Trump Urges SC to permit dismissal of Federal Reserve Governor Lisa Cook

President Donald Trump’s administration has asked the US Supreme Court to allow him to proceed with dismissing Federal Reserve Governor Lisa Cook -- an unprecedented move since the central bank’s founding in 1913 -- in a legal battle that could imperil the Fed’s independence.

 

The Justice Department petitioned the justices to overturn US District Judge Jia Cobb’s 9 September order temporarily blocking the Republican president from removing Cook, an appointee of former Democratic President Joe Biden. Cobb ruled that Trump’s allegations of mortgage fraud committed before Cook took office -- which she denies -- were likely insufficient grounds for removal under the Federal Reserve Act.

 

“This application involves yet another case of improper judicial interference with the President’s removal authority -- here, interference with the President’s authority to remove members of the Federal Reserve Board of Governors for cause,” the Justice Department said in its filing.

 

Cook participated in the Fed’s high-profile two-day meeting in Washington this week, in which policymakers voted to cut interest rates by a quarter of a percentage point in response to a weakening jobs market. Cook was among those voting in favour of the cut.

 

Congress built safeguards into the 1913 law establishing the Fed to insulate it from political pressure. Under the statute, governors may only be removed “for cause”, though the term is undefined and no procedures for removal are laid out. No US president has ever dismissed a Fed governor, and the law has never been tested in court.

 

Cook, the first Black woman to serve as a Fed governor, sued Trump in August after he announced her removal. She contends the claims against her are a pretext to oust her over her monetary policy views, and that the president lacks lawful authority to do so.

 

Trump’s attempt reflects the sweeping interpretation of presidential power he has advanced since returning to office in January. The Justice Department argued that so long as a president cites a cause for dismissal, his discretion is “unreviewable”.

 

“Put simply, the President may reasonably determine that interest rates paid by the American people should not be set by a Governor who appears to have lied about facts material to the interest rates she secured for herself -- and refuses to explain the apparent misrepresentations,” the filing stated.

 

The administration asked the court to issue an immediate “administrative stay” to allow Cook’s temporary removal while the justices deliberate. Cook’s lawyers opposed swift action, warning that removing her “would threaten our nation’s economic stability and raise questions about the Federal Reserve’s continued independence -- risking shock waves in the financial markets that could not easily be undone.”

 

The Fed has declined comment but said it will abide by court rulings.

 

Ripple Effect on Global Markets

The case could have profound consequences for the Fed’s ability to set interest rates without political interference, a cornerstone of central banking worldwide.

 

Trump has repeatedly demanded steeper rate cuts and harshly criticised Fed Chair Jerome Powell, calling him a “numbskull” and a “stubborn moron”. The administration has frequently asked the Supreme Court to override lower courts blocking its policies, with the justices siding with Trump in most cases this year.

 

However, in May, the Court distinguished the Fed from other agencies, describing it as “a uniquely structured, quasi-private entity” with a singular tradition.

 

Trump cited allegations that Cook falsified mortgage records prior to her Senate confirmation in 2022. Judge Cobb, in blocking her dismissal, found the statute permits removal only for misconduct while in office.

 

The DC Circuit Court of Appeals upheld Cobb’s ruling this week, finding that Cook was denied due process.

 

Meanwhile, the Justice Department has launched a criminal mortgage fraud probe into Cook, with grand jury subpoenas issued in Georgia and Michigan. But some evidence, including a loan document for an Atlanta home and tax records in Michigan, appears to contradict the allegations.

 

The Supreme Court has not yet indicated how quickly it will act.

 

 

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