President Donald Trump’s renewed push against a Federal Reserve official has dropped his own hand-picked central bank chief into an awkward position.
Trump’s new effort to remove Fed Gov. Lisa Cook puts Fed Chair Kevin Warsh on the hook to defend the institution’s independence from the president who installed him, Politico reported Friday.
Trump, whom the Supreme Court previously blocked from ousting Cook over due process concerns, announced Friday that he has formed a panel of administration officials to review her statements on home loans, which he and his allies have claimed amount to mortgage fraud. He has demanded she appear at a White House hearing next month to answer the allegations.
“But the real defendant here is Kevin Warsh because his legacy is going to be defined by how he protects the Fed,” Peter Conti-Brown, a Wharton School expert on Fed history, told Politico. “And whether he likes it or not, Lisa Cook, in this instance, is the Fed.”
The timing adds to the pressure. Warsh and his colleagues hiked interest rates last month amid worries inflation wasn’t easing fast enough, a move that defied Trump’s repeated calls for cuts. The president stopped short of attacking Warsh directly, instead claiming he’s controlled by “a very hostile board.”
Cook’s attorneys, Abbe Lowell and Norm Eisen, maintain she did nothing wrong and said they have “grave doubts that this ‘hearing’ is a legitimate one that would conform to the law.”
“We have engaged with the White House to evaluate whether the process proposed has a possibility of being a genuine one and not simply a box-checking exercise,” they said.
Outgoing Sen. Thom Tillis (R-NC) pinned the blame on Federal Housing Finance Agency Director Bill Pulte, the Trump ally who first sent Cook’s mortgage records to the Justice Department, saying the regulator should “take the shovel out of his hand and stop embarrassing the President.”
Kathryn Judge, a Columbia Law School professor, warned that Warsh can’t afford to stay quiet. “There’s a real risk that silence will be read as being complicit in an effort to undermine the rigorousness and the robustness of the for-cause protection that has been fundamental to the Fed’s independence,” she said.
Conti-Brown said Warsh may instead try to work behind the scenes to cool tensions, but argued the president has a road map.
“The problem is that the Supreme Court sent a quite detailed invitation to President Trump,” he said. “‘You did it wrong the first time. Here’s how to do it right.’ And so far, President Trump is simply following the instructions that the Supreme Court left in their majority opinion.”
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