind its way through the courts and end up before the Supreme Court, Raymond James Washington policy analyst Ed Mills told clients Monday. This is because the Federal Reserve Act gives the president the authority to fire board governors “for cause” but what that means exactly is left ambiguous in the statute, Mills said.
FILE PHOTO: Lisa DeNell Cook, nominee to be a member of the Board of Governors of the Federal Reserve System, testifies during a Senate Banking nominations hearing on June 21, 2023 in Washington, DC.
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“The alleged mortgage fraud occurred before Cook became Governor, and ‘for cause' protection is often believed to be limited to causes occurring during one's tenure in office,” JPMorgan chief U.S. economist Michael Feroli told clients Monday, though he noted that “for cause” removals do not have much precedent.
Trump path to Fed majority
In the near term, Cook will seek an injunction against Trump's move and the U.S. District Court for the District of Columbia will likely grant her one, Marcus said. This would preserve the status quo at the Fed until the Supreme Court weighs in, the analyst said.
If Trump gets his way and forces Cook out before the year is over, he will be on a path to gain a majority on the Fed's board before it votes on regional presidents in January, TD Cowen policy analyst Jaret Seiberg told clients on Tuesday.
Trump's replacement for Cook would join appointees Fed Vice Chair Michelle Bowman and Fed Governor Chris Waller — and nominee Stephen Miran, who is expected to fill the vacancy left by Adriana Kugler after she resigned earlier this month.
“This matters as the President's majority could reject the picks from the reserve banks in favor of picks that support lower rates,” Seiberg said. “This would face hurdles, but if it works it would give Trump more influence over the FOMC and interest rates.”
