Federal Judge Blocks Trump from Firing Fed Governor Lisa Cook

Federal Judge Blocks Trump from Firing Fed Governor Lisa Cook, Preserves Board Balance Ahead of Key Rate Meeting

A federal judge on Tuesday granted a preliminary injunction that prevents President Donald Trump from removing Federal Reserve Governor Lisa Cook while her lawsuit challenging the dismissal proceeds through the courts, handing Cook an early victory in a legal fight with far-reaching implications for the Fed’s independence and U.S. financial policy. The ruling means Cook, a Senate-confirmed governor, will remain on the Board of Governors and is expected to participate in the Fed’s policy meeting later this month. 

U.S. District Judge Jia M. Cobb wrote that the administration had not shown legally sufficient grounds to oust Cook and that the mortgage-fraud allegations cited by the White House — all of which relate to conduct before Cook’s 2022 confirmation — likely do not meet the Federal Reserve Act’s “for cause” standard for removal. Judge Cobb also found that Cook had been denied due process because she was not given notice and an opportunity to respond before being dismissed. The order preserves the status quo while the case moves forward and is expected to be appealed.

The case crystallizes a constitutional and statutory test that has never been fully litigated: how far a president’s authority extends to remove members of an independent central bank. The Federal Reserve Act allows governors to be removed “for cause” — a phrase widely interpreted to mean malfeasance, neglect of duty or incapacity — but it does not define the term precisely. Judge Cobb wrote that the best reading of the statute confines “for cause” to misconduct while serving as a governor, not alleged wrongdoing that occurred before confirmation.

The dispute began in late August after Mr. Trump announced he was firing Cook, citing allegations first raised by William Pulte, the Trump appointee who heads the Federal Housing Finance Agency, that Cook misstated the status of multiple properties on mortgage applications. Cook denies any fraud and filed suit three days after Trump’s termination notice, arguing that the White House’s action was unlawful and politically motivated — an attempt to reshape the Fed’s voting majority to favor more aggressive rate cuts. 

The Reuters reporting underpinning the administration’s claim also noted a parallel Justice Department criminal inquiry into Cook, including grand jury subpoenas in Georgia and Michigan related to mortgage filings — a development that the judge referenced but found insufficient to justify removal under the statute at this preliminary stage. The DOJ probe has not produced criminal charges, and Cook has repeatedly denied wrongdoing in court filings. 

Cook’s legal team hailed the ruling as a defense of the Fed’s institutional independence. “This ruling recognizes and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference,” said Abbe Lowell, one of Cook’s attorneys. The Fed was ordered to allow Cook to continue carrying out her duties for the duration of the litigation.

The White House signalled swift resistance. A White House spokesman said the president lawfully removed Cook for cause and that the administration would continue to press its arguments in the courts. Officials have portrayed the move as part of a broader push to bring the central bank’s policy into alignment with the administration’s priorities for lower borrowing costs. The administration is expected to appeal Judge Cobb’s decision to a higher court.

The timing of the order matters politically and economically. The Fed is scheduled to meet on Sept. 16–17, and Judge Cobb’s ruling leaves Cook able to participate in deliberations and votes — a practical consequence that could affect policy optics even if the ultimate legal question ends up before the Supreme Court. Economists and market participants have warned that presidential control over Fed personnel could threaten the central bank’s ability to make decisions insulated from short-term political pressure. 

Legal scholars said the case could become a defining test of separation between the executive branch and so-called independent agencies. The Supreme Court in recent years has issued rulings that sometimes tilt toward allowing presidents broader removal authority for certain officials, but the Court has also recognized the special role of the Fed and left open questions about how far removal powers extend. The Cook litigation — rare in its speed and stakes — is likely to travel through the appeals process quickly and could reach the high court.

Market reaction was muted but watchful. Traders and policy analysts said the injunction removes near-term uncertainty about the composition of the Fed’s Board for the September meeting, but many noted that the larger legal battle and the potential for appeals mean uncertainty may linger for months. Investors will also be monitoring any developments in the DOJ inquiry and any new factual evidence the administration might present while pursuing its case.

Beyond the courtroom fight, the episode has deep political resonance. Mr. Trump has repeatedly criticised Fed Chair Jerome Powell and demanded faster, deeper rate cuts; removing Cook would have brought the president closer to building a majority on the Board that could be more receptive to his policy preferences. Critics of the firing warned that allowing removal for policy disagreements would hollow out the statutory protections designed to preserve central-bank independence, with possible long-term costs for inflation expectations and the credibility of U.S. monetary policy.

What happens next is predictable in broad outline if not timing. The administration is expected to seek immediate appellate relief, likely asking a federal appeals court to stay Judge Cobb’s injunction while litigation continues. If appeals fail, the question may be briefed and argued rapidly up the judicial ladder; a Supreme Court fight is plausible given the constitutional and economic stakes. Meanwhile, the Fed will prepare to meet next week with its current roster intact, setting up an unusual overlay of courtroom drama and policy decision-making. 

Analysis — independence under test, policy and political consequences

The Cook ruling is significant precisely because it is both legal and political. At its heart is a tug-of-war over who gets to shape U.S. monetary policy: elected officials accountable to voters or independent governors insulated by statute to pursue price stability and full employment. The court’s preliminary decision underscores a narrow but powerful principle — that Congress crafted the Fed to be partially autonomous, and that courts must guard the institutional design against abrupt political redefinition absent clear statutory cause.

Practically, the injunction restores short-term market calm by keeping one vote on the Board unchanged ahead of the meeting. Strategically, however, the administration’s effort to remove a governor for pre-confirmation conduct — and the parallel DOJ inquiry — signals a willingness to use executive tools to influence the central bank. If the appeal succeeds, the precedent would widen presidential control and could politicize Fed governance, raising the probability of higher inflation expectations and risk premia as market participants price in political interference. If the courts uphold protections, the decision will reinforce a separation designed to preserve macroeconomic credibility — at least until the next flashpoint. 

For now, Judge Cobb’s order buys time — for Cook, for the Fed to operate with its current membership in a critical week, and for the judiciary to weigh a question that will define the boundaries of executive power for years. How quickly the appeals process moves, what new factual material either side introduces, and how the Supreme Court — if it takes the case — frames the statutory standard for removal will determine whether the episode is a short legal skirmish or a constitutional milestone.