A federal appeals court has ruled against former President Donald Trump's effort to remove Federal Reserve Governor Lisa Cook from her position. This marks an unprecedented legal challenge, as no president has previously attempted to fire a sitting Fed governor since the central bank's establishment in 1913.
In a 2-1 decision, the U.S. Court of Appeals for the District of Columbia Circuit found that Governor Cook was likely denied her constitutional right to due process. The court's opinion, written by Judge Bradley Garcia, noted that the government did not dispute failing to provide Cook with meaningful notice or a chance to respond to the allegations against her. Those allegations, related to mortgage fraud which Cook denies, were previously dismissed by a lower court judge as insufficient grounds for removal.
The ruling creates a tight deadline for any appeal to the U.S. Supreme Court if the administration wishes to prevent Cook from participating in the Fed's upcoming policy meeting.
The case centers on the Federal Reserve Act, which states governors may only be removed by the president "for cause." However, the law does not define this term, and its limits have never been tested in court until now. The court's majority opinion stated that due to the strong due process claim, it did not need to define "for cause" at this stage.
Cook, the first Black woman to serve as a Fed governor, has argued that the allegations were a pretext for her removal due to her monetary policy views. The Trump administration contended that the president holds broad, unreviewable discretion to remove Fed officials.
The outcome of this legal battle is seen as critical to the Fed's political independence, which is widely considered essential for it to effectively manage inflation and set interest rates free from political pressure.
In a separate development, the Senate narrowly confirmed Stephen Miran, a Trump nominee, to a vacant seat on the Fed board, meaning he may also join the imminent policy meeting.
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