Trump Pushes to Remove Fed’s Lisa Cook Before Next Policy Meeting

Federal Reserve Governor Lisa Cook was appointed by President Joe Biden and confirmed to a 14-year term running through 2038. (Al Drago/Bloomberg)

Key Points

About This Summary

• The Trump admin. is trying to sideline Fed Gov. Lisa Cook before the next policy meeting.
• Trump alleges Cook misrepresented mortgage documents, questioning her trustworthiness.
• Cook’s lawyers call the emergency stay request unwarranted, and argued the precedents cited by the Justice Department don’t apply to the Fed.

The Trump administration is racing to sideline Federal Reserve governor Lisa Cook before next week’s policy meeting, asking a federal appeals court to pause a lower-court order that restored her to the central bank’s board.

In an emergency motion filed late Thursday, Justice Department lawyers urged the U.S. Court of Appeals for the D.C. Circuit to issue a stay by Monday, just one day before the Federal Open Market Committee meets to decide on a widely expected quarter-point rate cut.

Unless the court intervenes, Cook is expected to remain a voting member of the Fed’s Board of Governors and take part in the meeting.

In its motion, the government argued the decision to remove a Fed governor for cause falls within the president’s discretion and should not be second-guessed by the courts. It claimed President Donald Trump had “clear cause” to oust Cook, pointing to alleged misrepresentations on mortgage documents predating her time in office.

Prosecutors said that conduct calls into question her trustworthiness and competence, grounds that justify removal regardless of when they occurred. Forcing Trump, they said, to work with an official he has removed inflicts irreparable harm on the executive branch.

Cook’s attorneys on Thursday evening pushed back against the government’s request for an emergency stay, calling it “wholly unwarranted” and disruptive to the status quo. They noted she has continued to carry out her duties during the litigation and argued the precedents cited by the Justice Department don’t apply to the Fed, which the Supreme Court has called a “uniquely structured, quasi-private entity” with its own traditions.

Her legal team said Cook’s role on a multi-member board doesn’t undermine presidential authority in the way other cases have suggested, and any harm to the government from her reinstatement would be minimal. Cook, they said, faces a far greater risk: Trump has already said he would quickly name a replacement, which could leave her with no seat to return to, even if she wins her appeal.

The administration’s motion came after a federal judge on Tuesday temporarily granted Cook’s bid to block her termination by Trump, paving the way for the policymaker to participate in the FOMC meeting.

“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 nonemergency 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.

The judge noted this case involves the first purported “for cause” removal of a Fed governor in the central bank’s 111-year history.

Cook launched a legal battle on Aug. 28 to keep her job after Federal Housing Finance Agency Director Bill Pulte alleged 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.”

Cook, appointed by President Joe Biden and confirmed to a 14-year term running through 2038, has vowed to carry out her responsibilities. Her legal team said Cobb’s ruling reaffirms the importance of shielding the Fed from “illegal political interference.”

If the appeals court declines to issue a stay, Trump is expected to petition the Supreme Court.

Either way, the clock is ticking. The Fed meets Sept. 16-17, and unless the order is lifted, Cook is expected to sit at the table when officials debate whether to cut rates.

Write to Nicole Goodkind at nicole.goodkind@barrons.com and Megan Leonhardt at megan.leonhardt@barrons.com