Over-Cooked: The Establishment’s Fragile Case for Blocking Trump’s Removal of Lisa Cook
A bipartisan who’s who of the economic establishment has fired a fusillade of foolscap at the Supreme Court, insisting that President Trump must not be allowed to remove Fed Governor Lisa Cook. The amici brief they filed last week reads like a high-toned civics lesson: the Federal Reserve must be protected from political interference lest inflation expectations come unmoored, credibility collapse, and the economy careen into chaos.
This is serious company. The signatures include every living former Fed chair—Greenspan, Bernanke, Yellen—plus six former Treasury secretaries, a platoon of Council of Economic Advisers veterans, and academics from Hoover to Harvard. The legal filing was prepared by Covington & Burling, a firm Trump has taken swipes at before. By sheer pedigree, it is meant to impress.
And yet the argument creaks. The brief rests on two claims that it treats as interchangeable. The first is well-established: central banks that lack structural independence tend to deliver higher and more volatile inflation. Politicians tend to want easy money to lower borrowing costs for their constituents, accelerate economic growth, pump up employment, and reduce the cost of deficit spending.
The second claim, however, is dubious. The high priests of the economics profession argue that even a perception of reduced independence will immediately unanchor inflation expectations and push rates higher. The brief provides no evidence or even an attempt at an argument to back this up. The academic literature the brief cites measures institutional arrangements over decades. It does not track what happens in financial markets when one of the twelve Federal Open Market Committee (FOMC) members is removed during litigation.
The Anchor of Inflation Isn’t So Fragile
Indeed, the brief undercuts its own alarmism. It notes that “long-run inflation expectations stayed anchored around 2 percent” during the recent bout of inflation—the worst in 40 years—precisely because markets trusted the Fed’s independence. If expectations can remain steady through a nine percent CPI brought about by a Fed that kept interest rates pegged near zero even while the Biden administration unleashed massive fiscal stimulus on an economy well into the post-pandemic recovery, why would they unravel over the possible exit of Governor Cook, who casts one vote among 12?
Inflation expectations are not so easily rattled. They took a pandemic, a war, and a historic inflation shock in stride. Yet the brief would have us believe the public or investors might panic over Cook’s removal. That is asking the justices to accept a contradiction: markets are sophisticated enough to anchor expectations through major economic disruptions, but fragile enough to lose confidence at the whiff of political meddling.
If President Trump were arguing that he can remove central bankers on a whim or over policy disagreements, this would be more persuasive. But Trump is not claiming he has authority to control the central bank. He’s abiding by the statute and removing Cook for cause. Why would that cause people to lose faith in the independence of the Fed, much less do so in a way that unanchors inflation expectations?
Worse, the “perception” argument is one-sided. Cook has been credibly accused of mortgage shenanigans by the president. Her continued presence on the Board could itself damage the Fed’s credibility. The brief assumes removal would be the reputational blow, but never contemplates the reputational cost of retention. In the real world, both outcomes carry risks.
There’s an even stronger argument that the poobahs of central banking ignore, which is the damage done to the Fed credibility by the lack of accountability for the mismanagement of monetary policy during Biden’s presidency. Not a single Fed governor resigned or faced removal after overseeing the worst inflation in generations. Witnessing the Fed continue under the same management that bungled the pandemic recovery likely poses a more serious threat of unanchoring inflation expectations than the removal of a single Fed governor.
The Case Against Inflation Expectations Theory
There is also the small matter of evidence. The amici lean heavily on the idea that inflation expectations materially influence actual inflation. That is a claim that has a lot of adherents within the monetary side of the economic profession, but the actual evidence for it is weak. Even within the Fed, there are doubts. A 2021 paper by Jeremy Rudd, a senior Board economist, asked pointedly: Why do we think inflation expectations matter for inflation? His answer: “this belief rests on extremely shaky foundations.”
Rudd points out that economic models often assume, rather than prove, that expectations drive inflation. Empirical studies tend to smuggle in lagged inflation as a proxy, which means they may just be rediscovering the obvious—past inflation predicts current inflation. And despite endless survey data and market measures, expectations often fail to move in lockstep with actual inflation outcomes. In other words, the evidence indicates that it is not forward looking expectations that might influence inflation but the recollection of recently experienced inflation that matters.
Most strikingly, Rudd notes the long-run stability of inflation trends even when short-term expectations or survey results gyrate. Inflation didn’t spiral higher in the 2010s when five-year breakevens dipped below target. It didn’t spiral down in the late 1970s when inflation surveys screamed higher. And as the amici themselves acknowledge, expectations stayed anchored through the 2021-22 inflation surge. The link between what people say they expect and what inflation actually does is far weaker than the brief admits.
Fed Independence Does Not Depend on Cook Keeping Her Job
None of this is to deny that Fed independence matters. It does. Congress deliberately gave governors 14-year staggered terms, removal protections, required Senate confirmation of nominees, and budget autonomy to insulate monetary policy from election-cycle temptations. Structural independence is worth defending. But that is not the same as claiming that a single personnel dispute, even one freighted with political symbolism, would instantly shake the foundations of U.S. monetary credibility.
By inflating their claim, the amici weaken their case. They risk looking like an establishment chorus warning of doom to protect one of their own. A narrower, humbler argument—that the Fed’s independence is grounded in statute and should not be casually eroded—would be stronger.
Markets will not crumble if the Supreme Court tells Lisa Cook to take a break from the Fed while her case against the Trump administration snakes its way through the courts. Inflation expectations will not spiral. The dollar will not collapse. What might erode confidence, however, is the spectacle of the Fed’s defenders implausibly insisting that its legitimacy is so fragile it cannot withstand her removal.
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