Judge Blocks Trump From Removing Fed Governor Lisa Cook

{embedded type='node/custom_code_html' id='118653'}Order allows Cook to remain on central bank’s board for now while her legal challenge proceedsA federal judge late on Tuesday blocked President Trump from removing Lisa Cook from the Federal Reserve Board of Governors while a lawsuit challenging her firing proceeds.Judge Jia Cobb in Washington, D.C., granted Cook’s request for a temporary court order to keep her seat on the central bank’s seven-member board for now. The decision comes just days before the Fed’s next meeting , set for Sept. 16-17.Cobb said Cook is »substantially likely« to succeed on her claim that Trump violated the Federal Reserve Act because her purported termination didn’t comply with the statute’s requirement that officials can only be removed for cause.»Removal was not meant to be based on the President’s assumptions about the official’s future performance as extrapolated from unproven conduct dating from before they assumed the office,« Cobb wrote.The administration is likely to seek a swift appeal. It had asked the court to rule quickly on Cook’s request so it would have time to challenge the decision if needed ahead of the September Fed meeting.»This ruling will not be the last say on the matter, and the Trump administration will continue to work to restore accountability and confidence in the Fed,« a White House spokesman said.Cook’s attorney, Abbe Lowell, said the decision »recognizes and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference.«Cook’s lawsuit has set off an unprecedented legal battle testing the president’s power over the central bank , which is likely to quickly reach the Supreme Court. Job protection at independent federal agencies has been weakened by recent Supreme Court rulings and has never been tested in the context of the Fed. However, the Supreme Court suggested earlier this year that Fed employees have more protections than those at other agencies.In firing Cook, Trump cited allegations that she submitted fraudulent information on mortgage applications . His move came five days after Bill Pulte , the Federal Housing Finance Agency director, first publicized the allegations against Cook and referred them to the Justice Department, which has since launched a criminal investigation , The Wall Street Journal has reported.Trump said in his letter announcing Cook’s firing that the allegations called into question her competence and trustworthiness as a financial regulator.The administration said courts should defer to the president’s judgment on what constitutes proper cause for removal. »To repeat, a senior financial regulator made flatly inconsistent representations in important financial documents, shortly before taking office,« Justice Department lawyers said in a court filing. »Treating that as cause for removal is hardly a clear-cut abuse of discretion warranting judicial intervention.«Cook’s lawsuit says Trump used the allegations as a pretext to remove her to vacate a seat on the influential Fed board for him to fill and further undermine the central bank’s independence.Cook’s lawyers have said she didn’t commit mortgage fraud, although they haven’t yet provided a detailed explanation to clarify the circumstances around the mortgages. They say that unsubstantiated mortgage allegations don’t justify her ousting and that she should have been given an opportunity to respond.»The only way to clear the cloud over her name is an order that immediately reinstates her to her position,« her lawyers said in a court filing. Allowing Trump to lock Cook out of her office even temporarily »would amount to a crack in the foundation of the Federal Reserve’s near-century of independence,« they added.The Federal Reserve Act, which created the central bank, doesn’t define what constitutes a proper cause for removal, but laws establishing other independent agencies typically refer to neglect of duty, inefficiency or malfeasance as grounds for removal.In her decision, Cobb rejected the Trump administration’s more expansive view of what could constitute grounds for removal. »The Court finds that permissible cause for removal of a Federal Reserve Governor extends only to concerns about the Board member’s ability to effectively and faithfully execute their statutory duties, in light of events that have occurred while they are in office,« wrote Cobb, who was appointed by former President Joe Biden .Cook is also a Biden appointee. Her term is set to end in 2038.Trump has been pressuring the Fed to lower interest rates since taking office and told advisers he intends to quickly fill Cook’s seat , the Journal has reported.Fed Chairman Jerome Powell and the Fed board were named as defendants in the case alongside Trump in an effort to keep them from complying with any order from the president to remove Cook.An attorney for the Fed acknowledged during a court hearing that the case raises important and consequential questions, but declined to weigh in on Cook’s request for an emergency order. In a court filing, the Fed said it hoped for a prompt ruling from the court to »remove the existing cloud of uncertainty.«The Fed on Tuesday pointed to a previous statement saying it would abide by any court order.Write to Lydia Wheeler at lydia.wheeler@wsj.com