President Trump has claimed that he fired Federal Reserve governor Lisa Cook. Cook has said she will continue in her position and has refused to resign. Can Trump fire her?

The question does not admit of an easy answer. But there are two diversions from the question at hand.

First, there is the issue of so-called independent agencies, and whether the president has the power to fire their leadership. Authorizing statutes for agencies such as the Federal Trade Commission, Federal Communications Commission, and National Labor Relations Board contain language insulating their presidentially appointed leadership from removal. This practice was upheld by the Supreme Court in the 1935 case Humphrey’s Executor.

For years, conservatives have held that Humphrey’s Executor was wrongly decided. Trump has tried to force the issue by firing NLRB and FTC members, with lawsuits currently working their way through the courts to decide their legality.

By saying he has fired Cook, Trump is not doing that. He is claiming that Cook is being fired for cause, which is permitted by the Federal Reserve Act. The exact wording from the law is that “each member [of the Board of Governors] shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.”

In its cases urging courts to overrule Humphrey’s Executor, the administration has repeatedly argued that the Federal Reserve is different from the so-called independent agencies. It is still able to maintain that position after announcing Cook’s firing.

Second, there is the issue of central bank independence. It is important, for the purpose of keeping inflation low and ensuring monetary stability, that central banks not be subject to the momentary political imperatives. History says that when countries switch to independent central banks, they tend to see inflation stabilize.

That said, obviously, central banks make mistakes, and we will always criticize the Fed when it errs. The Fed is prone to groupthink and is far from immune to the knowledge problem inherent in setting prices, i.e., interest rates. There is also a role for Congress in creating a rules-based monetary policy that limits the Fed’s discretion.

Regarding Cook, the market clearly doesn’t think Trump’s move against her threatens the Fed’s independence. The S&P 500 closed slightly higher yesterday. A threat to central bank independence would look like Trump firing Chairman Jerome Powell not for cause, and markets would immediately react harshly to such an event.

Instead, Trump is seeking to use a power of the president under the Federal Reserve Act. Now, is he justified in doing so?

The allegation against Cook is that she committed mortgage fraud by claiming that two of her residences were her primary residence. A primary residence is eligible for a lower mortgage rate. The allegation was made by Bill Pulte, the director of the Federal Housing Finance Agency.

The issue is that Pulte is a Trump loyalist and has made similar allegations against Senator Adam Schiff and New York Attorney General Letitia James, both Trump enemies. It appears that the president is using the FHFA to scour the financial records of his political opponents. That doesn’t mean, though, that a serious matter hasn’t been uncovered here.

Cook was poorly qualified for the Fed in the first place. Biden wanted her to be the first black woman on the board. She is an accomplished economist, but she had no financial industry experience, her research isn’t about monetary policy, and some of it has replication issues.

But Trump isn’t claiming to fire her because she is unqualified (which is smart for his own interests, as his nominee, Stephen Miran, is even less qualified than Cook). He is claiming to fire her for cause for mortgage fraud. To know whether that is justified, we’ll need to know more.