A federal judge has temporarily restricted President Donald Trump from removing Lisa Cook, a member of the Federal Reserve Board of Governors, marking an early setback for the White House in a unique legal battle that could challenge the long-standing independence of the central bank.
In a preliminary ruling issued by District Judge Jia Cobb in Washington, D.C., the court found that the Trump administration’s claims that Cook committed mortgage fraud prior to her appointment are unlikely to constitute a valid reason for her dismissal.
Cook denies any wrongdoing.
Judge Cobb stated in her ruling, “President Trump has not specified any behavior or performance issues regarding Cook’s conduct as a board member that would indicate she is harming him or the public interest by performing her duties recklessly or ineffectively.”
Trump sought Cook’s dismissal in late August, but the Federal Reserve indicated she remains in her position.
This legal case, which could eventually reach the U.S. Supreme Court, has implications for the central bank’s ability to set interest rates without political interference.
Trump has urged the Federal Reserve to aggressively lower interest rates, blaming Chairman Jerome Powell for his management of monetary policy. The central bank is expected to announce a rate cut during its monetary policy meeting scheduled for September 16-17.
The law that established the Federal Reserve stipulates that members can only be removed for “good cause,” though it does not specify what constitutes such cause or outline removal procedures.
All allegations of mortgage fraud against Cook relate to actions taken prior to her confirmation by the U.S. Senate in 2022.
Both Trump and William Bult, the President’s appointee to the Federal Housing Finance Agency, claim that Cook inaccurately represented three separate properties in mortgage applications, potentially enabling her to secure lower interest rates.
Cook, who is the first Black woman to serve as a member of the Federal Reserve, categorically denies the fraud allegations in court filings, stating that she “did not commit any mortgage fraud.”
Cook has filed a lawsuit against Trump and the Federal Reserve, arguing that these accusations do not give Trump the legal authority to remove her and are merely a pretext for her dismissal due to her monetary policy stance.