A federal judge blocked President Donald Trump's attempt to fire Lisa Cook from her post as a Federal Reserve governor, setting up a legal showdown that will likely head to the Supreme Court.
US District Judge Jia Cobb ruled in favor of a temporary restraining order requested by Cook's lawyers, meaning the decision stands while additional litigation plays out, or unless it is reversed by a higher court.
"President Trump's actions and Cook's resulting legal challenge raise many serious questions of first impression that the Court believes will benefit from further briefing on a non-emergency timeline," Cobb wrote in her ruling.
Cobb said Cook had made a "strong showing that her purported removal was done in violation of the Federal Reserve Act's 'for cause' provision."
"The best reading of the 'for cause' provision is that the bases for removal of a member of the Board of Governors are limited to grounds concerning a Governor's behavior in office and whether they have been faithfully and effectively executing their statutory duties," Cobb wrote.
The "for cause" provision should not apply to an individual's "conduct that occurred before they began in office," Cobb said.
"In addition, the Court finds that the removal also likely violated Cook's procedural rights under the Fifth Amendment's Due Process Clause," Cobb added.
Cook's attorney, Abbe Lowell, said in a statement on Tuesday that Cobb's ruling "recognizes and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference."
"Allowing the President to unlawfully remove Governor Cook on unsubstantiated and vague allegations would endanger the stability of our financial system and undermine the rule of law," he said, adding that Cook will continue to carry out her duties at the Federal Reserve.
Trump published a letter on his Truth Social account in August announcing he was firing Cook for "cause," citing apparent irregularities in her mortgage documents found by Federal Housing Finance Agency Director Bill Pulte.
According to Pulte, the director of the Federal Housing Finance Agency, Cook had said that two different properties she purchased at around the same time would be her primary residence. He also made a referral to the Justice Department, which opened a criminal investigation into Cook that one of her lawyers called "politicized."
Cook sued Trump to block the firing. In court filings and public statements, she hasn't denied or explained the apparent discrepancy in her mortgage documents.
Lowell said in court filings and a hearing that she is owed due process before any firing for "cause" could take effect, and that Pulte has selectively targeted Trump's perceived political enemies by poring through their mortgage documents. Pulte has made similar claims against Democratic Sen. Adam Schiff, who led Trump's first impeachment, and against New York Attorney General Letitia James, who brought a successful civil lawsuit against Trump and the Trump Organization, accusing them of misleading banks in property loan documents.
Trump has urged the Federal Reserve to lower interest rates as part of his plan to reshape the American economy. The board has signaled that it will likely begin cutting rates in September.
Because the Federal Reserve is an independent agency, presidents have traditionally had limited ability to remove its members. Cook, an appointee of former President Joe Biden, has twice been confirmed by the US Senate, most recently in 2023 for a 14-year term that is scheduled to end in 2038. She is the first Black woman to serve as a Fed governor.
Before Trump said he was firing Cook, no president had attempted to fire a Fed governor, though some have tried to pressure the central bank.
Presidents are permitted to fire Fed governors for "cause," a standard that Justice Department lawyers say was met when Trump cited Pulte's allegations of mortgage fraud. Such a person should not regulate the rates that influence mortgages across the country, they said.
The Supreme Court has largely sided with Trump's firing of independent agency members without cause, breaking with precedent. On Monday, Chief Justice John Roberts allowed Trump to fire the only Democratic appointee on the Federal Trade Commission, without cause, while additional litigation plays out.
But in a brief, unsigned opinion from the Supreme Court in May, the majority of justices said it would treat the Federal Reserve differently.
"The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States," the court said.
Trump told reporters last month that he is considering nominees to replace Cook, but thus far has not made a formal nomination. He already has one pending nominee, Stephen Miran, chairman of the Council of Economic Advisors, to fill a separate vacancy on the central bank's board.
