Trump blocked from firing Fed Governor Lisa Cook as lawsuit plays out

A judge on Tuesday night blocked President Donald Trump from firing Federal Reserve Governor Lisa Cook as a lawsuit challenging her removal continues.

"The public interest in Federal Reserve independence weighs in favor of Cook's reinstatement," U.S. District Court Judge Jia Cobb wrote in granting Cook a preliminary injunction barring her termination.

Cobb said that "Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Act's 'for cause' provision."

"The best reading" of that provision is that the bases for removing a Fed governor are limited to actions relating to that governor's 'behavior in office,' " the judge wrote in Washington, D.C., federal court.

"'For cause' thus does not contemplate removing an individual purely for conduct that occurred before they began in office," Cobb wrote.

The judge was referring to allegations of mortgage fraud by Cook that Trump cited for firing her.

Cook, who denies any wrongdoing, is he first Black female Fed governor.

The Supreme Court is expected to have the final say in the case, which involves the first-ever effort by a president to fire a Fed governor for purported cause.

Cobb's decision means that Cook will participate in the Fed's next meeting, which starts Sep. 16. The Fed is expected to cut interest rates at that two-day meeting.

Trump said on Aug. 25 that he was removing Cook because of suggestions by Federal Housing Finance Agency Director Bill Pulte that she committed mortgage fraud in signing documents for two properties she owns.

Cook signed those documents before she joined the Fed.

Trump's attempt to remove Cook came after months of him unsuccessfully pressuring the Fed and its chairman, Jerome Powell, to cut interest rates. Trump seriously considered firing Powell over the summer.

If Cook is removed, Trump will get to nominate her replacement, meaning that a majority of the Fed's seven governors would be his nominees.

The Senate Banking Committee on Wednesday is set to vote on Trump's nomination of Stephen Miran, the chair of the Council of Economic Advisers, to the Fed board. Miran would replace Adriana Kugler, whose resignation in August was a surprise.

Cobb's order on Tuesday enjoins Powell and the Fed Board of Governors "from effectuating in any manner" Cook's removal because of Trump's order.

"Today's ruling recognizes and reaffirms the importance of safeguarding the independence of the Federal Reserve from illegal political interference," Cook's attorney, Abbe Lowell, said in a statement.

"Allowing the President to unlawfully remove Governor Cook on unsubstantiated and vague allegations would endanger the stability of our financial system and undermine the rule of law," Lowell said.

"Governor Cook will continue to carry out her sworn duties as a Senate-confirmed Board Governor."

White House spokesman Kush Desai, in a statement, said, "President Trump lawfully removed Lisa Cook for cause due to credible allegations of mortgage fraud from her highly sensitive position overseeing financial institutions on the Federal Reserve Board of Governors."

"This ruling will not be the last say on the matter, and the Trump Administration will continue to work to restore accountability and confidence in the Fed," Desai said.

The Federal Reserve did not immediately reply to a request for comment.

Lowell, during an Aug. 29 court hearing in the case, scoffed at the idea that Trump had legal cause to terminate her.

"You can't have Director Pulte's crazy midnight tweets be the cause," Lowell told Cobb at that hearing.

— CNBC's Christina Wilkie and Jeff Cox contributed to this story.