A US federal judge temporarily blocked President Donald Trump from eliminating Federal Reserve Governor Lisa Cook. Lisa Cook is breaking the White House early in a unprecedented legal battle that could overturn the central bank’s long-standing independence.
Later Tuesday, a preliminary ruling by US District Jia Cobb, Washington, DC, found that the Trump administration’s claim that Cook committed mortgage fraud before he took office is likely not sufficiently grounded for her removal.
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This decision blocks her from firing, and the dispute passes through the court. Cobb determined that there is a high chance that Cook would win the lawsuit he filed later last month to overturn the shooting.
Cook, a member of the Fed’s board, denys any fraud.
“President Trump has not identified as a board member anything related to Cook’s actions or work performance. Board members will show that she is insulting the board or the public interest by performing her duties in dishonest or inefficiently,” Cobb wrote in her ruling.
Trump moved to Fire Cook in late August, but the Fed said she remains in her position. The Fed declined to comment on the decision.
White House spokesman Kush Desai defended Trump’s actions on Wednesday, saying the president “legally removed” the mortgage claim for a cause, saying, “This ruling is not the last comment on the matter.”
Trump on Tuesday did not answer reporters’ questions about the verdict.
The case, which is likely to end before the U.S. Supreme Court, has affected the Fed’s ability to set interest rates regardless of politicians’ wishes.
“This ruling recognises and reaffirms the importance of protecting the Federal Reserve’s independence from illegal political interference,” Cook’s lawyer Abbe Lowell said in a statement.
The Federal Reserve governors aren’t like cabinet secretaries, and the law doesn’t allow the president to fire them for policy disagreements or simply because they want to replace them. Congress tried to isolate the Fed from political pressure, the court said, giving the Fed governor long and staggered conditions, noting that it is unlikely that the president will be able to appoint the majority of its board members for one period of time.
The law that created the Fed says that the governor could only be removed “for the cause,” but does not define the terminology or set up procedures for removal. No president has deleted the Fed governor. The law has never been tested in court.
Cobb discovered that the “best reading” of the law is to allow the Fed governor to be removed only for fraud while in his tenure. All mortgage fraud claims against Cook are related to actions taken in 2022 before the Senate confirmation.
President-appointed federal Housing and Treasury Directors Trump and William Porto said Cook inaccurately described three properties related to mortgage applications.
The U.S. Department of Justice has also launched an investigation into criminal mortgage fraud involving Cook and issued large ju judge subpoenas from both Georgia and Michigan.
Cook sued Trump and the Fed, saying the claims were an excuse to fire her without giving Trump the legal authority to eliminate her and for her financially-policy stance.
Cook, the first black woman to serve as Fed governor, denied the fraud claim in her court application, saying she “never committed mortgage fraud.”
However, she said that even if the allegations were true, it would not be the basis for removal as the actions that allegedly took place before she was confirmed by the Senate.
A crucial moment for the Fed
The White House argues that the president has broad discretion to determine that it is necessary to eliminate federal governors, and courts lack the authority to consider those decisions.
Trump has repeatedly denounced the US Central Bank of Japan’s Speaker Jerome Powell for its stewardship over monetary policy, demanding that it actively cut off. The central bank plans to cut fees at its policy meeting from September 16th to 17th.
According to CME Fed Watch, a group that tracks the possibilities of monetary policy decisions, economists are hoping to cut interest rates due to economic conditions like the cooling labor market, not political pressure.
Legal procedures are underway as Trump is seeking confirmation from Stephen Milan. He is likely to be approved by the Senate Banking Committee on Wednesday, but it remains unclear whether it will be confirmed by the Senate as a whole before the central bank’s policy meeting.
