Gov. Lisa Cook Will Stay At Fed Until At Least January

Fed governor Lisa Cook is fighting the Trump administration’s attempt to fire her. (Al Drago/Bloomberg)

Key Points

• Federal Reserve governor Lisa Cook will remain in her position until at least January, following a Supreme Court decision to delay ruling on her termination.
• President Donald Trump sought to remove Cook in late August over allegations of false claims on mortgage documents in 2021, which she denies.
• The Supreme Court deferred Trump’s attempt to remove Cook, indicating that oral arguments are necessary and will occur in January 2026.

Federal Reserve governor Lisa Cook will remain in place at the central bank until at least January, with the Supreme Court issuing a notice on Wednesday that delays ruling on her termination.

President Donald Trump sought to remove Cook from her role on the Board of Governors in late August after allegations emerged that she made false claims on mortgage documents in 2021 that may have secured her more favorable loan terms.

Cook, the first Black woman to serve on the Fed’s board, sued to block the termination on Aug. 28 and both a federal judge and the D.C. Circuit Court of Appeals ruled that the firing likely violated her right to due process and that she was likely to prevail on her claims. Both courts ruled to allow the Fed policymaker to keep her position until the legal case concludes.

Trump’s legal team, however, sought an emergency stay of the lower courts’ rulings by the Supreme Court, arguing that the president’s removal of Cook fell within his discretion and should not be second-guessed by the courts.

The Supreme Court, on Wednesday, deferred Trump’s latest bid to sideline Cook, indicating that oral arguments were necessary to make a determination.

“The application for stay presented to the Chief Justice and by him referred to the Court is deferred pending oral argument in January 2026,” the court said in a notice posted on Wednesday.

The court directed the clerk to set up a briefing schedule.

“The court’s decision rightly allows Governor Cook to continue in her role on the Federal Reserve Board, and we look forward to further proceedings consistent with the court’s order,” Cook’s legal counsel Abbe David Lowell of Lowell & Associates and Norm Eisen of the Democracy Defenders Fund said in statement.

The White House said Wednesday in response to the latest court notice that President Trump maintains he lawfully removed Cook for cause. “We look forward to ultimate victory after presenting our oral arguments before the Supreme Court in January,” spokesman Kush Desai said.

The court’s decision complicates the Trump administration’s attempts to gain a majority among the Fed’s voting members. Three of seven board members are Trump appointees: Michelle Bowman and Christopher Waller from the president’s first term, and Stephen Miran, who was confirmed to the board last month. Gaining the Cook seat would have in principle allowed the Trump bloc to control some policy decisions.

The Fed’s interest-rate decisions are made by a wider group of 12 comprised of the board plus five presidents of regional Fed banks. The presidents are appointed by the individual banks’ directors, but their appointments also need to be affirmed by the Fed board every five years. The next decision comes up early next year.

The court’s decision appears to take off the table the possibility that a Trump-controlled board could reject all of the regional bank presidents, thereby giving control of interest rates to the smaller group of presidentially appointed Fed board members.

Assuming the court doesn’t rule right away, “this might be enough to keep [Cook] on the Board until February, when she could vote to reappoint the Regional Fed Presidents,” wrote University of Michigan economist Justin Wolfers on X.

That said, the Supreme Court has the ability to act quickly. A 2022 case involving Covid vaccine mandates was resolved less than a week after oral arguments were heard, wrote George Pollack of research firm Signum Global Advisors in a note to clients.

The administration will need to decide soon on its choice to replace Chair Jerome Powell, whose chairmanship expires in May. Trump has said he is considering two or three names for chair. He has mentioned as possibilities economist Kevin Hassett, former Fed governor Kevin Warsh, and sitting governor Waller.

Powell has the right to continue serving on the board until 2028. That means Trump needs an open seat if he chooses to appoint Hassett or Warsh. With Cook now expected to stay, the only guaranteed option for that seat is Miran’s, and he has said he doesn’t expect to be reappointed. There may be little reason for Trump to delay making that decision now that the slate of available board seats is clear for the immediate future.

The Cook case involves the first purported “for cause” removal of a Fed governor in the central bank’s 111-year history. Trump’s removal, however, hinges on alleged misrepresentations Cook made on mortgage documents predating her time in office.

Federal Housing Finance Agency Director Bill Pulte, who first raised the allegations, claimed Cook sought several mortgages in 2021 for homes in Michigan and Georgia that she inaccurately listed as primary residences, thus gaining favorable mortgage terms. Pulte later claimed a third mortgage on a home in Massachusetts was also being investigated.

But the government hasn’t produced any evidence that Cook gained favorable rates or other benefits. Additionally, documents reviewed by Barron’s indicate that Cook has claimed the Georgia property as a vacation home, rather than the primary property as Pulte alleged.

Cook’s full 14-year term on the board is set to end in January 2038. She was appointed in 2022 by then-President Joe Biden to fill an unexpired term. She was reappointed in 2023 to her current term.

Write to Megan Leonhardt at megan.leonhardt@barrons.com and Matt Peterson at matt.peterson@dowjones.com