The high-stakes showdown between the Trump administration and the US central bank intensified Monday as an appeals court blocked the White House from removing Federal Reserve governor Lisa Cook from her post for now.
The divided court in Washington affirmed that Ms Cook can continue working while her lawsuit challenging Donald Trump’s move to dismiss her proceeds.
The court held that the district judge was correct to find that Mr Trump likely violated Ms Cook’s due process rights by attempting to fire her via a social media post.
The 2-1 ruling came just hours before the start of the Fed’s highly anticipated September 16th-17th meeting to vote on interest rates.
Mr Trump could still ask the supreme court to step in.
As Ms Cook fights to stay in her position, Mr Trump’s economic adviser Stephen Miran is on his way to joining the Federal Reserve board after the Senate confirmed him to the post in a vote Monday evening. He will fill a seat recently vacated by former Fed governor Adriana Kugler.
Republicans fast-tracked approval of Mr Miran’s nomination with Mr Trump pressuring the central bank to cut interest rates.
Investors and economists surveyed by Bloomberg expect Fed officials to lower rates by a quarter percentage point on Wednesday. Undeterred, Mr Trump predicted a “big cut” from the central bank.
Ms Cook sued Mr Trump last month after the president moved to oust her over allegations of mortgage fraud, which she denies.
The lawsuit has emerged as a major flashpoint in the growing clash between the White House and the Fed, which has resisted Mr Trump’s demands to lower interest rates.
US district judge Jia Cobb on September 9th ruled that Ms Cook could remain on the job as her case proceeded, saying that Mr Trump’s attempt to oust her likely violated the law. The appeals court decision allows that ruling to stand for now.
Mr Trump said last month he was firing Ms Cook after Federal Housing Finance agency director Bill Pulte accused her of fraudulently listing homes in Michigan and Georgia as a “primary residence” when she obtained mortgages in 2021 to secure more favourable terms on loans.
Mr Pulte later added a claim involving a third mortgage in Massachusetts.
Ms Cook’s lawyer said in a filing last week that any ruling that threatens her attendance at the Fed meeting would “potentially plunge” the board’s vote “into turmoil” and would have “the real potential of impacting domestic and foreign markets”.
The judges did not address the underlying claims of mortgage fraud against Ms Cook, and also did not reference reports over the weekend that loan documents for Ms Cook’s Georgia home appear to contradict Mr Pulte’s claim, showing that she told the lender the property was a vacation home.
Mr Pulte said in a social media post that the ruling is “for now”.
Senator Elizabeth Warren, a Massachusetts Democrat, hailed the ruling for “rejecting Donald Trump’s illegal attempt to take over the Fed so he can scapegoat away his failure to lower costs for American families”.
“If the courts – including the Supreme Court – continue to uphold the law, Lisa Cook will keep her seat as a Fed governor,” she said. – Bloomberg