By Daniel Wiessner
(Reuters) -President Donald Trump’s administration on Thursday asked a federal appeals court to allow Trump to remove Federal Reserve Governor Lisa Cook from office for now after a judge said he likely lacked cause to do so.
The Department of Justice in a court filing asked the U.S. Court of Appeals for the D.C. Circuit to pause U.S. District Judge Jia Cobb’s Tuesday ruling temporarily blocking Cook’s removal, pending the administration’s appeal.
The court’s decision could determine whether Cook, whom Trump has accused of mortgage fraud, holds onto her seat ahead of a September 16-17 policy meeting where the U.S. central bank is expected to cut interest rates.
Trump moved to fire Cook in late August. Cobb’s ruling prevents the Fed from following through on Cook’s firing while her lawsuit moves forward.
Cook, who denies any wrongdoing, filed a lawsuit saying Trump’s 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.
The case, which will likely end up before the U.S. Supreme Court, has ramifications for the Fed’s ability to set interest rates without regard to politicians’ wishes, widely seen as critical to any central bank’s ability to keep inflation under control.
The Supreme Court and lower appeals courts including the D.C. Circuit have temporarily lifted several other rulings that briefly blocked Trump from firing officials at agencies that have historically been independent from the White House.
On Wednesday, however, the D.C. Circuit blocked Trump from firing U.S. Copyright Office director Shira Perlmutter while she appeals a lower court’s refusal to reinstate her to the post.
Trump has demanded that the Fed cut rates immediately and aggressively, berating Fed Chair Jerome Powell for his stewardship over monetary policy. Cook has voted with the Fed’s majority on every rate decision since she started in 2022, including on both rate hikes and rate cuts.
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 on Tuesday said the public’s interest in the Fed’s independence from political coercion weighed in favor of keeping Cook at the Fed while the case continues.
She said that the best reading of the law is that a Fed governor may only be removed for misconduct while in office. The mortgage fraud claims against Cook all relate to actions she took prior to her U.S. Senate confirmation in 2022.
Trump and William Pulte, the Federal Housing Finance Agency director appointed by the president, say Cook inaccurately described three separate properties on mortgage applications, which could have allowed her to obtain lower interest rates and tax credits.
The U.S. Justice Department has also launched a criminal mortgage fraud probe into Cook and has issued grand jury subpoenas out of both Georgia and Michigan, according to documents seen by Reuters and a source familiar with the matter.
(Reporting by Daniel Wiessner in Albany, New York and Ann Saphir; Editing by Alexia Garamfalvi and Andrea Ricci)
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