US Appeals Court Blocks Trump’s Attempt to Remove Fed Governor Lisa Cook

A US appeals court on Monday rejected Donald Trump’s bid to remove Federal Reserve Governor Lisa Cook, marking the first time a president has sought to dismiss a Fed governor since the institution was established in 1913. The case has raised concerns over the central bank’s long-standing independence.

 

The ruling by the US Court of Appeals for the District of Columbia Circuit means the administration now has only hours to appeal to the Supreme Court if it hopes to prevent Cook from participating in the Fed’s policy meeting on Tuesday and Wednesday, where interest rates are expected to be cut to bolster a cooling labour market.

 

The D.C. Circuit denied a Justice Department request to stay an earlier order temporarily blocking the Republican president from removing Cook, an appointee of former Democratic President Joe Biden.

 

On 9 September, District Judge Jia Cobb ruled that Trump’s claims that Cook committed mortgage fraud prior to her appointment -- which Cook denies -- were unlikely to constitute sufficient grounds for removal under the Federal Reserve Act.

 

The appeals court decision, split 2-1, saw Judges Bradley Garcia and J. Michelle Childs (both Biden appointees) in the majority, with Trump appointee Judge Gregory Katsas dissenting. Writing for the majority, Garcia said Cook was likely to succeed in her claim that she had been denied due process under the Fifth Amendment of the US Constitution.

 

“Before this court, the government does not dispute that it provided Cook no meaningful notice or opportunity to respond to the allegations against her,” Garcia wrote.

 

Neither the White House, the Fed, nor Cook’s legal team offered immediate comment on the ruling. The Fed has stressed that it will abide by any court decision while urging a swift resolution to avoid disruption.

 

Separately, the Senate on Monday narrowly confirmed Trump’s nominee Stephen Miran to a vacant seat on the Fed’s board in a 48-47 vote, paving the way for him to participate in this week’s rate-setting meeting alongside Cook.

 

Legal Protections and Precedent

When Congress created the Federal Reserve in 1913, it deliberately shielded the institution from political interference. Governors may be removed by a president only “for cause”, though the law neither defines the term nor sets out procedures. No president has ever removed a Fed governor, and the issue has never previously been tested in court.

 

Garcia wrote that because Cook’s due process claim was “very likely meritorious”, the court did not need to address the interpretation of “for cause” at this stage.

 

Cook, the first Black woman to serve as a Fed governor, sued Trump and the Fed in late August, arguing the allegations against her were a pretext to remove her for her policy positions. Trump’s administration has argued that the president has broad discretion in such matters and that courts cannot review those decisions.

 

The case carries profound implications for the Fed’s independence, particularly its ability to set interest rates free from political pressure -- widely regarded as essential to maintaining credibility and controlling inflation.

 

Trump has repeatedly demanded steep rate cuts this year, criticising Fed Chair Jerome Powell for his handling of monetary policy. While the Fed has resisted such demands in its fight against inflation, it is expected to cut rates this week.

 

Wider Implications

Earlier this year, the Supreme Court allowed Trump to dismiss members of independent federal agencies. However, in a related May ruling, the Court distinguished the Fed as “a uniquely structured, quasi-private entity” with a long tradition of independence, signalling its protection may be stronger than other agencies.

 

Judge Cobb’s initial ruling suggested that the 1913 law only allows governors to be removed for misconduct committed while in office, not for actions preceding their appointment. The mortgage allegations against Cook date back to before her 2022 Senate confirmation.

 

Trump and Federal Housing Finance Agency Director William Pulte alleged Cook misrepresented properties on mortgage applications. However, documents reviewed by Reuters and records from local authorities in Michigan and Georgia appeared to undermine those claims, potentially bolstering Cook’s defence.

 

The Justice Department has nonetheless launched a criminal investigation into possible mortgage fraud, issuing grand jury subpoenas in both states.

 

For now, Cook remains in her position, underscoring both the legal uncertainty and the high stakes for the Federal Reserve’s future independence.