The District of Columbia Circuit Court of Appeals rejected on Monday the appeal filed by President Trump's team against the decision of a lower court to overturn the sudden dismissal of Lisa Cook, the governor of the Federal Open Market Committee (FOMC) of the Fed. As a result, she will be able to be at the table this week where the decision to lower interest rates will be made, as expected by the markets. Also present at the meeting will be Stephen Miran, one of the economic gurus of the White House, thanks to his confirmation by the Senate last night to temporarily fill the vacancy left by another governor's unexpected resignation this summer.
The president wants to take control of the Central Bank so that the institution, which has resisted so far due to significant economic uncertainty and inflation threats, lowers interest rates immediately. The strongest attacks have been against President Jerome Powell, chosen by Trump himself in his first term in the White House, whose term ends next spring. He has pressured, insulted, threatened, and even forced an investigation blaming him for possible fraud associated with cost overruns in the Fed's headquarters renovation and for lying to the Senate. However, he has not achieved his goal.
Although he has not ruled out forcing his dismissal, he has not dared to take that step yet, as the legal framework seems to make it clear that it is entirely illegal without justified cause. Trump's team is still considering whether the accusation regarding the renovations is sufficient, and meanwhile, they have tested the limits of the courts for the application of that strategy. On August 25, unexpectedly, Trump dismissed Lisa Cook, citing a possible deception in one of her mortgage documents, as she had previously stated when applying for a home loan that it would be her primary residence, something she had done before with another property.
Cook sued and won. Not so much on the substance of the matter, which has not been addressed yet, but on procedural grounds, as the established procedures were not followed, she did not receive prior notice, nor had the opportunity to defend herself. The White House appealed, and today the Appeals Court, by a vote of 2 to 1, sided with the economist and rejected the request to expel her immediately, even on a provisional basis. Therefore, she will be able to participate this week in the monetary policy meeting. Ironically, it is widely expected that the Fed will lower interest rates for the first time since Trump won the elections.
"Before this court, the Government did not challenge that it failed to provide Lisa Cook with even a minimal process, understood as a notification of the allegations against her and a real opportunity to respond before her dismissal. The district court overturned the decision considering that it had violated the right to a fair process contained in the Fifth Amendment. That decision was correct. For that reason, and due to the many unique circumstances that differentiate this case from other presidential decisions that have been challenged, we voted against the Government's request for emergency measures," say the two judges who made the decision.
Among the many reasons cited is the fact that the case against Cook, once the circumstances were known, seems very weak. Indeed, she marked the box indicating her properties as primary residences on two different occasions, which can have tax advantages. However, she never took any action to benefit from those tax advantages. Additionally, in several additional documents submitted when she took her current position, she correctly indicated which house she resided in. Not to mention that several government ministers and their families are in a similar situation, with several contradictory forms and examples of attempts to benefit from tax advantages.
Therefore, Cook will be part of the discussion when a decision of great relevance to the country's economy is made, amid doubts about growth, very concerning job creation data, and fear of the effects of tariffs. A session loaded with anomalous exogenous elements. A 0.25 point rate cut is expected, from the current level of 4-4.50%. But in addition to that, the markets will be closely watching the projection for the coming months. And there, a controversial figure will play a significant role.
The US Senate also approved on Monday the appointment of Stephen Miran, one of Trump's key economists, to temporarily fill the vacancy left by Adriana Kugler, who resigned prematurely this summer, citing pressure from the White House, which has launched an unprecedented campaign since the institution's creation. The Senate approved by 48 votes to 47, just two weeks after receiving his nomination. The second-fastest confirmation in over 30 years, evidence of the significant interest in changing dynamics within the board of governors.
The decision is particularly striking because Miran has not resigned from his White House position but has taken a leave of absence and stated his intention to return to his position as soon as the president chooses someone permanently, a process linked to the appointment of the next Federal Reserve president. Perhaps Miran will be confirmed to stay, but the important aspect is the doubts about his independence, which led one Republican senator to vote against him.
Dozens of economists and lawmakers have denounced the situation, considering not only that it questions the independence that has been one of the pillars of the system for decades. But also the fact that the White House does not even try to conceal it. Miran himself, when Biden was president, strongly criticized Federal Reserve officials who move to positions in the executive branch and vice versa, referring to economist Janet Yellen, who went from Fed chair to Treasury Secretary under the Democrats. "It is impossible" to think that someone "can go from being a political agent to being politically neutral just to get a promotion. That's not how humans work," he said in some of his social media posts back then.
Miran's participation in this week's meeting is unlikely to change the outcome, as the 0.25 point cut is expected. But apart from disagreeing with the decision (as he wants a much more pronounced cut), due to his specific functions, he can present an economic projection that may influence market expectations regarding the short-term monetary policy trajectory.