Washington (AFP) – Nearly 600 economists have signed an open letter expressing support for Federal Reserve Governor Lisa Cook and US central bank independence, as Cook battles President Donald Trump’s attempt to fire her. “Good economic policy requires credible monetary institutions,” said the letter, whose 593 signatories as of Tuesday include Nobel laureates and former US government officials. “Credible monetary institutions, in turn, require the independence of the Federal Reserve,” the letter added.
The support came after Trump said on his Truth Social platform last week that he was immediately removing Cook over claims of mortgage fraud. Cook, the first Black woman to serve on the Fed’s board, is challenging her ouster in court. On Tuesday, her lawyers pushed back on Trump’s justification in firing her and argued in a filing that she was not given a chance to meaningfully contest allegations against her.
The open letter signed by economists noted that: “Recent public statements about Governor Cook — including threats of removal and a claim that she has been fired — have arrived alongside unproven accusations.” “This approach threatens the fundamental principle of central bank independence,” the letter cautioned. As of Tuesday, signatories included Nobel laureates Claudia Goldin, Joseph Stiglitz, and Paul Romer. Also on the list were Christina Romer, who served as chair of the Council of Economic Advisers under former president Barack Obama, and Jared Bernstein, who held the post under Joe Biden.
The letter was organized by Tatyana Deryugina, an associate professor of finance at the University of Illinois Urbana-Champaign. Among the allegations Cook faces are that she claimed two primary residences on mortgage documents in 2021 — one in Michigan and another in Georgia. A primary residence typically attracts better mortgage terms for a loan. But although Trump pointed to a criminal referral in announcing Cook’s removal, she has not been charged with a crime. The alleged incidents also occurred before she took office as a Fed governor in 2022.
In their Tuesday filing, Cook’s lawyers argued that the referral letter’s language signaled charges against Cook “were nothing more than a set of cherry-picked, cut-and-paste allegations.” They charged that the aim was “to try to give the President political cover to remove a (Fed) Board member with whom he has policy disagreements.” They also warned that allowing Trump to keep Cook out of her office even temporarily “would amount to a crack in the foundation” of the Fed’s near-century of independence.
The Supreme Court suggested in a recent ruling that Fed officials can only be removed for “cause,” which could be interpreted to mean malfeasance or dereliction of duty. The central bank has faced growing pressure in recent months, with Trump urging for lower interest rates. But policymakers have been cautious in cutting rates as they monitor the effects of Trump’s tariffs on the economy.
© 2024 AFP
