Trump makes new push for court approval to fire Fed’s Cook

(Bloomberg) — President Donald Trump on Sunday made a final push to sway a U.S. appeals court to let him oust Federal Reserve Governor Lisa Cook over allegations of mortgage fraud before next week’s Fed vote on interest rates, again telling the court that she’s failed to dispute the claims.

Trump last week asked the Washington-based appeals court to temporarily pause a lower court’s Sept. 9 injunction blocking him from firing Cook while her lawsuit challenging her dismissal proceeds. The ruling from the three-judge appellate panel is expected to come later Monday.

If the appeals court denies the Justice Department’s request for a so-called stay order, the president is likely to immediately ask the Supreme Court to intervene, setting up a series of last-ditch arguments with the justices before a highly anticipated Fed policy meeting that starts Tuesday.

Trump moved to fire Cook last month after Federal Housing Finance Agency Director Bill Pulte, one of the president’s most outspoken supporters, accused her of committing mortgage fraud. He alleged that she declared two homes in Georgia and Michigan as her primary residence in order to get better loan terms. The real estate transactions predated her time on the Fed.

Cook “has provided no explanation for the contradictory representations apparent on the face of her mortgage agreements, and that alone is grounds to stay the extraordinary” preliminary injunction, the Justice Department said in a filing Sunday afternoon.

Yet Trump’s new filing comes just days after revelations that Cook described the disputed Georgia property as a “vacation home,” according to documents viewed by Bloomberg News. The May 2021 loan estimate was issued by a credit union weeks before Cook purchased the home. The document shows she told the lender that the property wouldn’t be her primary residence.

The Justice Department’s filing did not address those revelations.

In a statement responding to Trump’s Sunday filing, Cook lawyer Abbe Lowell said the allegations are a “smear campaign” aimed at helping Trump seize control of the Fed.

“The government continues to ignore the facts that have been publicly reported on and cited in our briefs that refute their allegations against Governor Cook,” Lowell said. “The attempt to remove Governor Cook is based on cherry-picked social media posts from the FHFA Director that collapse under basic scrutiny.”

Lowell made his final arguments against Trump’s stay request in a filing on Saturday, repeatedly contending that the Fed’s independence would be shattered if the court allowed Cook to be fired over unproven allegations with questionable motives.

“A stay by this court would therefore be the first signal from the courts that our system of government is no longer able to guarantee the independence of the Federal Reserve,” Lowell said. “Nothing would then stop the president from firing other members of the Board on similarly flimsy pretexts. The era of Fed independence would be over.”

Lowell portrayed the court battle as a slippery slope with “dire” consequences for the US economy, echoing arguments that Cook made in the lawsuit she filed last month.

“Central banks like the Federal Reserve are independent for a reason: Even the perception of political influence can destroy the investor confidence that is essential for economic growth and stability,” Cook’s lawyer said in Saturday’s filing. “And that bell cannot be unrung.”

The president is seeking to overturn a decision by US District Judge Jia Cobb, who ruled Trump likely did not have “cause” under the Federal Reserve Act to fire Cook. Cobb also held Trump likely violated Cook’s constitutional right to due process by trying to terminate her via a social media post that did not provide an opportunity to challenge the allegations.

‘Reading in Limitations’

In Trump’s Sunday filing, the president argued that Cobb went too far by saying he didn’t have cause to fire Cook because the alleged misconduct occurred a year before she took office in 2022. The Justice Department called the judge’s findings “backwards” and said she was “reading in limitations that Congress knew how to impose but did not.”

The Fed hasn’t taken a side in the legal fight and has said it will respect the court’s decision.

The question for the appeals court is whether to issue a ruling that would put Cobb’s decision on hold while the appeal proceeds, allowing Cook’s dismissal to take effect. Such stays are typically granted if the judges believe an appeal will ultimately succeed on the merits and the party asking for it will face “irreparable harm” without immediate action.