A federal judge on Tuesday night temporarily blocked President Donald Trump from firing Federal Reserve Governor Lisa Cook as her lawsuit challenging her termination plays out in court.
The late-night order from Federal Judge Jia Cobb came two weeks after Trump said he’d fire the governor, foreshadowing a highly politicized legal battle—touching issues of fundamental balance of power between the judiciary and executive branch—that could be highly consequential for how much Trump can modify the makeup of the federal government.
In her order, Cobb issued a preliminary injunction, which is a procedural step in a lawsuit whereby the judge orders a party to do—or oftentimes, as in this case, not do—something pending the result of the litigation.
This often means that the judge thinks the plaintiff’s case will likely succeed on the merits, that the plaintiff is likely to suffer irreparable harm without the injunction, the injunction is in the public interest, or, as is the case here, a combination of these factors.
Trump could appeal the order to a higher court, as he often does. Cases touching important constitutional issues like this one often ultimately get decided by the Supreme Court.
The publicized controversy began when the director of the Federal Housing Finance Agency (FHFA), William Pulte, posted on X on Aug. 20 a criminal referral letter accusing Cook of committing mortgage fraud in June and July 2021, before she was nominated and confirmed to the Board of Governors.
Trump, in a Truth Social post half an hour later wrote, “Cook must resign, now!!!” and shared a link to an article regarding the allegations. Five days later, Trump posted a letter, dated Aug. 25 and addressed to Cook, stating that she is “removed from [her] position on the Board of Governors of the Federal Reserve, effective immediately.”
Her alleged misconduct “exhibits the sort of gross negligence in financial transactions that calls into question [her] competence and trustworthiness as a financial regulator,” the president wrote in his letter. Three days later, Cook filed the current lawsuit at district court in the District of Columbia.
The core issue in the case concerns the president’s ability to remove a Federal Reserve official “for cause,” a term in the Federal Reserve Act designed to grant some level of political insulation for high-level Fed officials.
Because Trump based his rationale for removing her on alleged misconduct that occurred before Cook’s confirmation—instead of behavior during her term—his decision to fire Cook is not grounded in “good cause” and runs afoul of Congress’s intent when they passed the law, the court wrote in its opinion.
But the government’s lawyers say that’s not an issue, because the statute provides the president discretion to remove Cook, and that his decision to do so is not subject to review by the courts.
“The bottom line is that the statute provides for the President to remove a Governor ‘for cause’,” the government’s lawyer wrote in a Sept. 4 reply brief to Cook’s complaint. “The President exercised that authority after public revelations of Dr. Cook’s mortgage misconduct; and there is no basis in the statute, the Constitution, or principles of equity for a district court to second-guess that determination, let alone to order reinstatement.”
Not letting the president remove Cook “would insulate all manner of gross wrongdoing” and preclude the president from “remov[ing] a Governor who was revealed to have committed massive financial fraud—so long as it happened before confirmation,” the government’s lawyer wrote in another brief filed on Aug. 29.
But the court disagreed, citing two cases—one recent and one dating back to the 19th century—that establishes the authority of the court to review decisions by other parts of the government.
“Even when a statute ‘delegates discretionary authority’ to an actor, the ‘role of the reviewing court . . . is, as always, to independently interpret the statute and effectuate the will of Congress subject to constitutional limits,’ the court wrote.
“It is emphatically the province and duty of the judicial department to say what the law is,” the court added.
The commonsensical reason that the president can’t remove Federal Reserve officials for arbitrary reasons has to do with the design of the purpose of the agency itself, the court wrote in its opinion.
“Sound monetary policy often involves making short-term sacrifices for the long-term good of the economy,” the court wrote in its decision on Tuesday. “Congress therefore designed the Federal Reserve and the Board of Governors to possess characteristics that reflect their insulation from other parts of the federal government, in particular with respect to the Board’s monetary policy decisions,” the court wrote.
“Board members are appointed to staggered fourteen-year terms, which, notwithstanding unexpected vacancies, typically prevents any single administration from appointing a majority of the Board’s members and further shields the Board from partisan influences.”
In other words, because the Federal Reserve must make unpopular decisions, insulating the Federal Reserve from political influences is crucial for it to make good monetary policy.
By doing so, “Congress sought to ensure that the Federal Reserve would ‘reflect, not the opinion of a majority of special interests’, but a body that takes into consideration all phases of national economic life,” the court wrote in its opinion on Tuesday.
“Today’s ruling recognizes and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference,” Cook’s lawyer, Abbe Lowell, said in a statement. “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.”
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