Lisa Cook’s Future Remains Unclear After Round 1 of Her Legal Fight

A top Justice Department lawyer hammered Lisa Cook on Friday as a federal judge weighed her request to remain at the Federal Reserve.

“Is there some material factual dispute?” Justice Department attorney Yaakov Roth said during a hearing. “I think there was something like that; we would have heard it by now.”

Roth said that US District Judge Jia M. Cobb could not extensively review President Donald Trump’s reason for firing Cook for apparent irregularities in her mortgage filings made before she was confirmed to join the central bank. He said that any review of Trump’s decision had to be deferential to the president.

“I don’t see the argument for a very senior financial regulatory official making contradictory statements on financial documents that is not reasonable grounds for removal,” Roth said. “I just don’t see it.”

Cobb is weighing whether to issue a temporary restraining order to ensure Cook continues in her role while additional litigation plays out. Friday’s hearing concluded without any action. Cobb asked the Justice Department and Cook’s legal team to get together to confirm the sequence of events.

In the meantime, Cook’s future remains uncertain. The Fed has tried to take no position on whether Trump’s action should stand.

“At this time, the Board merely expresses (1) its interest in a prompt ruling by this Court to remove the existing cloud of uncertainty; and (2) its intent to follow any order this Court issues,” Joshua P. Chadwick, assistant general counsel for the Fed, said in a court filing before Friday’s hearing began.

In a court filing, DOJ lawyers said that Trump had no obligation to give Cook additional chances to argue she didn’t do anything wrong.

“Incredibly, Dr. Cook even now hazards no explanation for her conduct and points to nothing she would say or prove in any ‘hearing’ that would conceivably alter the President’s determination that the perception of financial misconduct alone is intolerable in this role,” DOJ letters wrote in a Friday morning court filing.

During the hearing, Roth said that Cook had yet to offer any potential explanation, including that the signature on the mortgage documents wasn’t hers or that she was potentially advised by a lawyer that everything was above board.

Cobb offered few hints at how she might rule, but she sounded skeptical of Roth’s claim that Cook knew she only had a limited window to respond to the president.

“How did she know that she had five days to respond?” the judge asked.

Trump posted a letter on Truth Social Tuesday night saying he was firing Cook from the Federal Reserve board of governors for “cause.” He cited a criminal referral authored by Federal Housing Finance Agency Director Bill Pulte, who alleged she lied on mortgage documents. According to Pulte, Cook said two different homes would be her primary residence at the same time.

Justice Department attorney Yaakov Roth pressed the point at Friday’s hearing. He said Cook was unlikely to succeed with additional litigation, so Cobb should not block Trump’s firing.

“Is there some material factual dispute?” Roth said. “I think if there was something like that, we would have heard it by now.”

Cook and Trump dispute what ’cause’ means

Cook sued Trump and the Federal Reserve on Thursday. In her lawsuit, she called the allegations about her mortgage documents “unsubstantiated” and said that, in any case, Trump’s basis didn’t meet the required legal standard for for-cause removal from her post.

Because the Federal Reserve is an independent agency, presidents have limited power to remove members of its board. The governors serve for staggered 14-year terms, and Cook’s is scheduled to end in 2038. Under the law, presidents can only remove board members for “cause.”

“President Trump does not have the power to unilaterally redefine ’cause’ — completely unmoored to caselaw, history, and tradition — and conclude, without evidence, that he has found it,” Cook’s lawsuit says.

Cook’s lawsuit did not explain the apparent discrepancy in her mortgage filings. Her attorney, Abbe Lowell, said in Friday morning’s hearing that, in any case, Trump was legally required to hold a process that would determine whether she acted with improper intent and motive.

“Cause” may be difficult to define, but a mere allegation isn’t enough, Lowell said.

“It certainly doesn’t mean Director Pulte coming up with allegations in the middle of the night,” he said.

The Justice Department lawyers, who are representing Trump, said in their Friday morning filing that judges should defer to the president when interpreting the “cause” standard.

“Removal for ’cause’ is a capacious standard, and one Congress has vested in the discretion of the President,” the Justice Department lawyers wrote. “Even if it were subject to any judicial review — and over a century of caselaw suggests it is not — that review would have to be highly deferential, lest it intrude into the President’s constitutional authority over principal officers.”

The Supreme Court has so far largely sided with Trump in his attempts to fire the leaders of other independent agencies without citing any cause.

But in an unsigned May opinion, the majority said the Federal Reserve deserves different treatment because of its history, without explaining what those different standards would be.

Trump has said he wants the Federal Reserve board to lower interest rates as part of his plan to reshape the American economy. Cook’s lawsuit highlighted the importance of an independent board, insulated from political interference.

“An independent Federal Reserve is essential for a stable economy, as the short-term political interests of a president often clash with sound monetary policy,” the lawsuit says.

At Friday’s hearing, Lowell said Trump’s desire to lower interest rates was a pretext for trying to fire Cook, and supports the argument that his attempt to fire her was invalid.

“A bad motive can illuminate the fact that there was no real cause,” he said.

Roth said Trump’s repeated criticism of the Federal Reserve’s chairman, Jerome Powell, is irrelevant to the case.

He said the president had not criticized Cook in the same vein before allegations about her mortgages came to light.

“This isn’t Chairman Powell,” Roth said. “This is Dr. Cook.”