Opening Rounds in the Trump/Cooke Kerfuffle

In NRO, Andrew McCarthy discusses the latest legal mess the Trump administration is bringing to light. Donald Trump’s actions are significant and controversial, but don’t forget, notes Mr. McCarthy, we are in the early innings of the Lisa Cook/Trump power play.

Andrew McCarthy refers to all this “garment rending.” He, too, is concerned that the president is making a move on the Fed and that his intention is to monetize our astronomical national debt. (Historically, presidents tend to pressure the Fed to keep interest rates low, even when inflationary conditions indicate that they should be higher.)

(Low interest rates) would weaken the dollar, penalize savers, and risk higher inflation that would penalize everyone.

Yes, Government officials have the public’s trust. Along with that, trust is the responsibility of being held to a higher standard. That is, it should not be necessary for officials to be accused of crimes in order to establish their unfitness for office.

Nevertheless, this is not as imperious or radical a presidential action as is intimated by the press. That is because Trump purports to be firing Cook for cause.

… no one has yet proved that (Lisa) Cook violated the law, even though Trump is pronouncing her guilty. (His letter, issued last night, asserts: “There is sufficient reason to believe you may have made false statements on one or more mortgage agreements” and engaged in “deceitful and potentially criminal conduct.”)

Questions Unanswered

• Would private misconduct — which is what Cook’s mortgage documents involve — constitute cause?
• Does causeneed to be misconduct in executing the duties of the office?
• Could cause be established by private conduct that compromises a governor’s capacity to carry out her duties?

President Trump has taken aim at independent agencies. Critics of Trump contend, not without cause, that it’s because Trump is imperious, rejects limitations on his authority, and seeks to amass power.  Yes, that sure sounds like Trump.

Mr. McCarthy believes Trump is trying to provoke a controversy that would require the Supreme Court to reconsider its 1935 decision in Humphrey’s Executor v. United States, which endorsed the concept of independent agencies (in that case, it was the Federal Trade Commission) and upheld congressional restrictions on the president’s removal authority.

The president has fired … agency heads who have duly challenged their removal in lawsuits that have begun to reach the Supreme Court.

Still, the administration has so far gone about this project with an important caveat: It has excluded the Fed.

A Calculated Putsch

Even before there was a President Trump, many legal scholars point out that the concept of independent agencies offends the Constitution’s principles of separation of powers, in which no entity is permitted to exercise a combination of executive and legislative powers, as the Fed does.

The US system of government vests all executive power in the president. Therefore, an agency that wields executive power is wielding the president’s power. McCarthy notes that the Constitution requires Senate confirmation before a superior federal officer is permitted to assume an office that exercises executive power, and the Constitution authorizes the president to fire such people at will.

Ergo, to the extent that Congress attempts to impose statutory limitations on the president’s authority to remove such officials — for example, by requiring that the president have just cause for removal — such statutes are arguably unconstitutional.

To McCarthy, this is not a legal distinction. Trump’s objection to the separation-of-powers is an unprincipled political distinction (while trying to gussy it up as law-driven).

Trump knows that Fed independence is popular and that, if it appeared that the president was taking over the Fed (by supplanting existing board members with his own loyalists), this would roil the financial markets.

Consequently, in the sundry legal cases, the Justice Department has argued that the Fed is different, and that even if the Court ultimately overrules Humphrey’s Executor, the central bank can constitutionally persist with its independent status and “for cause” removal restrictions. has made — so far, successfully — against other agencies is equally applicable to the Fed.

There is a question of selective prosecution, offers the WSJ, since the crackdown on mortgage fraud seems to be aimed only at the President’s opponents. Lisa Cook “deserves more due process than a presidential declaration of guilt on Truth Social.”

The Fed would not comment on whether there were extenuating circumstances that would have required Cook to designate a second primary residence two weeks after designating the first one.

What happens when central banks become arms of politicians? You don’t need to look far:

• Turkey under President Recep Tayyip Erdogan
• Argentina for decades
• Richard Nixon jawboned then Chair Arthur Burns to keep monetary policy easy, and the result was the 1970s great inflation.

Lisa Cook will have to explain why she should continue to sit atop the regulator of America’s largest financial institutions. Editors of the WSJ hope Trump considers what a politically malleable Fed might do when the progressive left takes charge under another president.

McCarthy ends his editorial pondering the following:

Maybe Trump is right, or maybe he is being unfair to Cook. Either way, he has not fired her at will. He is claiming to fire her for cause. That means he is adhering to Congress’s rules for the Federal Reserve, regardless of whether his motives are pure.