The topic of discussion for this Constitution Monday is the power of the President of the United States to fire appointed members of the Executive Branch. This includes the power to fire members of the Federal Reserve’s Board of Governors (Fed) for “cause.”
Recently,
William Pulte, director of the Federal Housing Finance Agency referred Lisa
Cook, a member of the Federal Reserve’s Board of Governors, to the Department
of Justice for allegedly committing mortgage fraud “by lying about her principal
place of residence for purposes of securing more favorable interest rates – and
then failed to report her rental income from the properties, to boot.”
Since
Cook was hired to enforce mortgage laws and prevent mortgage fraud, President
Donald Trump suggested that Cook should resign from the Fed and threatened to
fire her if she did not resign. She did not resign, and Trump fired her – the first
POTUS to ever try to “fire a fed governor for cause.”
Trump’s
detractors immediate criticized him for violating “institutional norms,” but
Josh Hammer claims that Trump “acted appropriately” and “fully within his
constitutional and statutorily delegated authority … -- whether for ‘cause’ or
not.” He suggests that we “return to first principles.”
The
modern administrative state operates as a fourth branch of government, unmoored
from direct political accountability….
Article
II of the Constitution vests the entirety of the “executive power” in the hands
of the president of the United States….
…
Members of the Fed’s board of governors are appointed by the president and
confirmed by the Senate. They exercise significant policymaking authority,
affecting the economy, interest rates and the value of the dollar. That is
executive power under any reasonable understanding of the term.
Even
more to the point, if the Fed is not part of the executive branch such that the
president is able to wield plenary removal power, then where exactly is it?
Surely, the Fed is not part of Congress or the judiciary….
Ultimately,
Trump must be able to fire members of the Fed’s board of the governors – or else
the Fed is structured in an unconstitutional manner. There is no tenable middle
ground here.
What
about the relevant authorizing statute? The Federal Reserve Act of 1913, which
brought the Fed into existence, sets staggered 14-year terms for governors and
doesn’t expressly provide for at-will removal. But it also doesn’t specify what
constitutes a legitimate “cause” for a governor’s removal. Congress could have
specified that “cause” requires, as Cook’s counsel Abbe Lowell now argues, a
Fed governor to first be indicted or convicted of a crime. But Congress didn’t
specify that.
“Cause”
absent such specification is an inherently subjective criterion. And what could
be more legitimate of a cause for removing a governor of the nation’s central
bank – which is, among other things, the lender of last resort to the country’s
financial institutions – than the alleged defrauding of financial institutions?
The allegations raise serious concerns about the legitimacy of the Fed. It is
in the national interest to preserve that legitimacy.
Let’s
also not forget: Term length does not equal tenure protection. Saying governors
serve “for 14 years” is not the same as saying they cannot be removed within
that time period. Courts have made this distinction plenty of times before –
consider, for instance, the (legitimate) 2017 dismissal of James Comey, who was
less than four years into what was to have been a 10-year tenure as FBI
director.
The
lawsuits will come anyway. So be it. Those fights are worth having. Trump’s
first term was plagued by internal sabotage from bureaucrats and agency
officers who fancied themselves a coequal branch of government. It is
imperative that Trump’s second term not repeat that tragic mistake. And the
first for-cause removal of a sitting Fed governor sends an unmistakable
message: The American people, through their elected president, will once again
take the reins of government.