Cook’s Lawsuit Puts ‘For Cause’ on Trial
Lisa Cook, who was confirmed as a Governor of the Federal Reserve in 2022, wants a federal judge to do something no court has attempted in the Fed’s 112-year history: define what “for cause” means when a president tries to fire a Fed governor.
Her lawsuit, filed Thursday after President Donald Trump threw her off the board of the Federal Reserve following allegations of mortgage fraud, asks for more than emergency reinstatement. Cook wants the court to import the Federal Trade Commission’s restrictive definition of cause—inefficiency, neglect of duty, or malfeasance in office—into Federal Reserve law. She wants a ruling that mortgage-form allegations from before her appointment can’t qualify as cause. And she wants a constitutional mandate for hearings before any Fed governor can be removed.
That turns a personnel dispute into a test of how far the court is willing to depart from the explicit design Congress used to protect Fed independence.
What Congress Actually Wrote
The governing statute, 12 U.S.C. § 242, is almost aggressively spare: it tells us that each Fed governor “shall hold office for a term of fourteen years from the expiration of the term of his predecessor, unless sooner removed for cause by the President.”
It does not include the enumerated standards found in other laws that Cook wants the court to import into the Federal Reserve Act. It does not impose any procedural requirements, such as the right to notice or hearings. It leaves what counts as “cause” as vague as can be.
This wasn’t an oversight. In 1935, as Congress rewrote Fed governance, lawmakers had the Supreme Court’s Humphrey’s Executor decision fresh in mind—the case that upheld tight “inefficiency, neglect of duty, or malfeasance” language for FTC commissioners. They could have copied that formula for Fed governors. They didn’t.
Senator Carter Glass, the Fed’s legislative architect, was explicit about the choice. A president could dismiss Fed members “for cause stated in writing” and thereby “change [the Board’s] policy.” When asked whether the president must “prefer charges” like a prosecutor, Glass said no. The design favored reason-giving over judicialization.
Where Cook’s Case Falls Apart
The Supreme Court has expressed a reluctance to convert deliberately broad statutory language into a rigid code, especially when Congress declined to write such codes itself. The Supreme Court made this point sharply in Reagan v. United States (1901): “removal for cause, when causes are not defined nor removal for cause provided for, is a matter of discretion, and not reviewable.”
That century-old precedent suggests Cook faces an uphill battle. If “for cause” at the Fed means presidential discretion rather than judicial second-guessing, then pre-appointment conduct isn’t automatically off-limits—particularly conduct that might bear on fitness for overseeing America’s banking system. Candor in financial transactions, for instance, might reasonably connect to trustworthiness in monetary policy.
Cook’s due process argument faces similar headwinds. Presidential removal of principal officers isn’t subject to Administrative Procedure Act hearings, and Section 242 contains no procedural language. The 1935 design looks more like a command for the president to state his reasons to the public and the U.S. Senate, who could refuse to approve a president’s replacement nominee if they found the grounds for dismissal insufficient.
That’s hardly means the “for cause” requirement is toothless. The very fact that no president has ever attempted to remove a Fed governor—despite a number of clashes between the White House and the central bank—suggests that this has been an effective protection for over 100 years. As does the fact that Trump is not aiming to remove Fed Chairman Jerome Powell.
The Pretext Problem
Cook’s lawyers have also argued that the cause offered up by President Trump is nothing but a “thinly veiled pretext.” They describe the mortgage-fraud allegations as “concocted” and a cover for his “real” reason for firing her. In their legal brief, it is nothing more than “an attempt to remove Governor Cook over her unwillingness to lower interest rates.”
There’s a doctrinal problem with this and a practical problem. The doctrinal problem is that courts generally avoid diving into presidential motivations when evaluating removal decisions, preferring to judge stated reasons on their face rather than conduct psychological autopsies of executive intent. This judicial reluctance runs especially deep in separation-of-powers contexts, where motive-hunting risks entangling courts in the messy politics they typically try to avoid.
If the White House offers a plausible connection between the mortgage allegations and Cook’s fitness for a financial regulatory role—integrity in financial dealings, trustworthiness, candor—the judge is likely to accept that rather than inquire whether Trump’s real goal was changing Fed policy. Cook’s lawyers will undoubtedly point to the president’s public statements about interest rates, but courts have consistently held that mixed motives don’t invalidate presidential actions when at least one stated reason fits the legal framework. The pretext argument that seems so obvious in the political arena becomes much harder to prove in a courtroom bound by doctrinal constraints on judicial inquiry into executive decision-making.
What’s more, the removal of Cook is extremely unlikely to change the stance of monetary policy. She is one of 12 votes on the Federal Open Market Committee (FOMC) that sets interest rates. At the Fed’s last meeting, all but two officials voted against cutting. It will be hard to convince a court that a president is trying to fire Cook to accomplish a goal that firing her could not possibly accomplish.
The Irreparable Harm Problem
Cook’s biggest vulnerability may be the most basic: to convince the court to put a halt to Trump’s order removing her, she must show that losing her Fed seat would cause irreparable harm warranting emergency court intervention.
Supreme Court doctrine is unforgiving here. In Sampson v. Murray (1974), the Court held that the temporary loss of a government job and salary does not usually constitute irreparable injury. The reason is simple: money can be repaid later. It added that reputation or embarrassment harms “fall far short” of the standard for preliminary relief in this setting. And when the claimed injury is the inability to exercise public power, courts tend to treat that as an institutional concern, not a personal harm justifying extraordinary relief.
Modern precedent raises the bar further. Winter v. NRDC (2008) requires a likelihood, not a mere possibility, of irreparable harm. Judges are particularly reluctant to insist that senior officials remain in sensitive posts while litigation proceeds. Is it really a good idea to have a Fed governor deciding monetary policy while she is litigating against the President of the United States?
Cook’s team will argue that Fed independence itself suffers irreparable harm from political removal. But that institutional injury—however real—doesn’t easily translate into the personal, noncompensable harm that emergency injunctions require.
What the Court Will Likely Do
Of course, there’s no accounting for Trump Derangement Syndrome in any courtroom presided over by a federal district judge. Many have shown a willingness to throw legal precedent and conventional limitations on judicial power out the window in attempts to thwart the president. But Judge Jia Cobb, who will hear arguments on Friday, has a reputation for handling complex and politically sensitive cases with careful attention to statutory authority and legal boundaries.
Two realistic near-term outcomes follow from the doctrinal landscape. First, there’s likely to be no reinstatement but expedited proceedings on the merits. That preserves judicial resources while ensuring Cook gets a prompt ruling. Second, a narrow order requiring the administration to provide a more detailed statement of its “cause” determination—backed by whatever contemporaneous evidence exists—without reinstating Cook pending judgment.
Either approach forces the White House beyond “because we said so” while keeping federal judges out of the business of staffing Federal Reserve meetings.
Ultimately, however, the constraints Congress built to protect Fed independence depend more on the Senate and the structure of the central bank than they do on judicial oversight. Fourteen-year staggered terms, Senate confirmation for replacements, and a 12-member FOMC that dilutes any single appointment’s influence—these features protect Fed independence more reliably than courtroom hearings about presidential “cause.”
Read the full article here
