The Trump administration on Thursday requested a federal appeals court to allow President Trump’s attempt to remove Federal Reserve board of governors member Lisa Cook to proceed before an important meeting next week regarding interest rates.
Following a federal judge’s temporary block of the firing, which determined Cook had a “strong showing” that her removal was unlawful, the Justice Department appealed to the U.S. Court of Appeals for the District of Columbia to suspend that order.
The government urged the court to decide by the end of the business day Monday, as the Federal Open Market Committee, the Fed’s monetary policy-making entity that includes board members, is slated to convene on Tuesday and “may direct open market activities.”
“That extraordinary order countermanding the President’s exercise of his Article II authority rests on a series of legal errors and should be stayed pending appeal,” DOJ lawyer Daniel Aguilar argued in the government’s emergency motion.
Trump announced Cook’s termination last month, referencing mortgage fraud allegations detailed in a criminal referral from the Federal Housing Finance Agency (FHFA) as “cause” for her removal, as necessitated by a provision in the Federal Reserve Act.
U.S. District Judge Jia Cobb on Tuesday ruled that Cook’s removal likely violated that provision.
The dismissal raises unresolved legal issues, she stated, but the “best interpretation” of the provision suggests that a Fed governor cannot be removed for reasons beyond their conduct in office and their ability to “faithfully and effectively” fulfill their statutory duties.
“’For cause’ thus does not contemplate removing an individual purely for conduct that occurred before they began in office,” Cobb wrote in her 49-page ruling.
Cook’s lawyer, Abbe Lowell, had argued that she could not be fired for mortgage information that was available during her confirmation process, claiming the alleged contradictions were disclosed in documents sent to both the Senate and White House before her May 2022 confirmation.
He also said unequivocally she “did not ever commit mortgage fraud.”
The Justice Department argued in its Thursday motion that the court “fundamentally erred” in holding that Trump lacked cause for Cook’s removal.
The allegations stem from an Aug. 15 criminal referral from FHFA Director Bill Pulte, claiming Cook deemed properties in Michigan and Georgia both as primary residences, weeks apart in 2021. Pulte later said he filed a second criminal referral for Cook, alleging she represented a third property as her “second home,” despite referencing it in other government documents as an investment or rental property.
“As Alexander Hamilton made clear when discussing the Federal Reserve’s historical predecessor the Bank of the United States its principals must be entrusted with the ‘keen, steady, and, as it were, magnetic sense’ of the ‘prosperity of the institution’ for ‘careful and prudent administration,’ because that is the ‘only basis on which an enlightened, unqualified and permanent confidence can be expected to be erected and maintained,'” Aguilar, the DOJ lawyer, wrote.
“When Governors by misconduct or gross neglect erode the foundations of such confidence, the President acts properly and lawfully by removing them,” he continued.
Cook claims in her lawsuit that her firing stemmed from Trump’s desire to take greater control of the Fed, particularly due to the central bank’s refusal to lower interest rates amid uncertainty around his trade agenda and the volatility of markets. Federal Reserve Chair Jerome Powell has been frequently criticized by the president, including with threats to fire him.
The Hill requested comment from Lowell.
