A divided federal appeals court has ruled that President Trump illegally fired Lisa Cook from her position as a member of the Federal Reserve Board.
The decision, by a three-judge panel of the U.S. Court of Appeals for the District of Columbia, means that Cook may vote on whether to cut interest rates during a two-day meeting that started today.
Trump last month ordered Cook removed from the board, citing an investigation into allegations of mortgage fraud.
The Trump Administration has charged that Cook made false statements on mortgage applications for a home in Michigan and a condominium in Georgia. The applications were filed before Cook was nominated to the Board by President Biden.
Judge Jia M. Cobb of the U.S. District Court of the District of Columbia ruled that the firing was illegal, in part because the allegations involved Cook's behavior before joining the board and because she had not been given the right to answer the allegations against her.
Appeals Court Judge Bradley N. Garcia agreed.
"I agree with the district court's conclusion that Cook's due process claim is likely to succeed," he wrote for the majority.
Garcia, who was joined by Judge J. Michelle Childs, said, "Given that Cook has a property interest in her position, she is entitled to 'some kind' of process before removal."
Dissenting, Judge Gregory G. Katsas wrote, "The President plainly invoked a clause relating to Cook's conduct, ability, fitness, or competence. The allegations against Cook could constitute mortgage fraud if she acted knowingly, and that is a felony.
He wrote that even absent intentional misconduct, any misstatements in formal applications for six-figure loans are "at least concerning." He said that Trump had concluded that the allegations cast doubt on Cook's competence and trustworthiness as a financial regulator. He added that is plainly a permissible ground for dismissal.
Katsas wrote that as a principal officer of the United States, Cook serves in a position of public trust that creates no property rights.
While the Government could seek a stay from the en banc DC Court of Appeals, we believe that it is more likely that it will seek a stay from the Supreme Court by using its emergency docket. It seems unlikely that there is sufficient time for the Supreme Court to grant any stay in time for it to prevent Cook from being part of the decision of the Federal Open Market Committee tomorrow with respect to interest rates.
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