Executive Summary
The Story So Far
Why This Matters
Who Thinks What?
A federal judge on Tuesday blocked President Donald Trump’s effort to remove Federal Reserve Governor Lisa Cook, ruling that Trump had not identified sufficient cause related to her conduct or job performance as a Board member. The decision ensures Governor Cook will remain in her position while a legal challenge against the attempted firing proceeds.
Court’s Decision
Judge Jia Cobb granted Cook’s request for a preliminary injunction, stating that President Trump failed to demonstrate that Cook was “harming the Board or the public interest by executing her duties unfaithfully or ineffectively.” The ruling marks the first time a president’s attempt to fire a Fed governor has been legally challenged in this manner.
The judge found Cook’s claim of improper removal to be valid, violating her Fifth Amendment rights. Cobb clarified that permissible cause for removing a Federal Reserve Governor is limited to concerns about the member’s ability to execute statutory duties based on events occurring while in office.
President Trump had cited allegations of mortgage fraud as cause for Cook’s removal, which the Justice Department is reportedly investigating. However, the court determined that the “for cause” provision of the Federal Reserve Act does not extend to actions taken prior to assuming office.
Legal Arguments and Implications
Cook’s attorneys argued that President Trump’s use of “cause” was an attempt to circumvent a Supreme Court decision and redefine the term to allow the firing of any board member with whom he disagreed. They contended that Trump does not possess the power to unilaterally redefine “cause” without grounding it in legal precedent, history, or tradition.
Judge Cobb echoed this concern, stating that the Trump administration’s interpretation would lead to an “absurd result.” She noted that while the President cannot remove an official for policy disagreements, the government’s argument suggested such a removal would be unreviewable, effectively providing no practical insulation for Board members against presidential influence.
The judge emphasized that such a rule would allow a president to remove a Board member “merely because he wanted his own appointees on the Board of Governors,” undermining the Federal Reserve’s independence.
Outlook
The Trump administration is expected to appeal Judge Cobb’s preliminary injunction. However, the injunction means that the Federal Reserve must retain Cook as a governor throughout the ongoing legal process.
Following the ruling, Abbe Lowell, an attorney for Governor Cook, stated that she would continue her duties. Lowell underscored the importance of the ruling in safeguarding the Federal Reserve’s independence from political interference, warning that an unlawful removal based on unsubstantiated allegations could destabilize the financial system and erode the rule of law.
The court’s decision establishes a significant precedent regarding the limitations on presidential power to remove Federal Reserve governors, reinforcing the institution’s independence against political interference.
