The Supreme Court on Wednesday declined to allow President Trump to immediately remove Lisa Cook from the Federal Reserve Board, saying it would instead review the administration’s efforts to oust her and reshape the central bank at oral arguments in January.
Top former Fed and Treasury officials and Ms. Cook’s legal team had warned the Supreme Court that permitting Mr. Trump to fire her while litigation over her status was underway would spur economic turmoil and undermine public confidence in the Fed.
While the Supreme Court’s conservative majority has repeatedly cleared the way for the president to fire leaders of other independent agencies, the justices have recently signaled that the central bank is uniquely independent.
The legal battle over Ms. Cook’s firing has major implications for the central bank and its ability to set interest rates free from political interference. Every living former Fed chair — Alan Greenspan, Ben Bernanke and Janet L. Yellen — joined former Treasury secretaries nominated by presidents of both parties to tell the justices in a court filing that Ms. Cook should be allowed to stay on the job while her case was being reviewed to ensure “stability of the system that governs monetary policy in this country.”
In the months since he returned to the White House, Mr. Trump has put public pressure on the Fed far exceeding that of his predecessors, with repeated demands that it lower borrowing costs. The president has also taken steps to add political loyalists to the central bank’s board of governors.
Justice Department lawyers have defended the president’s actions, saying in court filings that he ousted Ms. Cook “for cause” for alleged mortgage fraud. The 1913 law that created the central bank sets a fixed tenure for Fed governors to serve “unless sooner removed for cause by the president.”
The president has accused Ms. Cook of falsifying records to obtain favorable mortgage terms before she joined the Fed in 2022. Ms. Cook, who was nominated by President Joseph R. Biden Jr., has not been charged with a crime. Her lawyers have called the allegations “flimsy” and “unproven” and noted they took place before she took office. They told the justices that the president’s moves were conspicuously timed to try to prevent Ms. Cook from taking part in a meeting of the Fed earlier this month where the Board of Governors agreed to lower interest rates.
Ms. Cook’s lawyers also said that she had not had a formal opportunity to respond to the mortgage fraud charges, and that she would demonstrate she “never acted improperly.”
Mr. Trump is the first president to try to remove a governor in the Fed’s 111-year history.
Accepting the president’s justification for firing Ms. Cook, her lawyers told the justices, would “eviscerate the Federal Reserve’s longstanding independence, upend financial markets, and create a blueprint for future presidents to direct monetary policy based on their political agendas and election calendars.”
In response, Solicitor General D. John Sauer said in court papers that Congress did not limit the president’s removal power over the Fed to only certain causes or require him to follow specific removal procedures.
In Ms. Cook’s case, the president removed her for what he has characterized as ‘“deceitful and potentially criminal conduct in a financial matter’” that Mr. Trump says makes her unfit to serve on the Fed’s board of governors.
Mr. Sauer also rejected concerns that removing Ms. Cook while litigation continues would cause economic turmoil.
“Recognizing the president’s power to remove governors for apparent financial misfeasance would not compromise the Federal Reserve’s policy independence, nor would removing Cook on that basis usher financial market disaster,” Mr. Sauer wrote.
The imperative for the Fed to operate independently, he added, “in no way depends on shielding governors from the consequences of such misconduct.”
A judge on the U.S. District Court for the District of Columbia ruled this month that Mr. Trump had not met the standard under the 1913 law to remove Ms. Cook “for cause.” The judge said the president could not oust her for conduct unrelated to her duties and that had occurred before she joined the Fed.
A divided three-judge panel of the U.S. Court of Appeals for the District of Columbia also sided with Ms. Cook, finding she had not received sufficient or due process.
Justice Department lawyers told the Supreme Court that Ms. Cook was given sufficient process because the president publicized the allegations against her on social media and waited five days before formally trying to remove her.
In targeting Ms. Cook, the president alleges she claimed that both a property in Michigan and a property in Georgia would simultaneously serve as her principal residence.
Ms. Cook cited news reports in her court filings detailing a set of financial records — a preliminary loan estimate from a credit union — that classify the Atlanta residence as a “vacation home.”
Ann Marimow covers the Supreme Court for The Times from Washington.
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