US Federal Reserve Governor Lisa Cook sued President Donald Trump on Thursday to block him from firing her, teeing up a historic legal battle over his efforts to control the central bank.
Trump alleged that Cook committed mortgage fraud, but the lawsuit argues that doesn’t give him cause to dismiss her, in part because the accusations are unproven.
While the matter is certain to reach the US Supreme Court, Trump’s attempt alone to fire Cook threatens the central bank’s long-term credibility regardless of the outcome, analysts and policymakers argued.
Markets were subdued after Trump moved to dismiss Lisa Cook, partly because investors “have no historical template for a politicized Fed,” The Wall Street Journal’s Greg Ip noted, but they should assume that “in the next nine months, the Fed will set rates according to Trump’s preferences.”
A former New York Fed president warned that Trump’s effort to control the Fed “is disruptive and the consequences of success would be dire.”
It also sends a “chilling message” to monetary policymakers, former Fed Chair Janet Yellen wrote: “express disagreement with the president’s views and you are next.”