It’s a curious complaint, challenging Federal Reserve Governor Lisa Cook’s purported firing by President Trump. While there is more than enough to substantiate her position that she engaged in no mortgage fraud, the gravamen of the complaint isn’t that she’s innocent and falsely accused, but rather that regardless of the accusation, it would not constitute a basis for her removal from the Fed board of governors.

This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would the first of its kind in the Board’s history. It would subvert the Federal Reserve Act (“FRA”), which explicitly requires a showing of “cause” for a Governor’s removal, which an unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not.

Most of us want to know whether the allegation of mortgage fraud is true or not, whether there is some explanation that mitigates the accusation of wrong doing. What this complaint seeks to do is challenge the meaning of “for cause” rather than than defend against the accusation.

13. One of the statutory devices used to maintain this crucial independence of the Federal Reserve is a “for cause” removal protection for Board Governors. The FRA expressly provides that

Upon the expiration of the term of any appointive member of the Federal Reserve Board in office on August 23, 1935, the President shall fix the term of the successor to such member at not to exceed fourteen years, as designated by the President at the time of nomination, but in such manner as to provide for the expiration of the term of not more than one member in any two-year period, and thereafter each member shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.

12 U.S.C. § 242 (emphasis added).

14. The “for cause” removal protection guaranteed by the FRA, which has been the bulwark of the Federal Reserve’s independence for the past century, prevents the President from firing a Federal Reserve Board governor except “for cause,” meaning instances of inefficiency, neglect of duty, malfeasance in office, or comparable misconduct.

The key phrase at issue is “malfeasance in office.” If there was malfeasance, which is sufficiently denied to later argue her innocence of wrongdoing should the primary thrust of the complaint not prevail, it would nonetheless not suffice for Trump to discharge a fed governor “for cause” as it occurred before her term of office and had nothing to do with her performance of her functions as a fed governor.

The Supreme Court has not defined “inefficiency, neglect of duty, or malfeasance in office” (emphasis added), but historical use of these terms indicates that (a) “‘neglect of duty’ meant failing to perform one’s duties in a way that caused specific harm to the entity . . . to which the duties were owed”; (b) “malfeasance” connoted the commission of an unlawful act in the performance of one’s official duties; and (c) the “inefficiency” standard targets concerns about
“waste, especially . . . result[ing] from self-interested dealing,” and was designed to “ensur[e] that . . . officers did their jobs competently and honestly.” Lev Menand and Jane Manners, The Three Permissions, 121 Colum. L. Rev. 1, 29, 48–49 (2021) (tracing the historical meaning of the term through English common law and early American law).

The issue raised, the scope of “for cause,” is not merely one of legal interest, but one that is particularly concerning at a time when the independence of the Federal Reserve, clearly a board created to be independent of the president and outside the realm of partisan politics, is at extreme risk. There is little doubt that this isn’t about Lisa Cook, per se, but about Trump being able to get rid of a governor in order to seize control of the Federal Reserve by installing his minion in her place in order to get the votes to lower the interest rate and create the appearance that the economy is doing swell under his economic brilliance.

From a legal standpoint, this strategy is understandable. The scope of “for cause” removal of a Fed governor has never before been defined as no president has ever tried to remove a governor before. From a public relations standpoint, however, it’s unsatisfying. Having been accused of impropriety, even if it’s ironically similar to what Trump has already been found to do along with the litany of criminal accusations against him, there is a desire to know whether she did it or not. That it’s “technically” not a basis for removal is not what the public wants to hear.

Then again, very few of us are so pure as to be able to overcome the government’s ability to find, or devise, a criminal act if it really wants a reason to attack a person. Three felonies a day, and all. And curiously, this concern for the “appearance of impropriety” doesn’t seem to extend to the president, whose laundry list of wrongs makes a mere three felonies look like the stuff of a slacker. Nonetheless, the focus is on Lisa Cook at the moment, and challenging the scope of “for cause” may not feel sufficient to sate the MAGA blood lust, but addresses a legal question that needs to be answered.