Appeals court rejects Trump’s bid to fire Fed Governor Lisa Cook

By Elisabeth Buchwald, Dan Berman, CNN

(CNN) — President Donald Trump cannot remove Lisa Cook from the Federal Reserve’s Board of Governors for now, a federal appeals court said in an emergency ruling Monday, hours before the central bank’s two-day monetary policy meeting kicks off.

The decision from the US Court of Appeals for the District of Columbia Circuit, split 2-1 along party lines, marks another defeat for the White House’s efforts to control the Fed and economic policy. Trump has sought to oust Cook over allegations of mortgage fraud, though Cook has not been charged with any wrongdoing.

The Federal Reserve Act specifies that presidents can only fire Fed governors “for cause,” and Trump has sought to leverage allegations of mortgage fraud as a sufficient cause for firing.

“In this court, the government does not dispute that it failed to provide Cook even minimal process—that is, notice of the allegation against her and a meaningful opportunity to respond—before she was purportedly removed,” Judges Bradley Garcia and Michelle Childs wrote in their opinion.

“The district court issued its preliminary injunction after finding that Cook is likely to succeed on two of her claims: her substantive, statutory claim that she was removed without ‘cause’… and her procedural claim that she did not receive sufficient process prior to her removal in violation of the Due Process Clause of the Fifth Amendment,” Garcia and Childs wrote.

In his dissenting opinion, Judge Gregory Katsas wrote that “President Trump removed Cook for cause.”

White House officials and Cook’s attorneys did not immediately respond to CNN’s request for comment following the ruling.

The court’s decision comes just weeks after Trump said he fired Cook, who responded by suing Trump based on “an unsubstantiated allegation” and that her firing violated her due process rights. If Trump is ultimately successful in removing Cook, it would mark the first time a Fed governor was fired by a president in the central bank’s 111-year history.

At the same time the court ruled Trump couldn’t immediately fire Cook, Stephen Miran, Trump’s nominee to fill a separate seat on Fed’s Board, was confirmed by the Senate.

Trump’s push to get the Fed to lower rates

The Fed is widely expected to lower interest rates at the conclusion of their two-day policy meeting this week. However, it’s an open question how big the cut will be at this and upcoming meetings.

Meanwhile, Trump’s push to oust Cook, a Biden appointee and the first Black woman to serve on the Fed’s Board, comes amid a campaign to get the central bank to lower interest rates.

As part of that effort, Trump has tried unsuccessfully to bully Fed Chair Jerome Powell into lowering rates, calling him a “numbskull,” a “major loser” and “a very stupid person” for keeping rates elevated. He also threatened to fire him, but more recently has said he’d allow Powell to stay on until his term as chair ends in May.

While seven out of 12 members of the Fed’s interest rate-setting committee are nominated by the president and confirmed by members of the Senate, the central bank for decades has functioned as an independent institution.

Trump’s attempt to fire Cook raises serious concerns about the degree of independence the Fed will have moving forward.

“President Trump’s attempted removal of Governor Lisa Cook, if allowed, would mark an immediate end to that history,” Cook’s attorneys wrote in a filing on Saturday. Economists have expressed similar concerns, arguing that the US economy’s success has been predicated on having an independent central bank, which helps instill confidence in domestic and foreign investors.

The Fed was designed to be independent from politicians specifically so it could focus on economic data – and not political considerations – in achieving its dual mandate to keep price increases in check while supporting the job market.

Politicians often prefer lower interest rates, aiming to boost stock prices and make it cheaper for people to borrow money, both popular moves among voters. But lower interest rates risk igniting price pressures. On the other hand, leaving rates too high could overly restrict spending and hiring, hurting the economy.

Legal hurdles remain

Cook and her attorneys have argued that Trump’s use of “cause” is an attempt to get around a Supreme Court decision from earlier this year that appeared to limit the president’s ability to remove Federal Reserve governors.

Trump, Cook argued in court papers, wants to redefine the meaning of “cause” in a way that would allow him to fire any board member “with whom he disagrees about policy based on chalked up allegations.”

“President Trump does not have the power to unilaterally redefine ‘cause’ – completely unmoored to caselaw, history, and tradition – and conclude, without evidence, that he has found it,” Cook’s attorneys wrote.

The Trump administration called Cook’s claims to stay on the board “meritless,” adding that concerns over whether Cook misrepresented her finances pose concerns as to “whether Cook can be trusted to act with forthrightness, care, and disinterest in managing the U.S. money supply.”

This story has been updated with additional context and developments.

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