Trump Asks Supreme Court to Allow Firing of Fed Governor Lisa Cook

The Trump administration is taking its fight over Fed governor Lisa Cook’s firing to the Supreme Court. (Al Drago/Bloomberg)

President Donald Trump took his fight to fire Federal Reserve governor Lisa Cook to the Supreme Court Thursday. In response, Cook’s team argued that removing her from the the central bank would disrupt the economy.

The Trump administration appealed to justices to lift lower court decisions and allow the president to fire Cook from the Fed board, just one day after she voted to lower interest rates at the central bank’s September policy meeting.

“This application involves yet another case of improper judicial interference with the President’s removal authority—here, interference with the president’s authority to remove members of the Federal Reserve Board of Governors for cause,” wrote D. John Sauer, solicitor general at the Department of Justice, in the filing, which was reviewed by Barron’s.

On Thursday afternoon, Cook’s attorney’s filed a response opposing the request for an immediate stay.

“Granting the President’s administrative-stay request now would upend the status quo because Governor Cook—unlike other officers whose attempted removal this Court has considered—has continued to perform her official duties throughout this litigation, including by participating at this week’s [Federal Open Market Committee] meeting. That disruption would subvert the Federal Reserve’s historical independence and disrupt the American economy,” wrote her lawyers in their filing to the Supreme Court.

The president, they suggested, did not ask the Supreme Court for a stay before this week’s Fed policy meeting, because he knew it could hurt financial markets.

“Having chosen to delay his administrative stay request by several days perhaps because he understood the chaos that removing Governor Cook before the FOMC meeting would create in the financial markets—he cannot now establish any need for immediate relief that would disrupt the status quo while this Court considers his stay application,” wrote Cook’s legal team.

The White House did not immediately respond to requests for comment. The Federal Reserve declined to comment, but previously said that it would abide by court rulings.

In the government’s appeal to the Supreme Court, the Trump administration argued that an official’s position, like that of Cook’s, isn’t property protected by the due process clause. The administration also asserted that the President’s determination of “cause” for removal is at his “unreviewable” discretion. Officials asked the Supreme Court for a stay, which would immediately remove Cook from her position while the legal case is still being considered.

A federal appeals court ruled on Monday that Cook can continue serving at the central bank as her legal case moves forward, upholding a lower court’s ruling.

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

In an order issued Monday night, the appeals court found in a 2-1 decision that the lower court’s conclusion was correct that Cook’s removal likely violated her right to due process.

In denying the government’s bid to stay the district court’s ruling, Circuit Judges Bradley N. Garcia and J. Michelle Childs noted that Cook has been serving in her position continuously, and so granting the government’s request for emergency relief would “upend, not preserve,” the status quo.

A federal judge temporarily granted Cook’s bid to block her termination by Trump on Sept. 9, paving the way for the policymaker to participate in this week’s FOMC meeting and continue serving on the Board of Governors.

But the government immediately appealed the decision, arguing that Trump’s move to oust a Fed governor for cause falls within the president’s discretion, and should not be second-guessed by the courts. It claimed Trump had clear cause to oust Cook, pointing to alleged misrepresentations on mortgage documents predating her time in office.

“The President removed Cook for cause…after detailing misrepresentations Cook had made in mortgage applications—misrepresentations that would constitute mortgage fraud if made knowingly, and that, at a minimum, reflect a lack of care in financial matters that the President determined was inconsistent with Cook’s holding a position of public financial trust on the Federal Reserve Board,” the government said in a brief.

Cook’s attorneys pushed back against the government’s request for an emergency stay, contending in a response filed Saturday that the government had not provided sufficient evidence to merit a “for cause” removal.

The 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.

If Trump successfully fires Cook and picks a replacement, he will have nominated four out of the seven Fed governors and created a majority.

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 Nicole Goodkind at nicole.goodkind@barrons.com