Judge grants injunction; Fed Gov. Cook to remain on board

Key insight: A federal judge issued an injunction allowing Fed Gov. Lisa Cook to remain on the Federal Reserve Board pending the outcome of her suit challenging President Trump’s effort to remove her.
What’s at stake: The ruling comes ahead of the Federal Open Market Committee’s next meeting on Sept. 16-17.
Forward Look: The ruling will likely be appealed and comes amid a broad campaign by the White House to assert greater authority over independent agencies.

A federal district court judge has granted an injunction allowing Federal Reserve Gov. Lisa Cook to continue to serve on the Federal Reserve Board pending the outcome of her lawsuit challenging President Trump’s effort to remove her.

In a ruling late Tuesday, Judge Jia Cobb of the DC District Court found that, while the suit raises “many serious questions of first impression” that “will benefit from further briefing on a non-emergency timeline,” Cook made a more convincing argument that the “for cause” protections afforded to Federal Reserve governors protect her from being removed under the circumstances that she was. To that end, Cobb ordered the Federal Reserve to “allow Cook to remain a member of the Board during the pendency of this litigation.”

“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,” Cobb said. “‘For cause’ thus does not contemplate removing an individual purely for conduct that occurred before they began in office.”

Cobb further found that Cook was “substantially likely” to win her argument upon further consideration by the court and had demonstrated irreparable harm from her purported removal for which immediate relief was warranted. 

The ruling comes a week before the next meeting of the Federal Reserve’s Federal Open Market Committee on Sept. 16 and 17, in which the central bank is expected to lower interest rates for the first time since January. The ruling also comes just ahead of the Senate Banking Committee’s scheduled vote on the nomination of White House Council of Economic Advisers Chair Stephen Miran to fill a seat vacated by former Fed Gov. Adriana Kugler last month. 

The Federal Reserve declined to comment on the ruling but said in an earlier statement that the central bank would abide by all court rulings in the case. The White House is expected to appeal the ruling.

In August, Federal Housing Finance Agency Director Bill Pulte issued a criminal referral to the Department of Justice concerning allegations that Cook had taken out primary residential mortgages on two separate properties in Michigan and Georgia within weeks of each other in 2021, before she had been nominated to serve on the Federal Reserve Board. Pulte shared a screenshot of the letter on social media shortly thereafter.

President Trump then published a screenshot of a letter to Cook on social media in late August informing her that he was removing her from the Fed Board “effective immediately,” citing Pulte’s referral as his justification and asserting his authority to interpret what actions justify “cause” for her removal.

Those events come amid a backdrop of the President exerting unprecedented authority to fire Democrats serving on what had long been considered independent regulatory agencies, including the National Credit Union Administration — actions that are also being challenged in court. Trump has also put additional pressure on the Fed to lower interest rates, pushing for the ouster of Fed chair Jerome Powell for months before turning his sights on Cook.

As expected, the thrust of the district court opinion centered on what precisely constitutes “cause” for removal as it applies to Federal Reserve Act, which itself is silent on the matter. The judge said that inconsistencies in the president’s attorneys’ definition of “cause” will likely require additional hearings to elucidate, but said even the president’s attorneys are not questioning the constitutionality of the “for cause” provision and acknowledge that there are limits to the president’s removal authority. 

“Thus, even the Government admits that the definition of ‘for cause’ in this context cannot extend to any articulable reason the President deems to warrant removal and must have some limitations,” the opinion said. “More than dictionary definitions are required to resolve this dispute.”

If “for cause” has limits, the opinion argues, the legislative and judicial case history of what those limits are have overwhelmingly understood those limits to be grounded in official rather than personal misconduct, and the circumstances of Cook’s removal do not satisfy that requirement. Further, the Supreme Court indicated in a ruling earlier this year that while the president’s removal powers over other independent agencies may be greater than they have historically been interpreted to be, the Federal Reserve’s functions are unique and thus removal actions must be limited to a more narrow range of offenses.

“Accordingly, the Court finds that permissible cause for removal of a Federal Reserve Governor extends only to concerns about the Board member’s ability to effectively and faithfully execute their statutory duties, in light of events that have occurred while they are in office,” the opinion said. 

Cook’s attorney, Abbe Lowell, said in a statement that the ruling “reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference.”

“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,” Lowell’s statement said.