A federal judge has ruled that Lisa Cook can keep her job at the Federal Reserve for the time being.
Cook sued Trump after claiming he fired her from the Fed, which is traditionally independent.
The Supreme Court has sided with Trump on independent agency firings, but believes the Fed is unique.
A federal judge blocked President Donald Trump’s attempt to remove Lisa Cook from her position as a Federal Reserve governor, setting up a legal battle that is likely to go to the Supreme Court.
US District Judge Jia Cobb granted Cook’s lawyers’ request for a temporary restraining order, which means the decision will stand until additional litigation is resolved or a higher court reverses it.
“President Trump’s actions and Cook’s resulting legal challenge raise many serious questions of first impression that the Court believes will benefit from further briefing on a non-emergency timeline,” Cobb wrote in its ruling.
Cobb reported that Cook had demonstrated a “strong showing that her purported removal was done in violation of the Federal Reserve Act’s ‘for cause’ provision.”
“The best reading of the ‘for cause’ provision is that the bases for removal of a member of the Board of Governors are limited to grounds concerning a Governor’s behavior in office and whether they have been faithfully and effectively executing their statutory duties,” wrote Cobb.
The “for cause” provision should not apply to an individual’s “conduct that occurred before they began in office,” according to Cobb.
“In addition, the Court finds that the removal also likely violated Cook’s procedural rights under the Fifth Amendment’s Due Process Clause,” says Cobb.
Abbe Lowell, Cook’s attorney, said in a statement on Tuesday that Cobb’s decision “recognizes and reaffirms the importance of safeguarding the Federal Reserve’s independence from illegal political interference.”
“Allowing the President to unlawfully remove Governor Cook on unsubstantiated and vague allegations would endanger the stability of our financial system and undermine the rule of law,” he said, adding that Cook will continue to serve at the Federal Reserve.
Trump announced on his Truth Social account in August that he was firing Cook for “cause,” citing apparent irregularities in her mortgage documents discovered by Federal Housing Finance Agency Director Bill Pulte.
According to Pulte, the director of the Federal Housing Finance Agency, Cook stated that two properties she purchased around the same time would serve as her primary residence. He also referred Cook to the Justice Department, which launched a criminal investigation that one of her attorneys described as “politicized.”
Cook sued Trump to stop the firing. In court filings and public statements, she has neither denied nor explained the apparent discrepancy in her mortgage documents.
Lowell claimed in court filings and a hearing that she is entitled to due process before being fired for “cause,” and that Pulte has selectively targeted Trump’s perceived political enemies by reviewing their mortgage documents. Pulte has made similar allegations against Democratic Sen. Adam Schiff, who led Trump’s first impeachment, and New York Attorney General Letitia James, who filed a successful civil lawsuit against Trump and the Trump Organization, accusing them of defrauding banks in real estate loan documents.
Trump has urged the Federal Reserve to lower interest rates as part of his strategy to reshape the American economy. The board has indicated that it will likely begin cutting interest rates in September.
Because the Federal Reserve is an independent agency, presidents have historically had limited authority to remove its members. Cook, a former President Joe Biden appointee, has been confirmed by the United States Senate twice, most recently in 2023 for a 14-year term that will expire in 2038. She is the first Black woman to serve as a Federal Reserve governor.
Before Trump announced his decision to fire Cook, no president had attempted to fire a Fed governor, though some had tried to put pressure on the central bank.
Presidents can fire Fed governors for “cause,” which Justice Department lawyers say was met when Trump cited Pulte’s allegations of mortgage fraud. They argued that such a person should not regulate mortgage rates across the country.
The Supreme Court has largely sided with Trump’s decision to fire independent agency members without cause, breaking precedent. On Monday, Chief Justice John Roberts allowed Trump to fire the only Democratic appointee to the Federal Trade Commission, without cause, while additional litigation is pending.
However, in a brief, unsigned opinion issued in May, the majority of the Supreme Court stated that it would treat the Federal Reserve differently.
“The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” according to the court.
Trump told reporters last month that he is considering nominees to replace Cook, but has yet to make a formal nomination. He already has one nominee, Stephen Miran, chairman of the Council of Economic Advisors, who will fill a separate vacancy on the central bank’s board.
