Background
On October 1, we learned that Lisa Cook will keep her job for the time being, at least until the Supreme Court hears arguments in January as it weighs whether President Trump can fire her.
“Supreme Court Allows Lisa Cook to Keep Her Job for Now” | WSJ,
https://www.wsj.com/us-news/law/supreme-court-lisa-cook-update-9f954366
The SCOTUS docket reads:
The application for stay presented to The Chief Justice and by him referred to the Court is deferred pending oral argument in January 2026. The Clerk is directed to establish a briefing schedule for amici curiae and any supplemental briefs responding to amici.
The Hill reported the details regarding the initial firing on August 26 in “5 questions surrounding ousted Fed governor Lisa Cook” | The Hill, https://thehill.com/homenews/5471841-trump-fires-fed-board-member/.
The Trump administration’s “Reply in Support of Application for Stay,” arguing the legality of the president’s attempt to fire Lisa Cook for cause, can be found here: https://www.supremecourt.gov/DocketPDF/25/25A312/378025/20250926150333128_25A312%20Cook%20Reply.pdf.
An Extraordinary Amicus Brief
Our focus today, however, is not on the particulars of the sequence of events. Instead, it is on the extraordinary amicus brief submitted on September 25 on behalf of Cook by an assemblage of esteemed experts on the Federal Reserve.
The opening paragraph of the brief notes the amici and introduces their argument regarding the essential importance of the Fed’s independence from political interference:
Amici are former United States Treasury Secretaries, Federal Reserve Board Chairs and Governors, Chairs of the Council of Economic Advisers, and other leading economists with substantial expertise with the Federal Reserve System (“Federal Reserve” or “Fed”) and national economic policymaking.1 Amici’s own experiences and scholarship give them firsthand insight into the essential role of Fed independence in ensuring national monetary policy that fosters long-term economic health and a stable economy. In this brief, amici explain why the Federal Reserve’s independence and the public’s perception of that independence are important for economic performance, including achieving the goals Congress has set for the Federal Reserve of stable prices, maximum employment, and moderate long-term interest rates. Because allowing the removal of Governor Lisa D. Cook while the challenge to her removal is pending would threaten that independence and erode public confidence in the Fed, amici urge the Court to deny the government’s request for a stay. Amici includes the following:
The full list of the brief’s contributors and the positions they have held begins on page one of the brief. For brevity, I will list their names in alphabetical order:
Ben S. Bernanke
Jared Bernstein
John H. Cochrane
Jason Furman
Timothy F. Geithner
Phil Gramm
Alan Greenspan
Glenn Hubbard
Jacob J. Lew
N. Gregory Mankiw
Henry M. Paulson
Kenneth Rogoff
Christina Romer
Cecilia Rouse
Robert E. Rubin
Lawrence H. Summers
Daniel Tarullo
Janet Yellen
You may find the full document at the following link, and I encourage you to take the time to read it:
“No. 25A312, BRIEF OF AMICI CURIAE FORMER TREASURY SECRETARIES, FEDERAL RESERVE BOARD CHAIRS AND GOVERNORS, COUNCIL OF ECONOMIC ADVISERS CHAIRS, AND ECONOMISTS IN OPPOSITION TO THE APPLICATION TO STAY THE PRELIMINARY INJUNCTION,”
https://www.supremecourt.gov/DocketPDF/25/25A312/376844/20250925093950081_25A312%20-%20Amicus%20Br.%20in%20Opposition%20to%20Application.pdf
I have read the entire brief twice. It is filled with citations and curated discussion of the issues. All signers have publicly demonstrated their willingness to disagree with President Trump and therefore knowingly risk any retribution from him. The assembled dignitaries are Democrats, independents, and Republicans. The brief includes citations from former US presidents. It is a unique document in American history. In the Fed’s entire 112-year history, never has there been an attempted firing of a Fed Governor for a disputed allegation prior to any due process that would determine if the allegation had any substance.
In the brief there is specific citation of the history when Congress rejected any “at will” firing or replacement status of a Fed Governor. Here’s the relevant excerpt from the amicus brief. It starts on page 18. I have bolded a sentence within the excerpt purposefully.
The modern version of the Federal Reserve was largely created in the 1930s when Congress overhauled its governance structure through a series of new laws. See Act of June 16, 1933, Pub. L. No. 73-66, 48 Stat. 162 (1933); Banking Act of 1935, Pub. L. No. 74-305, 49 Stat. 684 (1935). In so doing, Congress expressly rejected a proposal that would have vested greater control over the Federal Reserve and U.S. monetary policy in the President—by, e.g., providing that members of the Federal Reserve Board of Governors and other members of the Federal Open Market Committee (“FOMC”) could be fired by the President at will. That proposal met with alarm in the Senate because it would subject monetary policy to more direct political control. As a result, the Senate significantly amended the original legislation to include staggered, 14-year terms for the Federal Reserve Board of Governors. And, in a direct repudiation of the House bill, the Senate’s version mandated that members of the Board of Governors could be removed only “for cause.” The Senate bill also adjusted FOMC membership such that a President serving two terms could at most appoint four members of the Committee (assuming the Board Governors all serve their full terms). That Senate version became the final Banking Act of 1935.
Kotok view
First, I don’t like a premature action that denies any person due process. Anyone may allege anything — that doesn’t make the allegation true. Anyone accused of anything is entitled to a hearing and a judicial process. That protection is a fundamental American protection of our citizens and our nation. In the case of Lisa Cook, a document in which she declared her Atlanta property a “vacation home,” as reported by Reuters, certainly constitutes evidence that there was no intentional fraud committed.
Second, the implication for the US dollar and the application of monetary policy by this method of firing a Fed Governor is a high-risk gambit. If it succeeds, it means market agents around the world will revise their pricing estimates of anything and everything related to the finances of the United States. We already see the results in the worldwide pricing of credit default swaps (CDS are a form of credit insurance protection) on the sovereign debt of the United States. We already see it the weakness of the US dollar and the changes in the price of gold.
Last, the unique status of the United States as the world’s reserve currency is being threatened when politics in its ugliest form is inserted into monetary economics. In my opinion, the White House is now playing with fire, and the risk they run is torching the world’s monetary standard and the currency of our country.
Markets focused on this item are already moving. The decision of the Supreme Court will have enormous consequences. If they stay the Trump firing and support a due process, I believe markets will rally. If they don’t, I believe that market agents will not be happy with the resulting market adjustment.
This now comes down to SCOTUS’s decision and the clarity of any opinion rendered.
Previous Related Commentaries
“The Lisa Cook Affair” | Kotok Report, https://kotokreport.com/the-lisa-cook-affair/
“The Fed And Bill Pulte” | Kotok Report, https://kotokreport.com/the-fed-and-bill-pulte/
