Federal Appeals Court Blocks Trump from Firing Fed Governor Ahead of Interest Rate Vote

In a significant development, a federal appeals court has temporarily halted President Trump’s attempt to dismiss a member of the Federal Reserve’s governing board, just prior to a crucial vote on interest rates.

By a margin of 2-1, the court upheld an earlier ruling from a district judge who deemed that the termination of Lisa Cook could potentially breach the Federal Reserve Act, which incorporates safeguards intended to shield the central bank from political influence from the White House.

The decision was announced mere days before the Fed’s rate-setting committee is anticipated to vote on lowering its key interest rate for the first time in 2020. Trump has been aggressively advocating for a more aggressive reduction in interest rates.

In a social media post last month, the president announced his decision to dismiss Cook. He cited allegations from a political ally, Bill Pulte, who accused Cook of making false statements on a mortgage application in 2021.

Pulte, who oversees mortgage giants Fannie Mae and Freddie Mac, has levied similar accusations against other individuals perceived as adversarial to Trump, such as Senator Adam Schiff (D-Calif.) and New York Attorney General Letitia James, both Democrats. Cook, Schiff, and James have all denied any wrongdoing.

By law, Federal Reserve governors can only be removed “for cause.”

Cook’s legal team argued that unsubstantiated allegations concerning conduct prior to Cook’s tenure with the central bank do not meet this standard. They also expressed concern that barring Cook from attending the Fed meeting could potentially impact domestic and foreign markets.

The dismissal of Cook would enable Trump to appoint a fourth member to the Fed’s governing board, giving his nominees a majority on the seven-member board. Another Trump appointee, White House economist Stephen Miran, was narrowly confirmed by the Senate on Monday night to fill a temporary vacancy on the board.

Cook and her legal team have sought to delay this outcome.

“Preventing the President from seizing control over this nation’s independent central bank does not constitute irreparable harm to the Government,” they argued in their petition for Cook to remain on the board.

A majority of the three-judge panel concurred with this argument.

“The primary intention of providing ‘for-cause’ protection was to guarantee members of the Board of Governors—and national and global markets—that they do not serve at the President’s discretion, thereby ensuring a degree of policy independence from the White House,” the court stated.

The decision was penned by Judge Bradley Garcia, who was appointed to the appeals court by President Joe Biden, and was seconded by another Biden appointee, Michelle Childs. A third judge, Gregory Katsas—appointed by Trump—dissented, stating that he would have allowed the termination to proceed.