The U.S. District Court for D.C. has ruled that Federal Reserve board member Lisa Cook can remain in her job while she pushes back on President Donald Trump’s efforts to fire her.
The Trump administration is expected to appeal the federal court’s ruling, which comes as a major setback to the president’s bid to obtain a greater degree of control over the non-partisan U.S. central bank, which sets short-term interest rates to achieve its congressionally-mandated goals of securing stable prices for consumer goods and maximum employment.
The Fed traditionally prides itself on its independence, which it maintains is crucial to keeping it above the political fray and ensuring the decisions it reaches are made with citizens in mind, not political calculations.
On Tuesday, District Judge Jia Cobb granted Cook’s request for a preliminary injunction preventing her from being removed from the Fed’s Board of Governors while the dispute makes its way through the courts. Judge Cobb ruled that Cook is likely to prevail in the lawsuit she filed late last month in an attempt to overturn her firing.
Trump announced he was dismissing Cook on August 25 over allegations raised by one of his appointees that she committed mortgage fraud related to two properties she purchased in 2021, before she joined the central bank’s board.
Cook is accused of designating two different properties as her “primary residence,” which could have resulted in lower down payments and mortgage rates than if either was designated a second home or investment property, an allegation identical to one Trump has also levelled at one of his long-term enemies on Capitol Hill, California Democratic Sen. Adam Schiff.
Cook has since received the backing of more than 450 of her fellow economists, Nobel Prize winners among them, who signed an open letter in her defense.
Judge Cobb ruled that the allegations made against Cook were unlikely to provide sufficient legal cause to justify firing her.
Under the rules governing the Fed, governors can only be removed “for cause,” which the justice said was limited to actions taken during a governor’s time in office.
The “removal of a Federal Reserve governor extends only to concerns about the board member's ability to effectively and faithfully execute their statutory duties, in light of events that have occurred while they are in office,” she wrote. “President Trump has not stated a legally permissible cause for Cook’s removal.”
The decision means Cook is free to participate in the Fed’s fall meeting from September 16-17, when it is expected to reduce its key short-term rate by a quarter-point to between 4 percent and 4.25 percent.
“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,” her attorney Abbe Lowell said in response to Tuesday’s ruling.
“Governor Cook will continue to carry out her sworn duties as a senate-confirmed board governor.”
Additional reporting by agencies.
