In a significant legal ruling, a federal appeals court has determined that President Donald Trump cannot currently remove Lisa Cook from her position on the Federal Reserve’s Board of Governors. This decision, which comes just hours before a crucial two-day monetary policy meeting, was issued by the US Court of Appeals for the District of Columbia Circuit in a 2-1 vote that fell along party lines.
Trump’s efforts to oust Cook have been motivated by allegations of mortgage fraud, though it is important to note that Cook has not been charged with any criminal wrongdoing. Under the Federal Reserve Act, a president can only dismiss governors “for cause,” a stipulation that has become the focal point of the dispute. The judges’ ruling emphasized the lack of justification presented by the government, pointing out that Cook had not been provided the minimal process of notice or a chance to respond prior to her purported dismissal.
Judges Bradley Garcia and Michelle Childs highlighted that the district court’s preliminary injunction was based on Cook’s likelihood of success regarding her claims of being removed without “cause” and her right to due process under the Fifth Amendment. Conversely, Judge Gregory Katsas dissented, asserting that the president had valid grounds to remove Cook.
In a twist of events, this ruling followed a lawsuit filed by Cook, who contended that her termination was based on “an unsubstantiated allegation” and violated her rights. If Trump were to successfully fire Cook, it would mark a historic first, as no president in the Federal Reserve’s 111-year history has ever removed a sitting governor.
Concurrently, the Senate confirmed Stephen Miran as Trump’s nominee for a separate position on the Fed’s Board, further complicating the central bank’s political dynamics. The Federal Reserve is expected to announce a reduction in interest rates following the policy meeting, although the specifics of the cut remain uncertain.
Trump’s ongoing attempts to influence the central bank’s decisions are apparent, particularly as he has sought to persuade Fed Chair Jerome Powell to lower rates. In an aggressive campaign, Trump has labeled Powell with derogatory terms for maintaining higher rates and has even threatened his position, although he has recently indicated Powell will remain until his term concludes in May.
This unfolding situation raises questions about the Federal Reserve’s independence, especially given Trump’s aggressive approach towards executive power. Legal experts and economists have voiced concerns that allowing the president to remove governors at will could undermine the bank’s autonomy, which has traditionally been insulated from political pressures. This independence has been foundational in ensuring that monetary policy is based on economic conditions rather than political expediency, aimed at stabilizing prices and supporting employment.
Legal perspectives suggest that Cook’s attorneys view Trump’s interpretation of “cause” as an attempt to set a precarious precedent, allowing the president to dismiss any board member who differs with him on policy matters based on vague allegations. The Trump administration has dismissed Cook’s claims as “meritless,” suggesting that her financial misrepresentations raise doubts about her capability in managing the U.S. money supply.
The story remains fluid, with ongoing developments in this high-stakes battle over the independence of one of the nation’s most critical economic institutions.
