Cook Hearing Ends Without Ruling on Fed Governor's Status

Natasha Sarin, president and co-founder of the Yale Budget Lab, said the legal battle over president's bid to fire Fed Governor Lisa Cook could pose a risks to keeping the central bank free of political influence.

Questions about whether President Donald Trump had cause to try to push out Federal Reserve Governor Lisa Cook dominated a court hearing Friday, as a judge weighs whether he had proper reasons to order her removal from the US central bank.

US District Judge Jia Cobb peppered lawyers for Cook and the administration for about two hours Friday, before ending the hearing without ruling on the Fed governor’s request for a temporary order blocking Trump’s effort to oust her.. The judge, who isn’t expected to make a decision this week, didn’t indicate which way she is leaning in a landmark lawsuit that could determine the future of the Fed’s independence.

The hearing capped weeks of criticism of the Fed by the Trump administration and signaled the beginning of a pitched legal fight that is likely to land before the US Supreme Court. Cook sued after Trump moved to fire her for allegedly engaging in fraud by declaring two homes as her primary residence in separate mortgage applications. She hasn’t been charged with wrongdoing.

The judge focused in particular on Cook’s argument that being accused of wrongdoing and fired through a series of social media posts didn’t amount to proper due process under US law.

Cook lawyer Abbe Lowell spent more than an hour fielding questions from the judge over what cause the president needs to fire a Fed governor and whether Trump acted on an improper pretext. The judge also probed whether Cook received appropriate notice.

Lowell said that fraud allegations have become a “weapon of choice” for Trump as he seeks to remove officials whom he views as obstacles to his agenda. Trump’s motive, he argued, signaled he didn’t have the necessary cause to fire Cook.

Trump is not seeking a Fed governor who “has never committed an infraction in their life,” Lowell said, but one who “would lower the interest rate” to what the president “demanded.”

No Explanation

Justice Department attorney Yaakov Roth argued that Cook’s failure so far to explain the alleged mortgage discrepancies suggests she did something wrong and supports Trump’s right to remove her for cause. If there was an explanation, he said, “we would have heard it by now.”

As part of her lawsuit, Cook suggested that an unintentional “clerical error” may have been behind the mortgage filling.

Roth denied that Trump is looking to remove Cook over policy disagreements. She was appointed by former President Joe Biden and her term was set to expire in 2038. Roth also disputed the claim by Cook that Trump has violated her right to contest the claims against her.

Cook sued Trump on Thursday, arguing that his attempt to fire her was a power grab that could cause “irreparable harm” to the US economy. The president is seeking to remove her over claims by Federal Housing Finance Agency Director Bill Pulte that she lied on mortgage documents.

At the hearing, the judge said she is “uncomfortable” with Cook’s argument that she was fired on a pretext. But she said she’s also uncomfortable with Trump explicitly saying he wanted a majority on the Fed’s board and then saying “find reasons to kick all these people off so I can get my people in.”

Cobb also signaled that she is grappling with whether she has authority at all to review the legitimacy of Trump’s stated reasons for firing Cook, or if he’s entitled to wide discretion when deciding to remove someone “for cause.”

The judge is not expected to issue a ruling before at least Tuesday, when Cook’s lawyers are due to file another legal brief addressing the judge’s questions on Friday and responding to the government’s arguments.

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