A federal appeals court on Monday night rejected an emergency Trump administration request to remove Federal Reserve Governor Lisa Cook ahead of the central bank’s next meeting.
A divided three-judge panel in Washington, D.C., left in place a lower court injunction that blocked Cook’s termination while she challenges the legality of Trump’s move.
The administration could seek intervention from the Supreme Court, but it is running out of time before the next Fed meeting, which begins Tuesday.
Trump announced last month that he would remove Cook, citing allegations that she submitted fraudulent information on mortgage applications before she took office.
Federal Housing Finance Agency Director Bill Pulte, a Trump appointee, first publicized the allegations and referred them to the Justice Department, which has since launched a criminal investigation.
Cook hasn’t been charged with a crime, and, in court filings, has denied committing mortgage fraud. In her most recent submission, her lawyers say the complete property records “reveal the opposite” of what the administration claims.
Cook sued soon after Trump’s announcement, triggering a high-stakes battle over the president’s authority to control the central bank. She says Trump violated the Federal Reserve Act because he didn’t provide a valid basis for her removal. The statute provides that the president can only remove a member of the Fed board for cause.
Cook’s lawyers say unproven allegations unrelated to job performance don’t meet that standard, and they suggest that Trump is targeting her because she has disagreed with him on the wisdom of lowering interest rates.
U.S. District Judge Jia Cobb ruled last week that Cook was “substantially likely” to succeed with a claim that her firing was unlawful, and blocked her removal for now.
Cook’s lawyers said that pausing that court order would threaten her ability to participate in the coming Fed meeting as well as her seat on the board long term, noting Trump has signaled he would move quickly to replace her. Any sign that the Fed’s independence is in jeopardy risks unsettling markets, particularly following Trump’s monthslong public pressure on Fed Chair Jerome Powell to lower interest rates, they added.
“This moment calls for orderly process and sober deliberation—not a destabilizing rush to judgment,” they said.
The Trump administration argues the president has broad discretion to decide what constitutes a valid justification for removing a Fed official.
“If an earlier President and earlier Senate had confirmed Bernie Madoff or Charles Ponzi to be Federal Reserve Governors, it would blink reality to suggest that a later President could not remove them based on their misdeeds, regardless of whether they occurred in office or not,” the Justice Department said in a brief to the appeals court.
In a statement explaining the appeals court’s 2-1 decision on Monday, Judge Bradley Garcia, joined by Judge J. Michelle Childs, said there was merit in Cook’s claim that she wasn’t given proper notice or opportunity to respond to her firing.
Because Cook has been serving in her role despite Trump’s purported firing, they said granting the government’s request would “upend, not preserve, the status quo.” Both Garcia and Childs were appointed by former President Joe Biden.
Judge Gregory Katsas, a Trump appointee, dissented. The Fed “no doubt is important, but that only heightens the government’s interest in ensuring that its Governors are competent and capable of projecting confidence into markets,” he wrote.
If Fed governors were entitled to a hearing before removal, the adequacy of that process could be challenged and take months or years to resolve, Katsas wrote. “And that would enable a potentially compromised Governor to engage in significant governmental action—such as voting on whether to adjust interest rates, which Cook says she must do tomorrow,” he added.
The Supreme Court has already allowed the Trump administration to remove members of other independent federal agencies but suggested in one ruling that Fed employees may have more protection because the agency is a “uniquely structured, quasi-private entity.”
The Fed is widely expected to cut interest rates at its next meeting. The Senate on Monday night voted to confirm Stephen Miran, Trump’s pick to fill a vacancy on the Fed board, so that he can attend this week’s meeting.
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