A lawyer for Federal Reserve governor Lisa Cook on Friday urged a judge to temporarily block President Donald Trump from removing her, arguing that the US leader wants her out because she has not favoured cutting interest rates this year.
US district judge Jia Cobb in Washington, DC said at the hearing she would set an expedited briefing schedule in the case, the first step in what will likely be a protracted legal battle that could upend the Fed's historical independence and is likely to end up in the Supreme Court.
Cook sued Trump and the Fed on Thursday, saying the Republican president's unsubstantiated claim she engaged in mortgage fraud before she joined the central bank did not give him legal authority to remove her, and was a pretext to fire her for her monetary policy stance.
Cause for the president means she won't go along with the interest rate drop.
— Abbe Lowell, lawyer for Federal Reserve governor Lisa Cook
“Cause for the president means she won't go along with the interest rate drop,” Cook's lawyer, prominent Washington attorney Abbe Lowell, said during the hearing.
The Fed governor has denied committing mortgage fraud, calling the allegations “unsubstantiated and unproven” but has not explained the basis for that position. The outcome of the case could have ramifications for the Fed's ability to set interest rate policy without regard to politicians, widely seen as critical to any central bank's ability to keep inflation under control.
Trump attacked the Fed for not cutting rates during his first term in the White House and resumed that campaign when he returned to power in early 2025. He has berated Fed chair Jerome Powell for the central bank's rate policy and for allegedly mishandling a multibillion-dollar renovation project, though he has stopped threatening to remove Powell before his term as central bank chief ends in May. The Fed did in fact cut rates three times in 2024 but has held them steady since December out of concern that Trump's aggressive reshaping of US trade policy could boost inflation.
Cook voted with Powell and the majority of the central bank's rate-setting committee in all those policy decisions. The central bank, however, is widely expected to reduce its benchmark interest rate by a quarter of a percentage point from the current 4.25%-4.50% range at its September 16-17 policy meeting. Trump has demanded a far more aggressive cut in borrowing costs.
Concerns about the Fed's independence from the White House in setting monetary policy could have a ripple effect throughout the global economy. The dollar stumbled against other major currencies after Trump said he would remove Cook. The law that created the Fed says governors may be removed only “for cause”, but does not define the term nor establish procedures for removal. No president has ever removed a Fed governor, and the law has never been tested in court.
Cobb, an appointee of Democratic former president Joe Biden, seemed sympathetic to Cook's argument that she is being pushed out of her job because of a policy disagreement and that the fraud allegations are pretextual.
Trump says Cook described separate properties in Michigan and Georgia as primary residences on mortgage applications in 2021, which could have allowed her to obtain lower interest rates. Cook has said that even if Trump's allegations were true, it would not be grounds for removal because the alleged conduct occurred before she was confirmed by the US Senate and took office in 2022.
Trump administration lawyers argued in a Friday court filing that alleged mortgage fraud is sufficient cause to remove a Fed governor, regardless of when it happened.
Reuters
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