Donald Trump is using a fabricated mortgage pretext to seize the Federal Reserve.
Last June the Supreme Court, in a Roberts opinion, held that Federal Reserve Governor Lisa Cook is “entitled to notice and some opportunity to respond” before the President may remove her. The administration lost that procedural round. So it is now, with meticulous procedural compliance, walking back toward the same conclusion — under a different caption.
The statute does the doctrinal work. Section 10 of the Federal Reserve Act, codified at 12 U.S.C. § 242, fixes governors’ terms at fourteen years and provides that the President “may remove a member of the Board of Governors … only for cause upon notice and an opportunity for a hearing.” The “for cause” language is the operative phrase, and it is the one the administration cannot meet. The Supreme Court has not formally defined its outer reaches, but the tradition running through Humphrey’s Executor v. United States, 295 U.S. 602 (1935), and the historical practice of two Federal Reserve chairs who publicly sparred with sitting presidents, has treated the phrase as covering categories akin to “inefficiency, neglect of duty, or malfeasance in office.” That is the doctrinal frame the Roberts opinion carried forward in June.
On August 5 the White House wrote Governor Cook to say the President “is considering removing” her. The accusation is that in 2021 she obtained two mortgages, weeks apart, and signed both as her primary residence. To test whether this is cause, give the administration’s best version its strongest form. A Federal Reserve governor certifies a federal mortgage application under penalty. An alleged misstatement on that application — even an inadvertent one — engages the integrity and public trust the office requires. A president who possesses the contemporaneous paper and believes the certification was false has, on the surface, a colorable cause. That is the steel-man the government’s working-bar lawyers have at hand. It deserves a fair hearing.
The hearing it gets is unkind. Governor Cook replied through counsel that one property was a vacation home, that the lender understood it as a vacation home, and that the slip was an “inadvertent oversight.” Take the steel-man on its own terms: each of its predicate facts fails. A designation both parties to the transaction understood at the time it was made is not misrepresentation in any sense a federal regulator has recognized. Inadvertence conceded by the accused is not malfeasance. And the most striking fact in Cook’s reply — the one the White House would prefer the press to ignore — is that the President himself, in 1993, took out “primary residence” mortgages on two Florida properties within seven weeks of each other. The Treasury Secretary and the Attorney General have done the same. None of these gentlemen have received an August 5 letter. Disparate treatment of identically situated officials is the textbook tell of pretext. The steel-man survives in the abstract; it dies on the documentary record.
The pretext’s authorship is its own indictment. The mortgage paperwork was unearthed by Bill Pulte, the administration’s freelance inquisitor, a man whose notion of due process is a Truth Social post. When the executive branch outsources a personnel matter at the central bank to a partisan with a smartphone, the merits of the underlying accusation can be safely assumed to be zero.
Chief Justice Roberts’s June opinion stressed, more than once, the importance of Federal Reserve independence. The message, plainly, was: try this once with the procedural garnish the statute requires, and we will see you in September. The President read the warning and proceeded anyway. He is not a man who backs down from a fight on principle; he is a man who backs down from a fight only when it stops paying, and a fight with the Fed still pays.
That is the real stake here. The legal technicalities are scenery. The Federal Reserve exists to take the worst kind of politics — the politics of the business cycle — out of the hands of the politicians who run the business cycle. Every president since Burns has griped about Fed policy in public. None since Nixon has tried to fire a governor over a mortgage form. That line was crossed last year. It is being crossed again now.
A small housekeeping note. The Fed’s inspector general has been sitting on a report about the central bank’s building renovations, which the administration would like to spin into a criminal referral against the former Chair. Release it. Whatever the report says, the country would benefit from hearing it.