No ruling on whether Fed. Gov. Lisa Cook stays on the job

Bloomberg News

An emergency court hearing to determine whether Federal Reserve Gov. Lisa Cook can remain on the central bank's board while her lawsuit against President Donald Trump unfolds concluded without a ruling Friday.

On Thursday, Cook sued the president in the U.S. District Court for the District of Columbia over Trump's attempts to oust her from the Fed over as-yet unsubstantiated mortgage fraud claims. Cook's attorney requested for the court to issue a preliminary injunction confirming her status as a confirmed member of the Fed board.

Despite the lack of a ruling, a decision will likely be made before the Federal Open Market Committee meets on Sept. 16 and 17. Litigation filed by Cook claims that President Donald Trump failed to meet the legal standard "for cause" when he announced on social media that he was removing her from the Federal Reserve Board. The lawsuit argues that the mortgage fraud allegations against her were unsubstantiated and predated her time in office.

Attorneys for Trump on Friday called Cook's request for a temporary restraining order "meritless," arguing that a series of "ping-pong injunctions and stays" would destabilize governance at the Federal Reserve and should therefore be denied.

"Dr. Cook identifies no irreparable harm that requires overnight relief, or even relief within the next 14 days," Trump's attorneys wrote in an Aug. 29 filing. Additionally, Trump's lawyers defended the occupancy fraud allegations, saying it's "evidence of deceitful and potentially criminal conduct" which "constitutes 'cause' under any standard" and added that committing an alleged crime before being sworn in does not absolve the wrongdoing.

"She suggests that the President's actions are undermining the public's perception of the Federal Reserve as independent, directly threatening its mission of providing stability, but despite its independence, members of the Board are subject to removal for cause," attorneys representing Trump wrote in their filing. "And the President's actions to terminate Dr. Cook based on the mortgage impropriety should strengthen, not diminish, the public's perception of the Federal Reserve's integrity."

This argument follows a widespread assumption that the suit will hinge on what counts as "cause" for dismissal and whether the president's judgement alone serves as the arbiter of what infractions are or are not cause for dismissal. Experts have previously posited that if "for cause" removal protections are found unconstitutional or are the president's alone to judge, this will allow the president to remove anyone from the Federal Reserve, including the chair.

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The Federal Reserve also submitted a response to the suit in court, but said only that it urges the court to expedite its decision making.

"The Board merely expresses its interest in a prompt ruling by this court to remove the existing cloud of uncertainty and its intent to follow any order this court issues," the central bank's notice filed Friday reads.

The Federal Reserve has said little about the suit or the circumstances leading to it except to emphasize that it will abide by the court's decision, to the frustration of some industry experts, who have criticized the central bank for not standing up for its board members.

"How can a central bank call itself transparent when it won't tell you who its leaders are?" said Aaron Klein, senior fellow at Brooking's Institute, in an interview earlier this week. 

Alongside Cook's hearing, Bill Pulte, head of the Federal Housing Finance Agency, claimed Friday that there is a third property that Cook bought and claimed as a primary residence.

The new redacted referral Pulte posted on social media involves a property Cook purchased in Cambridge, Massachusetts. In the referral, Pulte alleges that four months before Cook took out loans in Georgia and Michigan, she represented a condominium property in Cambridge to be a second home. The alleged concern that Pulte flagged related to the Cambridge condo was that several months later she represented it to be an investment property she would rent out in other government filings.