The Federal Reserve’s goal is 2% inflation. Think about that — it is the monetary policy of the most powerful financial institution in the United States (arguably the world) to rob and tax people by devaluing the dollar, year after year, as a matter of course.
So, forgive me if I’m not terribly incensed about President Donald Trump firing (or at least attempting to fire) Lisa Cook, a Joe Biden-appointed governor and voting member of the Federal Reserve Board.
That board, as well as the broader system of Fed economists, is dominated by Democrats. Democrats like Cook, who in 2020 declared that Trump is “definitely a fascist.” Spare me the outrage that Trump is the one politicizing the Federal Reserve, or that “democracy” is threatened by the guy who was elected exercising authority over people who weren’t.
For another thing, far from some sort of imperial decree, Trump is firing Cook for cause in accordance with congressional statute that was upheld by the 1935 Supreme Court case Humphrey’s Executor v. United States. Cook allegedly committed mortgage fraud. Trump has also resisted the urge to try to fire Federal Reserve Chairman Jerome Powell because Powell has been too slow (in Trump’s estimation) to lower interest rates. His term ends next May anyway.
However, the real issue is far bigger than a statute — it’s the Constitution.
Former federal prosecutor Andrew McCarthy certainly has his issues with particular instances of Trump’s exercise of presidential power, but he argues the constitutional case on behalf of the executive branch:
As many Trump supporters point out (and have for years before Trump came along), the concept of independent agencies offends the Constitution’s separation of powers principles, in which no entity is permitted to exercise a combination of executive and legislative powers, as the Fed does.
Our system vests all executive power in the president, and therefore an agency that wields executive power is wielding the president’s power. While the Constitution requires Senate confirmation before a superior federal officer is permitted to assume an office that exercises executive power, 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.
The 1913 Federal Reserve Act created the Fed, including a provision for governors to serve 14-year terms “unless sooner removed for cause by the President.” The Federal Reserve has grown to become the most powerful independent agency, and it’s not even close. That’s the real reason Trump’s firing has so thoroughly ruffled feathers.
Over the last century or so, it has become fashionable for Congress to delegate much of its constitutional authority to the executive branch, the judiciary, or “independent” agencies. It’s far easier for members of Congress to rail against the way “they” do things without facing real accountability themselves.
Presidents are almost always eager to acquire more authority, and all politicians appreciate the facade of “independent” agencies that can expand government without the cumbersome requirement of being elected to do so.
The Supreme Court has upheld Trump’s firings of other members of independent agencies, though it singled out the Fed for different considerations. This spring, the Court’s unsigned opinion said, “The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”
Cook’s firing will go to court, and the resulting ruling(s) may lead to much bigger changes. There will be consequences, both foreseen and unforeseen, if Trump ultimately succeeds in undermining the Fed’s independence (though Cook’s firing is not that — unless it’s a message to “cut rates or else”). Higher inflation could be one. A future Democrat president running roughshod over the economy could be another. In short, an “independent” Federal Reserve may be bad, but one adhering to the short-term political whims of a president may be worse.
All that said, Trump appears to be at least trying to abide by federal statute in firing Cook, even when there’s a much bigger argument to be made about the Fed’s status under the Constitution. This bears watching.
