Trump appeals ruling allowing Fed Gov. Cook to remain

• Key insight: The White House has appealed a lower court ruling granting Federal Reserve Gov. Lisa Cook an injunction that allows her to remain at her post pending the outcome of her lawsuit challenging the president’s moves to fire her.
• What’s at stake: The appeals process, even if expedited, is unlikely to affect Cook’s participation in the Federal Open Market Committee’s next meeting, which takes place Sept. 16-17.
• Forward Look: The suit is likely to make its way to the Supreme Court, and the outcome of the high court’s decision on the legality of Trump’s efforts to fire Cook could have dramatic implications for the political independence of the Fed.

The White House is appealing a federal district court ruling earlier this week that allows Federal Reserve Gov. Lisa Cook to remain at her post on the Fed board pending the outcome of her lawsuit challenging her purported removal by the president.

Attorneys representing President Trump notified the DC District Court on Wednesday that they intended to appeal a Tuesday night ruling that found that the president’s reasons for removing Cook do not meet the long-understood definition of “cause,” which in turn serve as grounds to grant Cook’s motion for an injunction to allow her to remain at her post pending the outcome of the case. An appellate brief from the White House has not yet been filed with the U.S. Court of Appeals for the District of Columbia Circuit.

The pace of federal appeals, even on an expedited basis, mean Cook is likely to remain on the Fed board for the next Federal Open Market Committee meeting, which is scheduled to be held on Sept. 16 and 17. The FOMC is widely expected to cut interest rates by 25 basis points in light of new employment data showing a softening labor market.

Cook’s purported removal from office came after Federal Housing Finance Agency Director Bill Pulte sent a criminal referral to the Department of Justice in August alleging that Cook had claimed primary residence on two separate mortgages taken out within weeks of each other in 2021 — before she was nominated and confirmed by the Senate to serve on the Fed board. Pulte later posted a screenshot of the referral on social media, spurring Trump to suggest that he would remove her from office if she didn’t resign. Trump then posted a screenshot a few days later showing a letter to Cook informing her that he had fired her from the Fed Board, with the allegations of mortgage impropriety serving as his reason.

Cook promptly filed a lawsuit challenging her removal, arguing that the Federal Reserve Act’s “for cause” removal clause has long been understood by courts to mean that officials with those protections can only be removed for actions or inactions taken by her in her official capacity. Cook further argued that even if her prior actions were sufficient to remove her, mere allegations of misconduct are not sufficient grounds for her removal. 

Trump’s attorneys countered in their response to the lawsuit that the president has expansive power to define “cause,” and that the courts lack jurisdiction to question whether those definitions are sufficient. The DC District Court judge overseeing the case ruled on Tuesday night that the “for cause” protections as understood by Congress when the clause was added to the FRA in 1935 would not have been compatible with the president’s expansive view, and thus granted Cook an injunction allowing her to remain at her post pending the outcome of the suit.

The suit is almost certainly destined for a hearing by the Supreme Court, which has taken a more expansive view of the president’s power to remove independent regulators than prior courts. The Supreme Court in 2020 struck down “for cause” protections for the Consumer Financial Protection Bureau director over concerns that the single-director structure vested too much power in an independent regulator to pass constitutional muster. The Supreme Court has also ruled that fired Democratic officials at independent regulators like the National Labor Relations Board and Equal Employment Opportunity Commission will not remain in office pending the outcomes of their suits. 

But in a May ruling allowing those other officials to remain sidelined pending the outcomes of their cases, the Supreme Court also noted that their decision in that case would not necessarily apply to the Federal Reserve, which the court said “is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”