Appeals court declines to let Trump remove Fed governor Lisa Cook
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Ms Lisa Cook, the first Black woman to serve as a Federal Reserve governor, is accused by President Donald Trump of committing mortgage fraud before taking office. But a US district judge ruled on Sept 9 that the claims were likely not sufficient grounds for her removal.
PHOTO: REUTERS
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WASHINGTON – A US appeals court on Sept 15 declined to allow President Donald Trump to fire Federal Reserve governor Lisa Cook,
It is the first time a president has pursued such action since the Fed’s founding in 1913.
The decision by the US Court of Appeals for the District of Columbia Circuit means that the administration only has hours to appeal to the US Supreme Court if it hopes to block Ms Cook from attending the Fed’s policy meeting on Sept 16 and 17, where it is expected to cut US interest rates to shore up a cooling labour market.
The DC Circuit denied the Justice Department’s request to put on hold a judge’s order temporarily blocking the Republican president from removing Ms Cook, an appointee of Democratic former president Joe Biden.
US District Judge Jia Cobb ruled on Sept 9 that Mr Trump’s claims that Ms Cook committed mortgage fraud before taking office, which she denies, were likely not sufficient grounds for removal under the law that created the Fed.
The decision was 2-1, with Circuit Judges Bradley Garcia and J. Michelle Childs – both appointed by Mr Biden – in the majority. Circuit Judge Gregory Katsas, a Trump appointee, dissented.
In an opinion joined by Judge Childs, Judge Garcia wrote that Ms Cook is likely to prevail on her claim that she has been denied due process in violation of the US Constitution’s Fifth Amendment.
“Before this court, the government does not dispute that it provided Cook no meaningful notice or opportunity to respond to the allegations against her,” the judge wrote.
A White House spokesperson did not immediately respond to a request for comment.
The Fed, which had no comment on the ruling, has not made any legal arguments in the case. It has asked the courts for a swift resolution of the matter, and has said it will abide by any court ruling.
Ms Cook’s lawyers did not immediately respond to a request for comment.
Separately, the Senate on the night of Sept 15 narrowly confirmed Mr Trump’s nominee to a recently vacated seat on the Fed board. The largely party-line 48-47 vote means that it is likely that Mr Stephen Miran, the current chair of the Council of Economic Advisers, will also participate in this week’s rate-setting meeting alongside Ms Cook.
In setting up the Fed, Congress included provisions to shield the central bank from political interference.
Under the law that created the Fed, its governors may be removed by a president only “for cause”, though the law does not define the term or establish procedures for removal. No president has ever removed a Fed governor, and the law has never been tested in court.
In the Sept 15 opinion, Judge Garcia wrote that because Ms Cook’s due process claim was “very likely meritorious”, there was no need for the court to address the meaning of “for cause” at this point in the case.
Ms Cook, the first Black woman to serve as a Fed governor, sued Mr Trump and the Fed in late August. She said the claims did not give Mr Trump the legal authority to remove her and were a pretext to fire her for her monetary policy stance.
The Trump administration has argued that the president has broad discretion to determine when it is necessary to remove a Fed governor, and that courts lack the power to review those decisions.
The case has ramifications for the Fed’s ability to set interest rates without regard to the wishes of politicians. This is widely seen as critical to any central bank’s ability to function independently to carry out tasks such as keeping inflation under control.
Mr Trump demanded this year that the Fed cut rates aggressively, berating Fed chair Jerome Powell for his stewardship over monetary policy. The Fed, focusing on fighting inflation, has not done so, though it is expected this week to make a cut.
The Supreme Court in 2025 allowed Mr Trump to proceed with the removal of various officials serving on federal agencies that Congress had established as independent of direct presidential control.
But in a May order in a case involving his dismissal of two Democratic members of federal labour boards, the Supreme Court signalled that it views the Fed as distinct from other executive branch agencies. It said the Fed “is a uniquely structured, quasi-private entity” with a singular historical tradition.
Ms Cook’s protection from at-will removal distinguished her case from other members of regulatory boards that the Supreme Court allowed Mr Trump to remove, Judge Garcia wrote in the Sept 15 opinion.
The Trump administration, in a court filing on Sept 11, asked the DC Circuit to move quickly so that he could remove her before the Fed’s policy meeting. Administration lawyers said that allowing the president to fire Ms Cook would “strengthen, not diminish, the Federal Reserve’s integrity”.
In a filing in response, Ms Cook’s lawyers said removing her ahead of the meeting would impact US and foreign markets, and that the public interest in keeping her in office outweighed Mr Trump’s efforts to take control of the Fed.
In his dissenting opinion, Judge Katsas said there was a greater risk of harm to the Trump administration than to Ms Cook if she was left in her job while the appeal played out.
“Moreover, the Board of Governors no doubt is important, but that only heightens the government’s interest in ensuring that its Governors are competent and capable of projecting confidence into markets,” Judge Katsas wrote.
In blocking Ms Cook’s removal, Judge Cobb found that the “best reading” of the 1913 law is that it only allows a Fed governor to be removed for misconduct while in office. The mortgage fraud claims against her all relate to actions she took before her US Senate confirmation in 2022.
Mr Trump and his appointee William Pulte, the Federal Housing Finance Agency director, have claimed that Ms Cook inaccurately described three separate properties on mortgage applications, which could have allowed her to obtain lower interest rates and tax credits.
A loan estimate for an Atlanta home purchased by her shows that she had declared the property as a “vacation home”, according to a document reviewed by Reuters. This information would appear to undercut the allegations against her.
And the property tax authority in Ann Arbor, Michigan, said in response to a Reuters inquiry that Ms Cook has not broken rules for tax breaks on a home there that she had declared her primary residence.
The finding, which came in response to a Reuters request that the city review Ms Cook’s property records, could boost her defence against efforts by the Trump administration to remove her from the Federal Reserve Board.
Mr Trump’s Justice Department has also launched a criminal mortgage fraud probe into her, and has issued grand jury subpoenas out of both Georgia and Michigan, according to documents seen by Reuters and a source familiar with the matter. REUTERS
