Appeals court says Lisa Cook can stay on the Federal Reserve board — for now

A federal appeals court has blocked President Trump from firing a member of the Federal Reserve’s governing board, just ahead of a key vote on interest rates.

On a two-to-one vote, the divided court upheld an earlier decision from a district judge who found that firing Lisa Cook would likely violate the Federal Reserve Act, which includes provisions designed to insulate the central bank from political pressure from the White House.

The decision comes just days before the Fed’s rate-setting committee is expected to vote to lower its benchmark interest rate for the first time this year. Trump has been waging a high-pressure campaign to get the Fed to cut rates more aggressively.

The president announced his decision to fire Cook in a social media post last month. He pointed to allegations from a political ally, Bill Pulte, who accused Cook of making false statements on a mortgage application in 2021.

Pulte, who oversees mortgage giants Fannie Mae and Freddie Mac, has leveled similar charges against others seen as hostile to Trump, including Sen. Adam Schiff, D-Calif., and New York Attorney General Letitia James, also a Democrat. Cook, Schiff and James have all denied any wrongdoing.

By law, Fed governors can only be removed “for cause.”

Trump seeks to shape Fed’s board

Cook’s attorneys argued that unproven allegations, related to conduct before Cook joined the central bank, do not meet that standard. They also warned that blocking Cook from taking part in the Fed meeting “has the real potential of impacting domestic and foreign markets.”

Ousting Cook would allow Trump to appoint a fourth member to the Fed’s governing board, giving his nominees a majority on the seven-member board. Another Trump nominee, White House economist Stephen Miran, was narrowly confirmed by the Senate Monday night to fill a short-term vacancy on the board.

“Preventing the President from wresting control over this country’s independent central bank does not constitute irreparable harm to the Government,” Cook’s attorneys wrote in urging the court to allow her to remain on the board.

A majority of the the three-judge panel agreed.

“The plain purpose of providing for-cause protection was to assure members of the Board of Governors—and national and global markets—that they do not serve at will and thus enjoy a measure of policy independence from the President,” the court wrote.

The decision was authored by Judge Bradley Garcia, who was appointed to the appeals court by President Joe Biden, and joined by another Biden appointee, Michelle Childs. A third judge, Gregory Katsas — who was appointed by Trump — dissented, saying he would have allowed the firing to proceed.