In a landmark decision, a U.S. appeals court rejected Donald Trump’s bid to oust Federal Reserve governor Lisa Cook, marking the first instance of a president attempting such a move since the central bank’s inception in 1913. The ruling by the U.S. Court of Appeals for the District of Columbia Circuit allows Cook to retain her position at the Fed amidst ongoing legal proceedings that could impact the institution’s autonomy.
The court’s decision prevents the Justice Department from enforcing Trump’s directive to remove Cook, who was appointed by former Democratic president Joe Biden. Trump’s allegations of mortgage fraud against Cook, which she has denied, were deemed insufficient by U.S. District Judge Jia Cobb to warrant her dismissal under the law governing the Fed’s governance structure.
Established by Congress, the Federal Reserve operates with safeguards against political interference. The law stipulates that governors can only be removed by a president for specific reasons, a term not clearly defined in the legislation. This legal framework has never been tested in court, and no president has previously removed a Fed governor.
Cook, the first Black woman to serve as a Federal Reserve governor, initiated legal action against Trump and the Fed following the accusations, asserting that they were unfounded and politically motivated. The Trump administration contends that the president possesses broad authority to dismiss a Fed governor at his discretion, a stance challenged by Cook’s defense team.
The case holds significant implications for the Fed’s ability to execute monetary policy independently of political influence, crucial for tasks like managing inflation. President Trump has been vocal in his calls for aggressive interest rate cuts by the Fed, criticizing Chair Jerome Powell’s approach to monetary policy. The Fed, primarily focused on combating inflation, is anticipated to announce a rate reduction during its upcoming policy meeting.
While the Supreme Court has previously upheld Trump’s removal of officials from certain federal agencies, it distinguished the Fed as a unique entity with a historical legacy separate from typical executive branch bodies. Trump’s efforts to remove Cook before the Fed’s upcoming meeting were challenged by her legal team, citing potential market disruptions and emphasizing the public interest in maintaining her position.