President Donald Trump on Friday asked a federal judge to reject a request by Federal Reserve Governor Lisa Cook that would stop him from firing her while a court case plays out.
Trump moved to fire Cook on Monday over mortgage fraud allegations raised by his ally, Federal Housing Finance Agency Director Bill Pulte. The allegations focus on Cook claiming primary residence status on two mortgages for homes in Ann Arbor, Michigan, and Atlanta, Georgia, within two weeks in 2021. Pulte sent criminal referrals to the Justice Department, but Cook has not been charged with a crime.
Cook sued on Thursday, saying the president did not meet the legal standard for removing her “for cause,” and asked the court for a restraining order so she could stay on the Federal Reserve.
The Trump administration argued in court that Pulte’s criminal referral meets the “for cause” threshold required to remove a Fed governor, regardless of whether Cook’s actions qualify as criminal mortgage fraud.
FEDERAL RESERVE GOVERNOR LISA COOK SUES TRUMP
“Making contradictory statements in financial documents – whether or not they could meet a criminal standard – is enough to remove a senior financial regulator from office,” the Trump administration wrote in court papers.
The Federal Reserve and Chair Jerome Powell were also named in Cook’s lawsuit. This was done so Cook could get legal protection and stay in her role if she wins her case. The Fed’s filing said it will attend Friday’s hearing but does not plan to argue against Cook’s motion.
“The Board is asking only for (1) a quick ruling to clear up uncertainty, and (2) its intention to follow whatever order the Court issues,” the Fed wrote.
Cook’s lawsuit challenges the Trump administration’s claim that she can be removed based on the referral. She argued that federal laws for removing officials at other agencies require “negligence, malfeasance, or inefficiency” as the standard for “for cause” removal.
“There is no way ‘for cause’ removal allows the President to fire Governor Cook, either for his real reason or the made-up one he invented,” Cook said in her motion for a temporary restraining order.
If U.S. District Court Judge Jia Cobb grants the restraining order, it could become a longer-term injunction that an appeals court might review. Cobb said she would set a fast schedule for briefs in the case during Friday’s hearing.
The case could eventually reach the U.S. Supreme Court. A conservative majority has so far allowed Trump to fire officials from other agencies despite laws protecting them. But a May ruling said the Federal Reserve is different because of its unique structure and history.
The dispute comes as the Trump administration pressures the Fed to lower interest rates. If Cook is removed, Trump could appoint his fourth choice to the Fed’s seven-member board of governors, which helps set monetary policy through the Federal Open Market Committee.
Trump has often criticized Fed Chair Powell, who he appointed in 2017, for not cutting rates and for handling an expensive renovation project poorly. While Trump has threatened to fire Powell in the past, he has recently stopped making those threats as Powell’s term ends in May.
The Fed is expected to cut interest rates at its next policy meeting in mid-September because the labor market is weakening, even though inflation is still above the Fed’s 2% target.
