Barring eleventh hour intervention from the Supreme Court, Federal Reserve Governor Lisa Cook’s job is secure heading into Tuesday’s highly anticipated monetary policy meeting.
A federal appeals court ruled in Cook’s favor Monday, upholding a lower court’s temporary restraining order that will allow her to continue to serve on the Fed’s board and its rate-setting committee for the time being.
It’s a decisive legal blow for President Donald Trump, who moved to fire Cook on Aug. 25 based on a criminal referral letter sent to the Department of Justice by Bill Pulte, director of the Federal Housing Finance Agency. Pulte alleged Cook fraudulently claimed two homes as her primary residence, then allegedly received rental income from one of the properties.
The 2-to-1 ruling by the U.S. Court of Appeals for the District of Columbia Circuit agreed with U.S. District Judge Jia Cobb’s opinion that Cook’s Fifth Amendment due process rights were likely violated when Trump announced that he was seeking to remove her from office.
“The Supreme Court and this court have repeatedly held that a public official with ‘for cause’ protection from removal has a constitutionally protected property interest in her position,” the majority ruling from Circuit Judge Bradley Garcia stated. “She therefore may not be removed prior to being provided ‘some kind’ of meaningful notice and opportunity to respond.”
Garcia, an appointee of former President Joe Biden, was joined in the majority opinion by Judge Michelle Childs, also a Biden pick. Judge Gregory Katsas, a Trump appointee, dissented.
The real estate transactions referenced in Pulte’s DOJ referral letter occurred prior to Cook’s appointment as a Fed governor. The dissent by Katsas disagreed with the lower court’s opinion that pre-appointment conduct of a Fed governor cannot support for-cause removal from office.
“The President plainly invoked a cause relating to Cook’s conduct, ability, fitness, or competence.” Katsas wrote. “The allegations against Cook could constitute mortgage fraud if she acted knowingly, and that is a felony offense.”
Garcia and Childs argued that since Cook has been serving in her position continuously despite Trump’s attempted firing, granting the government’s request for a stay of the restraining order “would thus upend, not preserve, the status quo.”
Katsas countered that “judicial review can frustrate presidential action for months or even years … and that would enable a potentially compromised Governor to engage in significant governmental action — such as voting on whether to adjust interest rates, which Cook says she must do tomorrow.”
The Trump administration is likely to appeal Monday’s ruling to the Supreme Court, though it is unclear if it has time to do so prior to the Fed’s monetary policy meeting, which begins Tuesday morning. The Fed is widely expected to cut interest rates by 25 basis points at the meeting, though Trump has called for a larger rate cut.
The legal setback for the administration occurred around the same time Trump scored a congressional win when the Senate confirmed his nomination of Stephen Miran to fill Adriana Kugler’s vacated seat on the Fed’s board. Miran now faces a race against the clock to complete required paperwork and take the oath of office prior to the Fed meeting.
