Lawyers for President Trump on Friday asked a federal judge to reject a request by Lisa Cook, a governor at the Federal Reserve, to remain in that role as she contests the legality of her firing. In justifying their case, the administration sketched out a sweeping view of the president’s power to dismiss members of the independent central bank.
Friday’s hearing is the first in what is likely to be a landmark legal battle that will determine the future of the Fed and its ability to set interest rates free of political meddling.
In a roughly 30-page filing, submitted just before a federal judge was set to hear the first arguments in the case, the Justice Department said that Mr. Trump had sufficient cause to dismiss Ms. Cook over allegations that she engaged in mortgage fraud, even though she has not been charged with any wrongdoing or committed of any crime.
In doing so, the Justice Department told the court it should be “highly deferential” to the president and his interpretation of what qualifies as sufficient cause to remove a government official. The lawyers attacked Ms. Cook for what they described as a noteworthy refusal to address nature of the allegations against her. The term “for cause” is broadly meant to refer to gross malfeasance or a dereliction of duty, but it is a vague term that is subject to interpretation.
Mr. Trump’s lawyers said the president’s rationale provided “more than sufficient ground for removing a senior financial regulator from office.”
The response from Mr. Trump’s lawyers came after Ms. Cook filed a lawsuit on Thursday against the president over his attempt to remove her from her position as a member of the Fed’s powerful Board of Governors. As a governor, Ms. Cook casts a vote at every meeting on interest rates as well as other major policy decisions. She also sued the board and Jerome H. Powell, the Fed chair, to prevent them from executing on Mr. Trump’s order to remove her.
Her lawyers argued that Mr. Trump’s actions were “unprecedented and illegal” and were part of a broader campaign to pressure the Fed to lower interest rates. They also acknowledged the stakes of the case, warning that if the president were allowed to proceed with her removal, the independence of the institution would be jeopardized.
Ahead of Friday’s hearing, the Fed weighed in as well, saying that it would not offer arguments to support Ms. Cook’s lawsuit. Instead, the central bank said in a filing it sought a “prompt ruling” in the case and would follow the court’s orders.
But in a statement earlier this week, a spokesperson at the central bank spoke positively about the protections laid out in the Federal Reserve Act that seek to insulate the institution from political interference.
“Long tenures and removal protections for governors serve as a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis and the long-term interests of the American people,” the person said.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
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