Federal Appeals Court rules in favour of Federal Governor Lisa Cook stating that President Donald Trump cannot be fired before the Fed 's meeting. Image: MarketWatch.
(The Post News) – In another legal setback for US President Donald Trump, a federal appeals court on Monday ruled that he cannot remove Federal Reserve Governor Lisa Cook ahead of the central bank’s key policy meeting this week.
Trump tried to fire Cook in late August based on allegations of mortgage fraud made by his director of housing finance, Bill Pulte. Cook rejected the claims and sued, arguing the attempted firing violated due process and imperiled the Federal Reserve’s independence.
Judges Block Trump’s Move to Fire Cook
Trump lawyers made an emergency request to stay a lower-court ruling, temporarily delaying Cook’s removal. But Biden appointees Judges Bradley Garcia and Michelle Childs turned down the appeal, stating the administration failed to meet the “stringent requirements” for it.
The district court issued its preliminary injunction after finding Cook likely to prevail on her claims… that she was removed without ’cause’ and that she lacked sufficient process prior to her removal,” Judge Garcia wrote in a concurring opinion.
Judge Gregory Katsas, a Trump appointee, dissented, arguing the president had the right to act. White House spokesman Kush Desai announced the administration would appeal to the Supreme Court. “The President legally removed Lisa Cook for cause. The Administration will appeal this decision and expects ultimate victory on the issue,” Desai said.
If Trump prevails ultimately, it would be the first time in the history of the Federal Reserve that a sitting governor was removed by a president. The Federal Reserve Act authorizes the removal of governors “for cause,” but the law does not define the term. Legal experts are confident the ambiguity leaves the topic open to interpretation.
Trump lawyers replied that the president’s attempt to redefine “cause” so broadly that it would include political differences with Fed officials instead of misconduct could effectively allow presidents to remove Fed officials for having political disagreements with them. Economists warn that this would erode investor confidence and undermine central bank independence. “President Trump has no power to unilaterally redefine ’cause,'” Trump lawyers replied.
The case comes as the Fed is poised to cut interest rates for the first time this year, as employment growth slows and inflation pressures rise, partly thanks to Trump’s tariffs. Trump has continuously demanded deep rate cuts, frequently lambasting Fed Chair Jerome Powell, although legal protections so far have prevented Powell from being ousted.
Global Reaction
European Central Bank President Christine Lagarde warned earlier this month that Trump’s attacks on the Fed pose a “very serious danger” not only to the U.S. economy but also to global financial stability. “The U.S. Supreme Court has clearly indicated that a Fed governor can only be dismissed in the case of gross misconduct,” she said. “You’d have to go quite far to be fired for gross misconduct.”
The government’s appeal to the Supreme Court will determine whether the president can exercise more control over the Fed’s governors. Until then, Cook remains in place and will attend this week’s rate-setting discussion, a meeting that could shape the course of the U.S. economy in the months ahead.
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