A federal judge on Friday weighed President Trump’s attempted ouster of Federal Reserve board of governors member Lisa Cook, acknowledging that the case raises “important questions” that courts may not have mulled before.
At the first hearing in Cook’s lawsuit challenging her firing, U.S. District Judge Jia Cobb recognized the “novel issues” before her.
“I keep returning to the unique nature of this board and the need for independence,” Cobb said at one point.
Trump announced Cook’s dismissal Monday, citing allegations of mortgage fraud raised in a criminal referral from the Federal Housing Finance Agency (FHFA) as “cause” for her removal.
The move challenged the Fed’s longstanding independence from the White House’s political influence and has prompted the courts to weigh in on a new front in the president’s quest to expand executive power.
Cook filed suit over the “unprecedented and illegal attempt” to fire her Thursday.
The Federal Reserve Act says the president can only remove members of the governing board “for cause.” Until now, the courts have not weighed what that means because a president has never sought to remove one.
Abbe Lowell, Cook’s lawyer, argued at the hearing that the courts must define “cause” or whatever the president says will go.
He questioned whether a president could fire Cook for wearing a pantsuit to a meeting instead of a dress, claiming it disrespected the institution, or for teaching at a university he disagrees with because of its commitment to diversity, equity and inclusion, or DEI.
“And that’s cause?” Lowell asked.
The lawyer argued that Cook had no meaningful chance to contest the allegations against her before Trump moved to fire her. He also noted that the president has already indicated he’s mulling her replacement, posing the threat of irreparable harm if that person were quickly confirmed.
“That hypothetical is not so hypothetical in the world we live in today,” Lowell said.
DOJ lawyer Yaakov Roth acknowledged the Fed’s “unique historical background,” but said that’s why Trump explained his reasoning for firing Cook. Previous firings of independent agency members have often amounted to a single sentence with no explanation.
In court papers, the Justice Department argued that making contradictory statements in financial documents is “more than sufficient ground” for removing a senior financial officer — no matter whether a criminal burden of proof could be sustained.
An Aug. 15 criminal referral from FHFA director Bill Pulte alleged that, weeks apart in 2021, Cook wrote in mortgage documents for properties in Michigan and Georgia that each was her principal residence. In 2022, she listed the Georgia property for rent, the referral says.
Pulte wrote on X Thursday night that he has filed a second criminal referral for Cook, alleging she represented a third property as her “second home,” despite referencing it in other government documents as an investment or rental property.
“3 strikes and you’re out,” the FHFA director said.
Roth argued Friday that Cook, a “very senior” financial officer, has still not explained the seemingly contradictory documents and questioned how that wouldn’t be “reasonable ground” for removal by the president.
“I just don’t see it,” Roth said.
Cook claimed in her complaint that Trump’s desire to take greater control of the Fed put a target on her back, noting the president’s frustration with the central bank over its refusal to lower interest rates amid uncertainty around his trade agenda and the volatility of markets.
“Let’s take him at his word — ‘for cause’ means she won’t go along with an interest rate drop,” Lowell said Friday.
Cobb, the judge, said she is “uncomfortable” with Cook’s pretext argument — but is also “uncomfortable” with the notion that a “majority” might be sought by digging up dirt on board members, as Cook’s counsel alleged.
Trump weighed firing Federal Reserve Chair Jerome Powell, as well. The Fed took no position on Cook’s firing, saying it would abide by any ruling from the court.
The parties agreed to discuss a briefing schedule moving forward, as Cook’s counsel insisted on maintaining the status quo.
