A judge will hear arguments in the Lisa Cook firing case as the Fed governor faces mortgage fraud allegations. Lydia Hu with more.
President Donald Trump on Friday requested that a federal judge deny a request by Federal Reserve Governor Lisa Cook to prevent the president from firing her, as the court proceedings in the lawsuit to block her removal play out.
Trump on Monday moved to fire Cook over mortgage fraud allegations raised by the president’s ally, Federal Housing Finance Agency Director Bill Pulte, which centered on Cook claiming primary residence status on two mortgages obtained on homes in Ann Arbor, Michigan, and Atlanta in the span of two weeks in 2021. Pulte sent his criminal referrals to the Justice Department, though Cook has not been charged with a crime.
Cook filed suit on Thursday, arguing that the president hadn’t met the standard of a removal for cause and requesting a restraining order to allow her to remain on the Federal Reserve.
The Trump administration’s court filing argues that Pulte’s criminal referral satisfied the “for cause” threshold needed to remove a Fed governor from their role, regardless of whether Cook’s actions meet the standard of criminal mortgage fraud.
FEDERAL RESERVE GOVERNOR LISA COOK SUES TRUMP
President Donald Trump is pushing for the removal of Fed Governor Lisa Cook. (Andrew Harnik/Al Drago/Getty Images / Getty Images)
“Under any standard, making facially contradictory statements in financial documents – whether a criminal burden of proof could be sustained or not – is more than sufficient ground for removing a senior financial regulator from office,” the Trump administration’s filing stated.
The Federal Reserve and Chair Jerome Powell were also named as defendants in Cook’s lawsuit, though that is only to ensure Cook can obtain legal relief and remain in her role as a Fed governor if she prevails in her legal case against the removal effort.
The Fed’s filing explains that while the central bank has the authority to litigate independently under the Federal Reserve Act and will be present at Friday’s hearing, “it does not intend to offer arguments concerning Governor Cook’s motion.”
“At this time, the Board merely expresses (1) its interest in a prompt ruling by this Court to remove the existing cloud of uncertainty; and (2) its intent to follow any order this Court issues,” the Fed’s filing explained.
COOK’S LAWSUIT AGAINST TRUMP SETS UP A POTENTIAL SUPREME COURT CLASH
Fed Chair Jerome Powell and Fed Governor Lisa Cook have faced criticism from President Trump amid his pressure campaign on the central bank. (SAUL LOEB/AFP via Getty Images / Getty Images)
Cook’s lawsuit counters the Trump administration’s claims that she could be removed following the referral, saying that federal laws covering the removal of officials at other agencies define negligence, malfeasance or inefficiency while in office as the standard of a “for cause” removal.
“There is no conceivable interpretation of ‘for cause’ removal protection that would allow the President to fire Governor Cook, either for his true motive or the pretextual one he has invented,” Cook said in the motion seeking a temporary restraining order.
Such orders cannot generally be appealed, but if U.S. District Court Judge Jia Cobb grants the restraining order, it would likely be a longer-term injunction that could be reviewed by an appeals court. Cobb said she would set an expedited briefing schedule in the case during Friday’s hearing.
TRUMP FIRED FED GOVERNOR LISA COOK OVER ALLEGED MORTGAGE FRAUD: WHAT DID SHE DO?
President Donald Trump has recently backed off his threats to attempt to fire Federal Reserve Chair Jerome Powell. (REUTERS/Kent Nishimura / Reuters)
The case is likely to reach the U.S. Supreme Court, where a conservative majority has tentatively allowed Trump to fire officials from other agencies despite laws shielding them from removal – though a ruling in May distinguished the Federal Reserve from those agencies through its unique structure and “distinct historical tradition.”
The legal dispute comes amid the Trump administration’s efforts to pressure the Fed into cutting interest rates. If Cook is removed, it would allow Trump to name his fourth pick to the Fed’s seven-member board of governors, all of whom serve on the Federal Open Market Committee that makes monetary policy decisions.
Trump has repeatedly criticized Fed Chair Powell, who he appointed to the role in 2017, for not cutting interest rates and allegedly mishandling an expensive renovation project.
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While the president has on several occasions threatened to attempt to fire Powell, the president has of late backed off those threats as Powell’s term as chairman is set to end in May.
The Fed is expected to cut interest rates at its next policy meeting in mid-September amid signs of a weakening labor market despite inflation remaining above the Fed’s 2% target.
Reuters contributed to this report.
