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Of data points a second for threats.
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Got some breaking news. Federal Reserve Governor Lisa Cook is going to remain in her job at least through the September meeting of the Federal Reserve about interest rates because Judge Gia Cobb in the District of Columbia has issued her preliminary injunction blocking the firing of Lisa Cook, finding that there has been no for cause reason for her termination, determining that she has been deprived of her fifth Amendment rights to have due process before she's deprived of her and also finding that Donald Trump violated the Trump administration violated the Federal Reserve act because the stated reason, even if she was given proper due process, the stated reason for Lisa Cook's dismissal was a mortgage fraud or mortgage issue before she was on the Federal Reserve when she checked a couple of boxes and took out two primary loans for two primary residences. And even if that were true, Judge Cobb has declared that does not rise the level of for cause as that term is widely known in the removal arena because it does not constitute what's called inefficiency, neglect of duty or malfeasance. Particularly, Judge Cobb said that the bad conduct that is the basis for the removal in order to protect the independence of the Federal Reserve must have occurred while the person was in office. And the allegations that Bill Pulte, the Nepo baby donor to Donald Trump that runs Fannie Mae and Freddie Mac, the ones that he has made deal with her taking out mortgages before she was appointed by Joe Biden Information and facts the judge observed that would have been available during her confirmation process. So she is blocking Donald Trump from taking out Lisa Cook. What'll happen next? An appeal, likely an emergency appeal. And stay up to the D.C. circuit Court of Appeals on the way to the Supreme Court. And it presents another clash about a case I'm going to go into detail called Humphrey's executor. I'm Michael Popak. You're on the Midas Dutch network in Legal af. You're here for it and so are we. Let's get into the memorandum opinion. I'm going to post it in its entirety today on the Legal AF substack so you can read it. But let me give you my announcement analysis. Having gone through it, you'll recall that Lisa Cook was appointed in 2023 to a 14 year term. It times out in 2038 to serve on the Federal Reserve. That the Federal Reserve, even as this United States Supreme Court right wing majority has observed, is the equivalent of the first and second banks of the United States and that its independence, apart from political whims of whoever's occupying the Oval Office and is paramount for it to do its job, even while the Supreme Court has allowed, even as recently as yesterday, has allowed all the heads to be lopped off of other commissioners and other agencies like the Federal Trade Commission or the National Labor Relations Board, they seem to have a special interest of protection. Teacher's pet seems to be the Federal Reserve because in May, in a case called Wilcox, which Judge Cobb relies on the Supreme Court in talking about, the National Labor Relations Board said, well, the Federal Reserve is different and they can't be fired except for cause without defining what for cause is. So the whole fight here in a trial that took place, an evidentiary hearing that took place about three weeks ago, which was the basis for now the preliminary injunction by Judge Cobb, the whole focus was really on two things. Did Lisa get a proper due process? In other words, was she given notice, an opportunity to defend herself and a hearing before she was canned, before her life, liberty and property, the property interest in her job was taken away from her. And the answer to that was clearly no. Or as the lawyer for Lisa Cook said out loud, Abby Lowell, the crazy midnight tweets of Director Bill Pulte cannot be due process or cause. And the judge agreed with that. The second thing she found is that it's likely that Cook will win on her arguing on her argument, her claim that the Trump administration has violated the Federal Reserve act as it relates to for cause. To hear Donald Trump's argument, cause is Whatever he says it is, cause is whatever the President says it is. And he went further and argued that the judges have no right to review whatever his claim is. It's the same argument Trump has made about a war is what I say it is, a rebellion is when I declare it, and insurrection is when I point to it and nobody can review my powers. And now sometimes the Supreme Court has sided with him, but not for, for cause. There's a difference between somebody being fired for cause, an actual reason of bad conduct in office, and an argument that they can be fired at will or for no cause. And the Supreme Court in May, as pointed out by Judge Cobb, and I'm going to read to you from certain aspects of her, of her decision here, Judge Cobb said there's a difference, and you can't destroy the difference by having Trump say, I can fire for any reason. Then what would be the reason that the Supreme Court in May would say particularly, you can't fire anybody except for cause. If you could fire them for any cause that you can imagine, that's the equivalent of somebody at will and having no for cause rights of protection. And so Judge Cobb was like, yeah, I'm not buying that. There was a lot of fighting in the, in the, in the arguments, and then ended up in part of this order about dictionary definitions and the dictionary definitions of what is cause and not cause. That. That doesn't completely answer the question. As the judge pointed out, she had to go to the legislative history. She had to go to the history of what 4 cause meant in, like, 1935, you know, when a lot of these, a lot of these. The Federal Reserve was created in its present modern format, and she found there it relies on something that's referred to in the business as inm, that the foreclos has to be inefficiency. I'll talk to you about what that means. Neglect of duty or malfeasance in office, meaning inefficiency means you're slow, you're not doing your job, Neglect of duty means you're not doing your job, and malfeasance means you're not doing your job. It's just three different versions of you're not doing your job in your job, not about things outside your job, even if it's allegations of fraud or a criminal referral, that is not grounds removal. Now, if she's criminally convicted, I think that therefore would probably go into what's called ineligibility to serve in the role, and she'll be taken out by the criminal Court. System but for a 4 cause, employment reason to destroy the independence of the Federal Reserve. No way you ever have a meal that just stays with you. Like for me it was this spicy citrus marinated grilled fish thing I had on vacation last summer. It was perfectly charred, bursting with flavor and I still crave it. That's exactly what cookunity delivers. Meals so good they stick in your memory. 