Trump Appeals Decision to Keep Fed’s Cook in Place Ahead of FOMC Meeting

Lisa Cook was fired by President Donald Trump in August. She is challenging in court his ability to terminate her. (Drew Angerer/Getty Images)

President Donald Trump’s legal team appealed a decision by a federal judge that temporarily granted Federal Reserve Governor Lisa Cook’s bid to block her termination.

On Wednesday morning, Trump’s lawyers notified the district court they planned to appeal the decision to the U.S. Court of Appeals for the District of Columbia.

This came after a federal judge temporarily granted Cook’s bid to block her termination by Trump late Tuesday night, paving the way for the policymaker to participate in the Federal Open Market Committee meeting next week.

“President Donald Trump’s actions and Cook’s resulting legal challenge raise many serious questions of first impression that the Court believes will benefit from further briefing on a non-emergency timeline. However, at this preliminary stage, the Court finds that Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Act’s ‘for cause’ provision,” Judge Jia M. Cobb wrote in granting Cook’s request.

Cook launched a legal battle on Aug. 28 to keep her job after Federal Housing Finance Agency Director Bill Pulte alleged that she made false claims on mortgage documents in 2021 that may have secured her more favorable loan terms. Trump cited that alleged mortgage fraud as cause for dismissal in an Aug. 25 letter terminating Cook.

Cobb ordered that Trump and members of the Fed’s Board of Governors, including Chair Jerome Powell, are preliminarily enjoined from “effectuating in any manner” of Cook’s removal from her position as a member of the Board of Governors.

The order allows Cook to continue to operate as a member of the board for the duration of the litigation and blocks anyone from obstructing Cook’s access to “any of the benefits or resources of her office.”

The Federal Open Market Committee, of which Cook is a voting member, is scheduled to meet on Sept. 16-17. It is widely expected that policymakers will lower interest rates by a quarter percentage point at that meeting.

Cook’s lawyers applauded the ruling Tuesday night and said that she plans to “continue to carry out her sworn duties” as a Senate-confirmed governor.

“This ruling recognizes and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference,” Cook’s legal team said. “Allowing the President to unlawfully remove Governor Cook on unsubstantiated and vague allegations would endanger the stability of our financial system and undermine the rule of law.”

Trump’s challenge to Cobb’s order was expected. White House spokesman Kush Desai said in a statement sent to Barron’s early Wednesday morning before the appeal notice was filed that Judge Cobb’s decision would “not be the last say on the matter,” adding Trump lawfully removed Cook for cause due to credible allegations.

Cook has argued that while a president has the statutory authority to fire a Fed governor, they can only do so “for cause.” That typically requires evidence that there were instances of “inefficiency, neglect of duty, or malfeasance” committed during an official’s term of service. Disagreements over policy aren’t considered cause for removal.

In terminating Cook, the lawsuit contends, Trump relied on unproven allegations of misconduct that predate her confirmation and don’t meet the “for cause” standard. Further, the complaint notes that Trump hasn’t cited any alleged wrongdoing committed during the course of Cook’s official duties as a Fed governor.

Cook’s lawsuit contends that Trump’s firing violated her right to due process and her statutory right to notice and a hearing under the Federal Reserve Act.

Trump’s legal team urged the judge to deny Cook’s request for an emergency temporary restraining order, calling the legal grounds behind the procedural challenge “misguided and futile.”

The president’s lawyers have contended that the president didn’t need to wait until Cook was proved guilty before moving forward with the removal. The Department of Justice’s investigation into the allegations is ongoing, and Cook hasn’t been convicted of any wrongdoing.

The president’s legal team argued that even if Cook had been given an “opportunity to be heard,” as the Fed governor said she’s entitled to, there’s no evidence that it would’ve changed Trump’s mind.

Cobb said in Tuesday’s ruling that the best reading of the “for cause” provision is that it is limited to an official’s behavior in office and whether they have been “faithfully and effectively” executing their duties.

“‘For cause’ thus does not contemplate removing an individual purely for conduct that occurred before they began in office. In addition, the Court finds that the removal also likely violated Cook’s procedural rights under the Fifth Amendment’s due process clause. She has also demonstrated irreparable harm from her removal,” the judge wrote.

Cook is currently serving a full 14-year term on the board that ends 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