Supreme Court Refuses to Let Trump Oust Fed’s Cook for Now (1)

The US Supreme Court refused to allow President Donald Trump to immediately oust Federal Reserve Governor Lisa Cook while she sues to keep her job, dealing a setback to his efforts to exert more control over the central bank.

The order issued Wednesday means Cook can remain in her position at least until the justices rule after hearing arguments in the case in January. The economist has remained on the job since late August, when Trump said he would remove her over mortgage fraud allegations that she’s denied.

The court said that it is deferring action on Trump’s bid to remove Cook while the Justice Department appeals a lower court ruling that said she was likely to win her lawsuit over the firing. No justice noted a dissent from the order.

The Supreme Court has largely sided with Trump this year in cases challenging his firings of officials at different federal agencies. Cook’s case is especially high stakes, since the Fed’s independence from the White House has been historically seen as critical to its role in maintaining economic stability.

“President Trump lawfully removed Lisa Cook for cause from the Federal Reserve Board of Governors,” White House spokesperson Kush Desai said in a statement. “We look forward to ultimate victory after presenting our oral arguments before the Supreme Court in January.”

A spokesperson for Cook’s legal team did not immediately respond to a request for comment. The Fed declined to comment.

Read More: Trump Asks Supreme Court to Let Him Fire Fed’s Lisa Cook

The Fed, which has its own legal office separate from the Justice Department, hasn’t taken a side in the fight, telling judges it will respect whatever ruling comes down. The Fed is set to meet next on Oct. 28-29 and vote on whether to further lower interest rates. Future meetings are scheduled for Dec. 9-10 and Jan. 27-28.

“It’s far from over but this is a win for Fed independence for now,” said Tim Mahedy, a former senior adviser at the Federal Reserve Bank of San Francisco. “It’s a bit like punting the football, we still have to deal with this in January.”

The court fight over Cook’s position on the Fed unfolded rapidly ahead of its most recent policy meeting on Sept. 16-17. Lower courts allowed Cook to participate and the board voted to lower interest rates by a quarter percentage point. Following the meeting, the Justice Department asked the Supreme Court to intervene.

The potential for Trump to rapidly remake the Fed is why a group of former Fed and Treasury officials who served under Republican and Democratic administrations recently appealed to justices in a friend-of-the-court brief, urging the court to leave Cook in place. They pointed to a sizable body of research showing countries with independent central banks had consistently better economic outcomes.

FTC Firing Case

In September, the Supreme Court announced it would hear a case challenging Trump’s firing of Federal Trade Commission member Rebecca Kelly Slaughter. That case has potential consequences for Cook’s lawsuit, since the justices said that one of the questions they will consider is whether federal judges have the authority to prevent a public official from being removed from their position.

The court will hear arguments in the FTC case in early December. The Cook schedule suggests the justices want to think through the FTC case before turning their attention to Trump’s bid to oust the Fed governor.

Hearing arguments on an emergency application is an unusual step, though one the court has begun to employ on occasion amid a flood of such requests in recent years.

Trump announced in August that he was firing Cook after Federal Housing Finance Agency Director Bill Pulte accused her of fraudulently listing homes in Michigan and Georgia as a “primary residence” when she obtained mortgages in 2021 to secure more favorable terms on loans.

Cook’s lawyers have denied she committed mortgage fraud. Bloomberg News has previously reported that loan documents for Cook’s Georgia home appear to contradict Pulte’s claim, showing that she told the lender the property was a vacation home.

‘For Cause’

Cook sued in August, pressing two main claims. First, that Trump violated her due process rights by failing to give her formal notice of the accusations and an opportunity to defend herself before being fired. Second, that Trump’s rationale for removing her — the fraud allegations — violated the Federal Reserve Act, which states that governors can only be removed “for cause.”

US District Judge Jia Cobb sided with Cook in a September opinion, finding she was likely to succeed on the merits of both of her claims and granting a preliminary injunction that blocked her removal while the case went forward.

The Justice Department asked the US Court of Appeals for the District of Columbia Circuit to quickly act before the Fed’s policy meeting. A divided appellate panel voted 2-1 one day before the meeting to deny the government’s request, a decision that meant Cook could take part.

The day after the meeting, US Solicitor General D. John Sauer filed an emergency request with the justices. He wrote that Cobb’s injunction represented “yet another case of improper judicial interference with the president’s removal authority.” He also argued the judge had no role to play in reviewing a president’s determination for what qualified as “cause” to fire a Fed governor as long as it wasn’t clearly because of a “policy disagreement.”

Cook has alleged that Trump’s effort to remove her is part of a politically motivated pattern. The president had previously considered forcing out Fed Chair Jerome Powell after attacking him for not moving quickly enough to reduce interest rates.

Her lawyers argued in a Supreme Court brief that even a temporary change to the status quo could “threaten grave harm to the American economy.”

The case is Trump v. Cook, 25A312, US Supreme Court.

(Updated with context on the legal fight.)

--With assistance from Amara Omeokwe and Enda Curran.

To contact the reporters on this story:
Zoe Tillman in Washington at ztillman2@bloomberg.net;
Greg Stohr in Washington at gstohr@bloomberg.net

To contact the editors responsible for this story:
Elizabeth Wasserman at ewasserman2@bloomberg.net

Kate Davidson

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