Federal Reserve Governor Lisa Cook’s lawyer on Wednesday offered a detailed rebuttal to the accusations of mortgage fraud that US President Donald Trump asserts provide cause to fire her, saying they rely “on untried and unproven allegations of criminal wrongdoing.”
“Governor Cook has never committed mortgage fraud or any intentional wrongdoing, and there is no legally cognizable cause for removing her from the Federal Reserve Board,” Cook’s attorney Abbe David Lowell said in a letter to the White House.
Trump has been trying to sack Cook for more than a year in an unprecedented effort widely seen as part of a broader assault on the US central bank’s independence. It’s the first time a US president has attempted to remove a central banker since the institution’s founding more than a century ago. If he succeeded in removing Cook, Trump, who has long pushed for lower interest rates, would be able to install a replacement sympathetic to his view.
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Mortgage fraud allegations against Cook, the first Black woman to serve as a Fed governor, were first leveled a year ago by Federal Housing Finance Agency Director William Pulte. The accusations were promptly amplified by Trump, who announced on social media that he was dismissing her over them.
Cook denied any wrongdoing, calling the allegations a pretext to remove her for monetary policy differences, and she sued to keep her job.
In June, the US Supreme Court refused to allow her removal in a 5-4 ruling that definitively protects Fed officials from being fired at will by a president. It has since returned the case to the lower court.
The decision left open the question of whether there was any wrongdoing that could serve as cause for termination, provided Cook was given the opportunity to defend herself.
FED INDEPENDENCE
Earlier this month, the White House took a fresh run at Trump’s firing effort, telling Cook in a letter dated August 5 that the president was “considering” removing her from her role “due to there being sufficient reason to believe that you made false statements on one or more mortgage agreements.”
The letter told Cook that “this is your chance to respond” and set a deadline of Wednesday.
“The Letter describes two acts by Governor Cook that, ‘taken together,’ supposedly constitute grounds for her removal,” Lowell’s response to the White House said. “But neither of those acts shows intentional wrongdoing or amounts to a crime, and neither constitutes ’cause’ under the Federal Reserve Act.”
Lowell said any mistakes on Cook’s mortgage applications indicating she was seeking a primary residence mortgage for a second home were inadvertent and were partly the result of errors on forms prepared by the lender.
“The pre-office conduct at issue, all of which took place in Governor Cook’s private capacity, was not fraudulent or criminal in any form, nor a basis for the President attempting to remove her,” Lowell said.
Lowell also surfaced news reports that Trump and other members of his administration had done essentially the same thing as Cook at various points in the past.
“Surely the President does not believe himself ‘unfit for office’ because he signed these contradictory ‘primary’ mortgage documents,” Lowell said, adding: “The conduct of others in this Administration further undercuts any notion that the allegations against Governor Cook are grounds for removal.”
GOVERNORS APPOINTED BY BIDEN
Fed Chairman Kevin Warsh has not addressed Cook’s case since taking the reins at the Fed in May. But he has publicly echoed past Fed chiefs and the broader economic consensus that any loss of political independence for the central bank’s monetary policy decision-making would imperil its inflation-fighting credibility.
Trump repeatedly threatened to fire Warsh’s predecessor, Jerome Powell, for not lowering interest rates, and his Department of Justice pursued a criminal investigation of Powell over building renovations that a federal judge found to be a thinly disguised effort to pressure him into resigning.
Once Powell’s term as Fed chief ended and Warsh began his, the Republican president redirected his criticisms at other Fed board members, a majority of whom, including Cook, were appointed by Trump’s Democratic predecessor, Joe Biden.
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In a criminal referral to the Justice Department a year ago, Pulte suggested Cook had committed bank fraud punishable by 30 years in prison because mortgage documents appeared to simultaneously claim more than one home as her primary residence. The referral was one of several Pulte made containing similar allegations against other targets of Trump’s disfavor.
There has been no indication a criminal investigation into Cook is moving forward. A Reuters report last year showed Cook had indicated to a lender that one of the homes at issue was a vacation property, opens new tab. Reuters also reported the local tax authority in Michigan said Cook had not broken rules for tax breaks on a home there that she declared as her primary residence.
The letter this month to Cook, signed by White House Deputy Chief of Staff Dan Scavino, said that even if there wasn’t fraud, Cook’s misstatements constitute negligence that calls into question her trustworthiness as a Fed governor.
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