Trump said last month that he eliminated Cook from the Fed board, but the Fed insisted she was still on the Fed board, making important decisions. Judge Jia Cobb noted that Trump had failed to submit any evidence that Cook's behaviour or performance impaired the board or harmed the public interest.
The White House said on Tuesday that the judge's decision was not the final word and pledged to keep pursuing accountability in the Federal Reserve, but that it was going to actually respect the ruling from the court.
Dispute Over Fed Independence
The case is a peek into the tensions between Trump and the central bank. Trump often criticized the Fed and Chair Jerome Powell when they delayed interest rate cuts while European central banks and the UK central banks cut borrowing costs. The Fed was not ready to cut interest rates as they were still assessing the inflationary impact of Trump's tough tariffs.
Cook, through attorney Abbe David Lowell, claimed that the president's action was undermining the independence of the institution. She sued Trump after he told the public that he had dismissed her, and she launched a significant legal fight with implications for the independence of the US central bank.
Trump and William Pulte, head of the Federal Housing and Finance Authority, claimed that Cook misrepresented three properties in her mortgage applications to get the lowest interest rates and tax credits.
Legal Questions on "For Cause" Removal
The federal statute allows governors of the Fed to be removed from their position only "for cause." However, there is no definition of "for cause" in the law, so this case represents the first time a president has attempted to remove a governor of the Fed, which will be tried in court.
Judge Cobb stated that "for cause" can only be invoked from some type of misconduct or dereliction of duty, not for conduct that occurred before assuming office. The White House argued that Trump acted lawfully because there were "credible allegations of mortgage fraud" against Cook.
This case could eventually find itself in the US Supreme Court with serious implications for the ability of the Fed to function without being subjected to political attacks. The Fed is set to meet next week and could announce its first interest rate cut since September 2024.
