A federal appellate panel in Washington declined to let President Donald Trump fire Lisa Cook from the Federal Reserve Board of Governors while her lawsuit challenging her firing proceeds.
The order came Monday night from a divided three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit. Biden appointees Michelle Childs and Bradley Garcia voted for the denial, while Trump appointee Gregory Katsas dissented.
The two judges in the majority focused on due process, writing that “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.” In his dissent, Katsas wrote that the district court judge was wrong to rule that Cook had a constitutionally protected property interest in her office and that she can’t be removed based on conduct prior to her appointment.
The Supreme Court could soon weigh in on the consequential dispute, with implications for both the economy and presidential power. The case has developed quickly in recent days, after U.S. District Judge Jia Cobb on Tuesday Sept. 9 issued a preliminary order to keep Cook on the board, reasoning that she is likely to succeed in her appeal. Trump wants to fire Cook based on his claim that she committed mortgage fraud prior to her Senate confirmation to a term that expires in 2038. Cook and Cobb are both Biden appointees.
The Supreme Court could soon weigh in on the consequential dispute, with implications for both the economy and presidential power.
Cobb wrote that Cook made a “strong showing” that Trump’s attempt to fire her violated federal law, which requires cause for removal. The judge wrote that the “for cause” requirement in the Federal Reserve Act “does not contemplate removing an individual purely for conduct that occurred before they began in office.” Rather, she wrote that the “best reading of the ‘for cause’ provision is that the bases for removal of a member of the Board of Governors are limited to grounds concerning a Governor’s behavior in office and whether they have been faithfully and effectively executing their statutory duties.”
The Trump administration appealed to the D.C. Circuit, where it filed an emergency motion to lift Cobb’s order. The administration asked the circuit court to act by Monday, Sept. 15, ahead of a meeting the following day of the Federal Open Market Committee, which includes the Federal Reserve Board of Governors. The committee is set to review monetary policy, issue statements on market outlook and vote on interest rates. Trump has pressed for rate cuts from the central bank, which is structured to avoid direct control by the president.
But asserting control over historically independent agencies has been a theme of Trump’s second term, with this litigation posing the latest test of how far the Supreme Court wants his power to go. “That extraordinary order countermanding the President’s exercise of his Article II authority rests on a series of legal errors and should be stayed pending appeal,” the administration wrote of Cobb’s order keeping Cook on the board (Article II of the Constitution lays out presidential powers).
Cook hasn’t been charged with any fraud, and recent reporting undercuts the claim that she committed fraud. Her lawyers cited that reporting in opposing the administration’s bid to lift Cobb’s order, writing that Trump is trying to remove her based on “unsubstantiated accusations” that are “vague and incomplete.” They also made the broader argument that allowing her removal would end Federal Reserve independence and “send a destabilizing signal to the financial markets that could not be easily undone.”
When she filed her suit in late August, Cook called the president’s attempt to fire her “unprecedented and illegal.” Underscoring the stakes in her civil complaint, she noted that Fed independence “is vital to its ability to make sound economic decisions, free from the political pressures of an election cycle.” She warned that if “markets and the public believe that the central bank is making decisions based on political pressure rather than sound economic data, that confidence erodes.” In her ruling keeping Cook on the board for now, Judge Cobb noted that the case involves “the first purported ‘for cause’ removal of a Board Governor in the Federal Reserve’s 111-year history” and that it “raises important matters of first impression,” meaning issues that haven’t been legally resolved by courts before. That makes it all the more likely that the Supreme Court will have the last word. The Republican-appointed majority has been boosting Trump’s firing power in his second term, but it has also vaguely signaled an intention to protect Fed independence. The outcome of this historic case could hinge on the extent to which the justices say the president must prove he has cause to fire Cook, if they say he has to prove it at all. The administration argues that the president’s determination is un-reviewable by courts. Subscribe to the Deadline: Legal Newsletter for expert analysis on the top legal stories of the week, including updates from the Supreme Court and developments in the Trump administration’s legal cases.
Jordan Rubin is the Deadline: Legal Blog writer. He was a prosecutor for the New York County District Attorney’s Office in Manhattan and is the author of “Bizarro," a book about the secret war on synthetic drugs. Before he joined MS NOW, he was a legal reporter for Bloomberg Law.
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