CNBC: Nearly 600 economists signed an open letter Tuesday warning that President Donald Trump’s attempt to fire Federal Reserve Governor Lisa Cook threatens the central bank’s independence and erodes trust in a key pillar of the U.S. financial system.
“Good economic policy requires credible monetary institutions. Credible monetary institutions, in turn, require the independence of the Federal Reserve,” they wrote in the letter addressed to Trump, members of Congress and the American public. “We stand with Governor Cook and with the institutional safeguards that have long underpinned American economic strength,” they added.
The 593 signatories include Nobel laureates Joseph Stiglitz, Claudia Goldin, Alvin Roth, Paul Milgrom and Paul Romer, as well as multiple former Federal Reserve economists.
Christina Romer and Jared Bernstein, who led the U.S. Council of Economic Advisers under Presidents Barack Obama and Joe Biden, respectively, also signed the letter.
The appeal was published just over a week after Trump became the first American president to try to remove a member of the Fed’s Board of Governors.
On Aug. 25, Trump publicly posted a letter to Cook saying she had been removed from her position after an administration official accused Cook of having committed “mortgage fraud.”
In the letter, Trump said that those allegations and a criminal investigation into them that was quickly launched by his Department of Justice, constituted “cause” for Cook’s removal.
But the economists in Tuesday’s open letter pushed back, noting that the Federal Reserve Act, which Congress passed in 1913, designed the Fed to be independent and “insulated from day-to-day politics.”
Trump has been openly pressuring members of the Federal Reserve board for months to lower borrowing costs, accusing them of holding back U.S. economic growth.
Before accusing Cook of fraud and trying to fire her over it, Trump had floated similar accusations against Federal Reserve Chair Jerome Powell over claims he had mishandled building renovations of the Fed’s historic headquarters in Washington, D.C.
“It’s possible there’s fraud involved with the $2.5 billion renovation,” Trump told reporters in July at the height of his campaign to find a reason to fire Powell. After Trump backed off Powell, he pivoted to Cook.
“The President acted within his lawful authority by removing Cook for cause, and this action augments the Federal Reserve’s credibility and accountability for both the markets and the American people,” White House spokesman Kush Desai said in response to the open letter.
The Fed appears poised to vote to lower its target interest rate by a quarter of a percent in September. But Trump and his allies want steeper cuts. The letter also notes that the attacks on Cook from Trump and his officials rest on “unproven accusations.”
