The president's efforts to remove the central bank governor were halted by a district court judge
President Trump’s firing of Federal Reserve governor Lisa Cook was blocked by a federal judge Tuesday while a lawsuit against her dismissal plays out.
US District Court judge Jia Cobb granted Cook, who Trump said he was removing from her role at the Fed on August 25 after allegations of mortgage fraud, a preliminary injunction preventing her dismissal until that case has concluded.
“Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Act’s ‘for cause’ provision,” Cobb wrote, indicating that “the public interest in Federal Reserve independence” supported her reinstatement.
The move is a potentially significant one as Cook and allies gear up for a legal battle against what they view as a politically motivated effort by the president to exert more influence over the central bank.
Trump’s move to fire Cook came after Federal Housing Finance Agency (FHFA) director Bill Pulte referred the Fed governor to the justice department, alleging she potentially committed fraud in obtaining two mortgages.
But the president has also been a longstanding critic of the Fed’s decision not to cut interest rates so far this year, and Cook’s lawsuit against Trump described his attempts to oust her as “illegal and unprecedented.”
Cobb said the best reading of the “for cause” provision allowing a president to terminate a Fed governor is that it is restricted to actions relating to behavior in office – but Cook’s alleged fraud was committed before she started her role at the central bank.
“‘For cause’ thus does not contemplate removing an individual purely for conduct that occurred before they began in office,” said Cobb.
The announcement means Cook is almost certain to take part in the Fed’s next deliberation on interest rates, scheduled to begin on September 16 with its decision announced the following day.
The central bank is widely expected to cut rates after a weak jobs report last week and substantial downward revision of prior employment data, revealed yesterday.
But plenty of intrigue surrounds the decision amid the continuing firestorm between the Trump administration and the Fed, with market watchers likely to keep a close eye on chair Jerome Powell’s remarks next week to see if he comments on that controversy and how it might be impacting the central bank’s approach.
Meanwhile, the Senate Banking Committee is scheduled to vote today on the nomination of Stephen Miran to the Fed board following the surprise August resignation of Adriana Kugler.
Stay updated with the freshest mortgage news. Get exclusive interviews, breaking news, and industry events in your inbox, and always be the first to know by subscribing to our FREE daily newsletter.
