Federal judge freezes Trump effort to fire Fed official

WASHINGTON (CN) — A federal judge Tuesday blocked the Trump administration from terminating Federal Reserve Board of Governors member Lisa Cook, setting up a further court battle over the central bank’s independence.

U.S. District Judge Jia Cobb issued a preliminary injunction blocking Federal Reserve Chair Jerome Powell and her fellow governors from effectuating, in any manner, President Donald Trump’s termination until the case was resolved.

“President Trump’s actions and Cook’s resulting legal challenge raise many serious questions of first impression that the court believes will benefit from further briefing on a non-emergency timeline,” the Joe Biden appointee wrote. “However, at this preliminary stage, the court finds that Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Act’s ‘for cause’ provision.”

The best reading of the provision, Cobb said, is that Trump’s claims of mortgage fraud from June and July 2021 would not amount to grounds for removal as it occurred before the Senate confirmed her in January 2022. A governor can only be removed based on their conduct in office and whether they have been “faithfully and effectively executing their statutory duties,” Cobb added.

Further, Trump’s attempted removal likely violated Cook’s Fifth Amendment due process rights and would irreparably harm Cook and the public interest, Cobb ruled.

Abbe Lowell, of Lowell & Associates and Cook’s attorney welcomed Cobb’s ruling in a statement on Tuesday, noting that Cook would continue serving in her role.

“This ruling recognizes and affirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference,” Lowell said. “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.”

White House Spokesman Kush Desai slammed the decision in an email to Courthouse News, indicating the administration will appeal the ruling.

“President Trump lawfully removed Lisa Cook for cause due to credible allegations of mortgage fraud from her highly sensitive position overseeing financial institutions on the Federal Reserve Board of Governors,” Desai said. “This ruling will not be the last say on the matter, and the Trump administration will continue to work to restore accountability and confidence in the Fed.”

Cobb, a Joe Biden appointee, expressed concern about Trump’s attempted firing at a hearing on Aug. 29, but she noted the termination and Cook’s subsequent lawsuit mark the first time a judge has tried to square the president’s removal powers with the Federal Reserve’s removal protections.

Cook filed the 24-page suit in the District of Columbia federal court on Aug. 28, setting up a significant legal battle over what has long been deemed a red line in the president’s ability to terminate political appointees.

Cook argues that the only causes for removal are inefficiency, neglect of duty, malfeasance in office or comparable misconduct. She says immediately firing her violated her due process rights.

In an Aug. 25 Truth Social post, Trump published a letter addressed to Cook that said her termination was “effective immediately.”

Trump cited accusations by Federal Housing Finance Agency Director William Pulte that Cook engaged in mortgage fraud. In an Aug. 15 criminal referral to Attorney General Pam Bondi and Justice Department Special Attorney Ed Martin, Pulte said Cook had wrongfully claimed two different houses as her main residence in 2021 to obtain better loan terms.

In an Aug. 20 post on X, Pulte claimed that Cook committed mortgage fraud by designating an Atlanta condo as her primary residence on July 2, 2021, two weeks after taking out a loan on a Michigan home that she also declared as her primary residence, on June 18, 2021.

“When someone commits mortgage fraud, they undermine the faith and integrity of our system,” Pulte wrote. “It does not matter who you are — no one is above the law.”

Cobb noted that neither Pulte nor the Justice Department shared the referral letter with Cook, and thus could not claim that they had provided her with evidence of the claims, proper notice or an opportunity to refute the charges.

The Justice Department argues that, without an explicit definition of cause in the statute, the president could articulate any reason beyond a clear policy dispute as reason for removal.

On Friday, Principal Deputy Assistant Attorney General Yaakov Roth repeatedly cited the 1901 Supreme Court case Reagan v. United States,  when the Supreme Court upheld the removal of William Reagan, a U.S. Indian Territory Commissioner, a position with no specific causes for removal defined by law.

The high court held that a federal judge of the territory possessed the inherent authority to remove Reagan, as an inferior officer, at will.

Under that decision, Roth argued, any review of Trump’s choice to remove Cook should be treated with deference, without delving too deeply into his reasoning.

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