The U.S. Department of Justice stated to the Supreme Court: The market will not be intimidated by Trump firing Cook

The U.S. Department of Justice argued in a document submitted to the Supreme Court on Friday that President Trump’s dismissal of Federal Reserve Governor Lisa Cook due to alleged misconduct would not trigger a "financial market disaster."

Justice Department advisor D. John Sauer urged the Supreme Court to allow Trump's dismissal decision to take effect while Cook's lawsuit against the president is still ongoing.

Sauer stated that Trump has suffered "irreparable harm" due to a lower court's order temporarily reinstating Cook. Acknowledging the president's authority to dismiss a Federal Reserve governor for apparent financial misconduct would not undermine the Fed's policy independence. Dismissing Cook on this basis would not lead to a financial market disaster.

Trump announced the dismissal of Federal Reserve Governor Cook at the end of August, citing mortgage fraud allegations raised by Bill Pulte, the director of the Federal Housing Finance Agency. Cook was accused of declaring two properties as primary residences in mortgage documents prior to her appointment as a Federal Reserve governor in 2022. Cook has denied any mortgage fraud.

Cook's legal team argued in a document submitted to the Supreme Court on Thursday that Trump's request for a "stay order" to effectuate the dismissal essentially seeks to have the justices "emergency destroy the independence of the Federal Reserve Board."

According to the Federal Reserve Act of 1913, the U.S. president does have the authority to dismiss Federal Reserve governors, but it must be "for cause."

Cook's lawyers contend that the "fabricated allegations" put forth by Trump do not meet this standard, as these allegations "are based on her conduct prior to her appointment to the board."

They also pointed out: "If the Supreme Court grants the stay order, it will send a signal to the financial markets that the Federal Reserve no longer enjoys its traditional independence, thereby bringing risks of chaos and turmoil."

In response to the Supreme Court filing on Friday, Sauer stated: "It is unclear why the market would panic over a dismissal for pre-appointment misconduct, but not panic over a dismissal for misconduct during the term; nor is it clear why the market would feel reassured by the prospect that as long as the statute of limitations has expired, newly discovered fraudsters can still serve on the Federal Reserve Board."

On the same day, renowned financial journalist Nick Timiraos, known as the "New Federal Reserve Correspondent," cited comments made earlier this week by Bank of Canada Governor Tiff Macklem:

The market may have begun to worry about the independence of the Federal Reserve. Historically, during turbulent times, investors typically treat dollar assets as a "safe haven." However, Macklem stated to reporters in Saskatchewan that the value of the dollar as a hedging tool "may not be as reliable as it once was."

Macklem said: "I am not saying that all of this is related to President Trump's threats to the Federal Reserve. But I do think you are starting to see some effects. In that sense, it is time to discuss this issue."