Lisa Cook under federal investigation for mortgage fraud as pressure mounts on the Fed

The U.S. Department of Justice opened a criminal investigation on Thursday to determine whether Federal Reserve Governor Lisa Cook committed mortgage fraud, marking another setback for the institution, which has been at the center of Donald Trump’s attempts to influence its interest rate decisions.

In an unprecedented move, Trump announced two weeks ago via social media the “for cause” dismissal of Governor Lisa Cook, who was appointed by Joe Biden and whom he accuses of committing mortgage fraud during her tenure as a professor of economics in Michigan, before joining the Federal Reserve. Cook has responded by filing a lawsuit against the U.S. president, denying the accusations — which Trump has not provided evidence for — and claiming that he wants to remove her to replace her with someone whose views align with his own.

Now it is the justice system that has decided to investigate Cook. Prosecutors have issued subpoenas to obtain information related to allegations that she provided false information on applications for two mortgages.

The complaints against the governor originate from a senior Trump administration official responsible for investigating potential mortgage fraud, who claimed on social media that in 2021 Cook had listed two different homes as her primary residence on separate credit applications. One is in Michigan, where she was teaching, and the other in Georgia, the state where she was born.

Cook has challenged her dismissal in court, and the case is now pending before a federal court, where state attorneys were scheduled to submit their arguments today defending Trump’s decision.

On Thursday, Cook’s lawyer, Abbe Lowell, reiterated that his client did not commit fraud. “The questions over how Governor Cook described her properties from time to time, which we have started to address in the pending case and will continue to do so, are not fraud, but it takes nothing for this DOJ to undertake a new politicized investigation, and they appear to have just done it again,” Lowell said in a statement.

Senate hearing

The criminal investigation into Cook coincides with the Senate confirmation hearing for Stephen Miran, Trump’s economic adviser, whom Trump has nominated as one of the seven members of the Federal Reserve Board of Governors. Trump proposed Miran in August to replace Governor Adriana Kugler, who unexpectedly resigned six months before her term was set to expire. If confirmed, Miran would initially complete the remainder of his predecessor’s term, which ends on January 31. At that point, Trump could either nominate him for a full 14-year term or put forward another candidate.

Miran’s appointment — and, if confirmed, Cook’s replacement — would give Trump the opportunity to secure an ideologically aligned majority on the Fed’s board of governors. Questions about the central bank’s independence surrounded his nomination. In Miran’s opening statement before the Senate Banking Committee, which must approve his appointment, the former White House economic adviser said that “I will act independently, as the Federal Reserve always does.” He also stated that his decisions would be based solely on “the macroeconomy and what’s best for its long-term stewardship.”

“I’m very independently minded,” Miran said, in response to accusations from Senator Elizabeth Warren, a Democrat from Massachusetts, who labeled him a “puppet” of the Republican administration ahead of the hearing.

Miran’s hearing was arranged at high speed. Republican lawmakers, who hold a Senate majority with 53 of 100 seats, aim to confirm him quickly so he can be ready for the next Federal Open Market Committee meeting on September 17, where interest rate decisions will be made. “Your nomination is getting rushed because the president is frustrated with the Fed for not cutting rates, and he wants loyalists on the Fed’s board,” protested Democratic Senator Tina Smith during the session.

Miran’s statements came under intense scrutiny from lawmakers. The U.S. president has made it clear that he wants to gain control of the Fed, whose independence is crucial for monetary policy decisions that safeguard the economy rather than serve the political interests of the administration in power. Since returning to the White House, Trump has increasingly pressured the central bank to lower interest rates — a move the Fed, led by Jerome Powell, has resisted so far, fearing it could trigger another wave of inflation, when the levels seen during Joseph Biden’s presidency are barely under control.

Last week, Trump’s remarks cast doubt on his nominee’s promises of independence. “We’ll have a majority very shortly,” he said. “So that’ll be great. Once we have a majority, housing is going to swing … People are paying too high an interest rate. That’s the only problem with us. We have to get the rates down a little bit."

Analysts and markets are watching the potential politicization of the Fed with concern. “A less independent Fed would likely favor more aggressive rate cuts […] at the expense of higher inflation,” Oxford Economics analysts wrote last week.

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