A divided federal appeals court on Monday refused to let President Donald J. Trump immediately oust Federal Reserve Governor Lisa D. Cook, but a forceful dissent warned that the decision misapplied both constitutional law and common sense.
In an order issued Monday night, the U.S. Court of Appeals for the District of Columbia Circuit denied the administration’s emergency request to lift a lower-court injunction that had restored Ms. Cook to her post after Mr. Trump declared he had “cause” to remove her. Judge Bradley Garcia, joined by Judge J. Michelle Childs, filed a concurring opinion. Judge Gregory Katsas dissented.
The Federal Reserve is scheduled to begin a two-day meeting of the Federal Open Market Committee on Tuesday. Monday’s order likely means that Cook will be able to attend the meeting and vote on monetary policy as a Fed Governor. The Trump administration is expected to ask the Supreme Court to stay the lower court’s order, upending Monday’s decision by the appeals courts.
The majority emphasized that the government had given Ms. Cook no notice or chance to respond to allegations against her, making the dispute less about presidential authority and more about due process. But Judge Katsas argued that the accusations — that Ms. Cook made misrepresentations when applying for home mortgages before her appointment — plainly called into question her fitness as a financial regulator. Pre-appointment misconduct, he said, is no less valid grounds for dismissal than acts committed while in office.
“Fraud is not just a permissible reason for removal,” Judge Katsas wrote. “It is an excellent one.”
The majority took a narrower tack. It did not rule out Mr. Trump’s ability to remove Ms. Cook for cause based on the mortgage allegations. Instead, it said her statutory protection from at-will firing meant she had a property interest in her position, entitling her under the Constitution to at least some opportunity to contest the charges before she was removed.
That distinction — procedure over substance — became central to the split. While the majority said Ms. Cook was likely to prevail on her claim that her summary dismissal violated the Fifth Amendment’s due process clause, Judge Katsas rejected the idea that principal officers of the United States could ever hold property rights in their offices. He likened her to the governor of Kentucky in a 1900 Supreme Court case, where the justices declared that “public office is not property.”
The case has unusually high stakes. Federal Reserve governors serve 14-year terms and play a direct role in setting the nation’s monetary policy, including interest rates. Although presidents of both parties have sparred with the central bank, Congress long ago insulated its governors from politics by making them removable only “for cause.”
Judge Katsas said Monday’s ruling undermined that balance by effectively letting a potentially compromised Fed official cling to power while litigation dragged on. “Even with expedition,” he warned, “judicial review can frustrate presidential action for months or even years.”
The majority countered that Ms. Cook’s removal without any process threatened the integrity of the law itself. “The government may not prioritize any policy goal over the Due Process Clause,” Judge Garcia wrote.
The legal battle is likely to head to the Supreme Court next. The Fed is expected to cut interest rates by a quarter of a point at the end of its two-day meeting on Wednesday.
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