An attempt by the president to remove a Federal Reserve governor threatens long-standing protections of central bank independence. If the president can fire a governor over alleged past mortgage application issues, similar removals could become routine. Evercore ISI analysts warned it could create a precedent granting the president broad discretion to decide what qualifies as 'for cause' removal. A politicized board majority could quickly replace presidents of Federal Reserve banks and discard procedural guardrails. Uncertainty surrounds the governor's current status, access to office and participation in meetings. A court stay is likely as legal teams and the Fed's lawyers litigate the dispute.
Even though it only concerns an attempt to fire one governor out of seven, for believers in central bank independence, the litigation that results from this is for all the marbles. Between the lines: If the president can fire Cook for the allegations involving some old mortgage applications that she has thus far had no legal recourse to address, he can fire pretty much anyone.
It could, wrote Evercore ISI's Krishna Guha and Marco Casiraghi, establish a precedent that the president "has substantial discretion to determine what meets the 'for cause' standard for removal in the future." If Trump succeeds, it will smooth the path for him to install a majority of appointees atop the Fed board sooner rather than later. A majority on the board could, in turn, seek to replace presidents of Federal Reserve banks
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