Federal Reserve Governor Lisa Cook leaves a meeting in Washington D.C. after judge ruled she could stay in her role despite President's Trump's attempt to fire her. Image: MarketWatch.
(The Post News) – A federal judge on Tuesday ruled that Federal Reserve Governor Lisa Cook may remain in office while her suit to prevent President Donald Trump’s attempt to remove her moves forward, setting the stage for a historic court battle regarding the independence of America’s central bank.
U.S. District Judge Jia Cobb, a Biden appointee, has handed Cook a preliminary injunction halting the White House from enforcing her termination. The decision is the first major court test of whether a president can remove a Federal Reserve governor at his or her own discretion.
“President Trump has not stated a legally sufficient reason for removing Cook,” Cobb said in her ruling. She also said that Cook’s due process rights were violated and that she would suffer “irreparable harm” if removed before she can have her case heard.
Trump’s Allegations Against Cook
Trump last August terminated Cook, indicating that she was being dismissed over charges of mortgage transactions she had made in 2021 prior to assuming office at the Fed. William Pulte, the Trump-named head of the Federal Housing Finance Agency, wrote in a letter that Cook had listed two different homes in Michigan and Georgia as her primary residence in an effort to secure more favorable loan terms.
Cook has not been charged with any criminal or civil wrongdoing. Her lawyers argue that the charges are “unsubstantiated” and have nothing to do with her service as a Fed governor.
“None of the alleged misconduct occurred in the course of Governor Cook’s office,” her attorneys wrote in a filing. They added that removal is only allowed “for cause,” and cause must be tied to misconduct in office, rather than to events prior to confirmation.
Judge Cobb’s ruling came at the heart of the Trump administration’s argument. She said the Federal Reserve Act requires removals to be based on conduct while serving time as a governor. Trump’s letter, she noted, “does not involve Cook’s in-office conduct at all.”
Cobb continued by saying that if presidents could remove governors solely based on imprecise or unsupported charges, then Congress’s intent to preserve the Fed as a political-free zone would be rendered null.
“Brought to its logical end, the argument of the government results in an absurd conclusion,” Cobb wrote. “It would signify the President had the ability, in reality, to displace a member simply because he preferred his own appointees.”
Cook’s Response
Abbe Lowell, attorney for Cook, celebrated the ruling as a triumph for the independence of the central bank.
This ruling recognizes and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference,” Lowell stated. “Allowing the President to illegally remove Governor Cook on unsubstantiated and ambiguous charges would jeopardize the stability of our financial system and undermine the rule of law.”
Cook, the first Black woman to be a member of the Federal Reserve Board of Governors, will now participate in the Fed’s September 16–17 policy meeting. The central bank is forecast to reduce its benchmark interest rate a quarter-point to between 4% and 4.25%.
The case has extensive implications for the 112-year-old institution. No president has ever attempted to remove a Fed governor, and economists indicate that political control of the central bank would destabilize financial markets.
If successful, Trump might gain majority control over the Fed’s Board of Governors, giving him greater control over interest rate policy. Trump has repeatedly criticized Fed Chair Jerome Powell and other board members for keeping interest rates too high.
Critics argue that granting presidents the power to remove governors at will would erode the credibility of the central bank, encourage short-term political management, and risk triggering inflation.
White House Response
The White House defended Trump’s move, saying he could fire Cook.
“President Trump lawfully removed Lisa Cook for cause on the basis of serious allegations of mortgage fraud,” said a statement from White House spokesman Kush Desai. “This action won’t be the last word on the subject.”
Legal experts expect the administration to appeal the ruling, and the case might end up before the U.S. Supreme Court.
Cook’s lawsuit describes Trump’s attempt to fire her as “unprecedented and illegal.” If the courts uphold Cobb’s ruling, it would set a binding precedent to protect the Fed from direct political manipulation. Otherwise, future presidents can experiment with trying to control monetary policy by firing governors they disagree with.
For now, the choice leaves Cook in place, her term set to expire in 2038. But the bigger question, how free the Federal Reserve can remain from pressure from the president, will likely be at the heart of legal and political arguments over the next few months.
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