Fired Fed board member sues Trump to try to keep her job

Lisa Cook, the Federal Reserve board member whom Donald Trump attempted to fire this week, asked a federal court Thursday to declare the president’s move illegal and void.

In a lawsuit filed in the federal district court in Washington, Cook contends that Trump’s stated reason for dismissing her is an “unprecedented and illegal” pretext to seize control of the Fed’s decision-making body, which Trump has long maligned and sought to influence.

Federal law permits the president to remove members of the Fed’s Board of Governors “for cause,” which is typically understood to mean serious misconduct or malfeasance. Trump claimed that he had good cause to fire Cook based on an uncorroborated allegation — which originated from the Trump loyalist who heads a federal housing agency — that Cook lied on a mortgage application.

“It is clear from the circumstances surrounding Governor Cook’s purported removal from the Federal Reserve Board that the mortgage allegations against her are pretextual, in order to effectuate her prompt removal and vacate a seat for President Trump to fill and forward his agenda to undermine the independence of the Federal Reserve,” Cook’s lawyers Abbe Lowell and Norm Eisen argue in the lawsuit.

Cook is asking the court to declare that a removal “for cause” cannot include “an unsubstantiated allegation” of the kind Trump leveled against her. She is also asking the court to bar Federal Reserve Chair Jerome Powell from effectuating Trump’s purported termination.

“President Trump’s conception of ‘cause’ has no limiting principle,” the lawsuit argues. “It would allow him to remove any Federal Reserve Board member with whom he disagrees about policy based on chalked up allegations.”

Cook was appointed to the Fed’s board by Joe Biden for a term that is slated to expire in 2038.

Trump has made no secret of his desire to exert more influence over the Federal Reserve, whose interest rate-setting authority has enormous sway over the economy. He has railed against Powell and other board members for what he says is slow-rolling rate cuts that might juice the market.

The case sets up the biggest test yet of Trump’s authority to control executive branch agencies that Congress has sought to insulate from political pressure. It appears destined to be resolved by the Supreme Court.

In the first seven months of Trump’s second term, the Supreme Court has repeatedly blessed his moves to summarily terminate agency heads and members of presidentially appointed federal boards, even when those leaders are protected under federal statutes from being arbitrarily fired. But the justices went out of their way in a May ruling to acknowledge the unique role of the Federal Reserve and its long history of independence.

However, Trump’s decision to cite a “for cause” basis to fire Cook — even a pretextual one — could complicate the legal equation. Courts may be reluctant to second-guess the president’s assertion about what counts as good cause for a firing.

Cook argues that in addition to the flawed basis for her firing, her due process rights required that she receive advance notice and a chance to contest the allegations against her in a hearing. The suit claims she has a property interest in the job, which carries an annual salary of $225,700. Under the Constitution, her lawyers say, the position cannot be taken away from her without due process.