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That's free Premium Meals for Life by using code legal af free or going to cookunity.com legal af free terms and conditions apply. Go to cookunity.com for details. And that's what the judge said. I am concerned with the independence of the Federal Reserve. This is her declaration in her order is as follows. The public interest is in the Federal Reserve and the Federal Reserve's independence weighs in favor of Cook's reinstatement. That she's made a strong showing that the removal was done in violation of the four cause provision and that the best reading of the four cause provision in the Federal Reserve act is that everything has to be done in office. And if there was something that she did beforehand, without even getting into the details of it, the judge says that cannot be the for cause reason. She also implies that that would have been information that would have been available during her vetting and confirmation process. Just as Bill Pulte pulled out of the public record all of these documents about her mortgages, they could have done that then. And so we have to presume they either saw it and didn't care about it or it's, you know, the due diligence wasn't done properly. But that doesn't give Trump the right to take out a prior president's pick for the Federal Reserve. Let me read to you from the memorandum opinion. Um, and then interesting little twist I'll, I'll tell you about at the end, which is the judge is saying this is my ruling for now, but I want further briefing as this, as this issue goes up potentially on appeal page one. However, at this preliminary stage, the court finds that Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Acts for cause provision. The best reading of the for cause provision is that the basis for removal of a member of the Board of Governors are limited to grounds concerning a governor's behavior in office and whether they have been faithfully and effectively executing their statutory duties. For cause thus does not contemplate removing an individual purely for conduct that occurred before they began in office. In addition, the court finds that the removal also likely violated Coke's procedural rights under the Fifth Amendment's Due Process Clause. She has demonstrated irreparable harm. The public interest and balance of equities tips in her favor and she they grant this now which they call the. She calls the preliminary injunction. It started as a temporary restraining order, but she ratcheted it up to a preliminary injunction because she already held the hearing. She starts with her statutory framework and leads off on page two with the Supreme Court decision from May in the Wilcox National Labor Relations Board case that I just told you about. And she says the following, citing the Supreme Court for May. The Federal Reserve System was established over a century ago. The Federal Reserve quoting from the Supreme Court is a uniquely structured quasi private entity that follows in the distinct historical tradition of the first and second banks of the United States, meaning Donald Trump, the executive that runs the executive branch. Because it's semi private and independent, he can't just fire them at will. And that the system involves a complex set of relationships. The Board of Governors, the Federal Open Markets Committee which sets the interest rates, and the 12 Regional Federal Reserve banks. She then says because the statute doesn't define for clause, she's going to have to go through dictionary definitions and legislative definitions from around the time of the modern, the modern Federal Reserve being formed. She rejects Trump's argument that she cannot as a judge review his decision and finding of for cause. So that's out. That's out, she says. Of course courts can and will do that. She then talks about on page 13. She takes on and dives into this argument about Humphrey's executor. Humphreys executor is a 1935 case at around the same time as these other statutes were passed in which it was said that a person can't be fired for cause unless for cause. Once Congress sets up this type of agency. The reason I'm saying she's wading into a new battle is because the Supreme Court just a day or so ago allowed Donald Trump to fire the Democratic member of the Federal Trade Commission, which would appear to be a violation of the Humphreys executor line of cases subject to further appeal. So Humphreys executor as a standing, as a jurisprudence basis, is on life support. Here's what the judge says, though, about it. The language of the act, the legislative reports and the general purposes of the legislation as reflected by the debates all demonstrate the congressional intent to create a body of experts who shall gain experience by length of service, a body which shall be independent of executive authority and free to exercise its judgment without the leave or hindrance of any other official or any department of government. In other words, we need an independent Federal Reserve. And Donald Trump, because of policy quibbles and policy differences, can't fire Lisa Cook because he's not gonna support him on interest rates because cut, which, by the way, when the Sept. 16 meeting comes around of the Open Markets Committee that she'll be participating in, at least for now, she may vote for rate cuts. Donald Trump's economy and recession is so bad right now and the job loss so great that I don't think there's any choice but for the Open Markets Committee by a majority, probably including Lisa Cook, to vote for interest rates to be cut at least by a quarter, if not a half a point, in order to get more money into the economy, to grow the economy, because Donald Trump is killing it. Now, if she votes for it, it's not because she's been attacked and sued and removed and got reinstated. It's because she, as an economist, as a person who's executing her duties, felt it was the right thing to do. This will now go. This case will now go up on appeal to the D.C. circuit Court of Appeals. Judge Cook has said she's not going to stay her order. They're going to have to get the stay from that court. Will they get the stay to keep Lisa Cook out of her position for the 16th in the meeting? I don't know about that, but these things are going to move quickly. I'll update you on Legal AF, YouTube, and on my live substacks as well, because this is a fast moving story. And then on top of that, it'll go up to the United States Supreme Court, probably be briefed when the new term opens on October 7th. I'll follow it all here. Take a minute, hit the free subscribe button here on the Midas Touch Network and of course on Legal AF YouTube. Until my next report, I'm Michael Popak. Can't get your fill of Legal af? Me neither. That's why we formed the Legal AF substack. Every time we mention something in a hot take, whether it's a court filing or a oral argument, come over to the substack. You'll find the court filing in the oral argument there, including a daily roundup that I do called Wait for It Morning Afraid. What else? All the other contributors from Legal AO for there as well. We got some new reporting, we got interviews, we got ad free versions of the podcast and hot takes where Legal AF on substack. Come over now to free subscribe.
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