A judge gave attorneys for the Fed governor until Sept. 2 to bolster their argument that she should keep her job, as Bill Pulte leveled new allegations of misrepresentation on a third property.
Attorneys for Federal Reserve Governor Lisa Cook have until Sept. 2 to explain in more detail why she should be allowed to keep her job, a federal judge said Friday — just hours after a Trump administration official leveled new allegations of misrepresentation on a third property.
President Trump notified Cook on Aug. 25 that he was removing her from her position, citing allegations leveled by Federal Housing Finance Authority Director Bill Pulte that the economist had claimed two separate properties in Michigan and Georgia as her primary residence.
“At a minimum, the conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator,” Trump said in a letter to Cook[1] he posted on Truth Social.
Pulte, who made the original allegations in an Aug. 15 criminal referral[2] to the Department of Justice, announced[3] a second criminal referral on the social media platform X Thursday night. This time, Pulte alleges Cook took out a mortgage on a Massachusetts condo that she represented was a second home. Pulte claims Cook has since listed the condo as an investment property.
Cook’s attorney, Abbe Lowell, called the latest allegations “an obvious smear campaign aimed at discrediting Gov. Cook by a political operative who has taken to social media more than 30 times in the last two days and demanded her removal before any review of the facts or evidence.”
Neither Cook or two Trump opponents Pulte has accused of mortgage fraud[4] — New York Attorney General Leticia James and Sen. Adam Schiff — have been charged with a crime. All deny wrongdoing, characterizing the allegations as political retribution[5].
Cook sued Trump[6] and the Federal Reserve Thursday, seeking an injunction to stop the Fed from carrying out Trump’s “illegal attempt” to fire her and a declaration that she remains on the central bank’s governing board.
“Since his confirmation, Director Pulte, often through social media postings, has used his office to allege mortgage wrongdoing against public officials, now turning his sights on Governor Cook,” her attorneys said in their complaint[7]. “Each of Director Pulte’s criminal referrals have notably been, at one time or another, political targets of President Trump’s ire prior to any mortgage fraud allegations.”
Allowing Trump to fire Cook “would subvert the Federal Reserve Act, which explicitly requires a showing of ’cause’ for a Governor’s removal,” her attorneys said, and violate Cook’s Fifth Amendment due process rights.
“The claims made in Director Pulte’s referral letter are unsubstantiated allegations about conduct that predates her Senate confirmation, and Governor Cook has never been given an opportunity to address them,” her attorneys said.
In a separate request for a temporary restraining order[8], Cook’s attorneys called the allegations a “thinly-veiled pretext” to obscure Trump’s real justification for targeting her: Her unwillingness to lower interest rates.
Trump administration attorneys argued[9] in a motion Friday that the president has “broad discretion” to remove Cook for cause, and that she hasn’t availed herself of the opportunity to defend herself against Pulte’s allegations.
The president “gave notice that he viewed the mortgage representations as grounds to fire Dr. Cook, and then waited five days for her to respond before proceeding with the threatened termination,” administration lawyers maintain.
Cook “has chosen not to dispute any of the facts undergirding the determination. All she offers is the conclusory claim that the accusations against her are ‘unsubstantiated’ — even though the mortgage documents themselves are facially contradictory.”
Although the case is expected to go all the way up to the Supreme Court, attorneys for the White House urged U.S. District Judge Jia Cobb not to stand in the way while the case is litigatged.
The president, they said, “has a strong interest in exercising his statutory authority to remove a federal officer for cause, and the public has a strong interest in stable governance at the Federal Reserve — a stability that would be undercut by the type of pingpong injunctions and stays that have characterized other litigation.”
Judge Cobb heard oral arguments Friday. While she did not grant a temporary restraining order, she gave Cook’s lawyers until Tuesday to bolster their case that Trump’s attempt to fire her would violate the Federal Reserve Act.
Although the Federal Reserve is named as a defendant, attorneys for the central bank said[10] they did not intend to offer arguments in the case, but are hoping for “a prompt ruling … to remove the existing cloud of uncertainty” and will follow “any order this court issues.”
If the Trump administration succeeds in ousting Cook, four of the seven members of the Fed’s Board of Governors will be Trump appointees.
“We’ll have a majority, very shortly so that’ll be great once we have a majority, and housing is going to swing and it’s going to be great,” President Trump told reporters[11] this week.
Although Trump has pressured Fed Chair Jerome Powell to lower short-term interest rates[12], mortgage rates and government bond yields could go up if investors are convinced the central bank is no longer independent, skeptics warn[13].
Pulte on Friday complained[14] on the social media platform X about a news report that “Jerome Powell has continued to let Lisa Cook have access to her office and electronics, despite the President of the United States ordering her firing.”
Get Inman’s Mortgage Brief Newsletter delivered right to your inbox. A weekly roundup of all the biggest news in the world of mortgages and closings delivered every Wednesday. Click here to subscribe.[15][16]
References
- ^ letter to Cook (truthsocial.com)
- ^ Aug. 15 criminal referral (x.com)
- ^ announced (x.com)
- ^ accused of mortgage fraud (www.inman.com)
- ^ political retribution (www.inman.com)
- ^ Cook sued Trump (www.inman.com)
- ^ their complaint (assets.inman.com)
- ^ request for a temporary restraining order (assets.inman.com)
- ^ Trump administration attorneys argued (assets.inman.com)
- ^ attorneys for the central bank said (assets.inman.com)
- ^ President Trump told reporters (www.youtube.com)
- ^ Trump has pressured Fed Chair Jerome Powell to lower short-term interest rates (www.inman.com)
- ^ skeptics warn (www.inman.com)
- ^ Pulte on Friday complained (x.com)
- ^ Mortgage Brief Newsletter (www.inman.com)
- ^ Click here to subscribe. (www.inman.com)
- ^ Email Matt Carter (www.inman.com)