Fed Governor Lisa Cook can keep her job pending court appeal

Federal Reserve Governor Lisa Cook can remain on the central bank’s board while she contests the legality of President Trump’s Aug. 25 order removing her from her position, U.S. District Court Judge Jia Cobb ruled Tuesday.

The Trump administration has appealed the decision, leaving in doubt whether Cobb’s preliminary injunction will allow Cook to attend the Federal Reserve’s two-day rate-setting meeting next week, which begins on Sept. 16.

The Trump administration has alleged that Cook claimed two separate properties in Michigan and Georgia as her principal residence. Her attorneys maintain that “she did not ever commit mortgage fraud,^[1]” and she has not been charged with any crime.

Even if true, the Trump administration’s unproven allegations would likely not constitute grounds for removing her “for cause,” Cobb said in issuing a preliminary injunction^[2] preventing Cook from being removed from the Fed’s governing board pending resolution of her court challenge.

In a 49-page opinion^[3], Cobb said that Trump’s attempt to remove Cook also likely violated her Fifth Amendment right to due process.

In notifying Cook^[4] that he was removing her from the Federal Reserve Board, Trump did not accuse her of mortgage fraud, but characterized the allegations against her as “deceitful and potentially criminal conduct.”

The case — which involves the first attempt by a president to remove a Federal Reserve Board governor “for cause” in the central bank’s 111-year history — is expected to go all the way to the Supreme Court.

“The key question in this dispute is the meaning of the term ‘for cause’ in the Federal Reserve Act,” Cobb said in her opinion. “Cook has shown that President Trump’s allegations likely do not qualify as cause justifying her removal under the Federal Reserve Act and that the court can resolve the parties’ dispute about the interpretation of this statute.”

In opposing Cook’s bid to keep her job, Trump administration attorneys said^[5] the president has “broad discretion” to remove Fed governors for cause, and that she hadn’t offered any defense to the allegations against her.

Cobb said that “the best reading” of the “for cause” provision is that “it is limited to grounds concerning a governor’s behavior in office and whether they have been faithfully and effectively executing their statutory duties. ‘For cause’ thus does not contemplate removing an individual purely for conduct that occurred before they began in office.”

Criminal investigations of 3 Democrats

Cook, a Biden appointee whose term runs until 2038^[6], has not been charged with mortgage fraud. But the Department of Justice is investigating allegations^[7] made against her and two Trump administration opponents — New York Attorney General Letitia James and Sen. Adam Schiff — by Federal Housing Finance Agency Director Bill Pulte.

James and Schiff deny wrongdoing^[8] and say the allegations against them are acts of political retribution that are intended to intimidate them.

Cook’s attorneys say Trump’s motive for ousting her from the board is to undermine the Fed’s independence and pressure it to lower interest rates — a move that could backfire if investors who fund most mortgages and government debt lose trust in the central bank.

The Trump administration’s move to fire Cook “threatens the fundamental principle of central bank independence and undermines trust in one of America’s most important institutions,” nearly 600 economists said in a Sept. 2 letter to Trump^[9], Congress and the American public.

Pulte’s criminal referrals of Cook, James and Schiff have raised questions about his tenure as the director of the FHFA, Fannie Mae and Freddie Mac’s federal regulator.

After Pulte was appointed to the position by Trump in March, he fired most of Fannie and Freddie’s boards^[10] and made himself chair of both companies.

Fannie Mae hired controversial Silicon Valley data analytics company Palantir Technologies^[11] in May to employ AI to help it detect mortgage fraud, which Pulte has claimed is “rampant.”

Pulte has said that^[12] Fannie and Freddie’s work to root out mortgage fraud are a nonpartisan continuation of past efforts carried out by the Obama and Biden administrations.

But in the past, the FHFA’s mortgage fraud investigations and criminal referrals the responsibility of the FHFA’s office of inspector general (OIG), The Guardian reported Sunday^[13].

“It’s very bizarre for Pulte to be the one making a criminal referral himself and it’s not coming from the IG’s office,” former FHFA chief of staff Janell Byrd-Chichester told the Guardian. “If we thought there might be criminal activity, that would go to the IG for review and a determination and the IG would be making any referral, not the agency.”

Pulte — the grandson of PulteGroup Inc. founder William J. Pulte — has declined to say what prompted the three criminal investigations now underway, and why Democrats are the only targets he’s publicized so far.

“Contrary to what the fake news media says, US Federal Housing FHFA has criminally referred people of each political parties,” Pulte posted^[14] on the social media platform X on Aug. 26.

ProPublica reported on Sept. 4^[15] that three Trump Cabinet members have reported more than one home as a principal residence: Labor Secretary Lori Chavez-DeRemer, Transportation Secretary Sean Duffy, and Environmental Protection Agency chief Lee Zeldin.

“Real estate experts say claiming primary residences on different mortgages at the same time is often legal and rarely prosecuted,” ProPublica reported.

The three Trump Cabinet members denied wrongdoing, and a White House spokesperson called ProPublica’s reporting a “hit piece.”

A Reuters investigation of public records^[16] found Pulte’s father and stepmother have claimed “homestead exemptions” for two primary residences in Michigan and Florida since 2020. The Bloomfield Township, Michigan assessor revoked the homestead tax exemption for the Michigan home after learning of the property in Florida from Reuters.

A separate Reuters review of more than 600 mortgage fraud cases found the Justice Department has brought criminal charges involving misrepresentation of a primary residence 20 times in the past eight years. All but one of those cases “were part of broader indictments involving large criminal schemes, such as drug cultivation or bank fraud,” Reuters reported Tuesday^[17].

The FHFA did not respond to Inman’s request for comment on reporting by the Guardian, ProPublica and Reuters calling into question Pulte’s claims that the agency has pursued mortgage fraud cases in a nonpartisan manner.

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Email Matt Carter^[20]