Fed Governor Lisa Cook sues Trump over attempt to fire her

Federal Reserve Governor Lisa Cook filed a lawsuit this Thursday against U.S. President Donald Trump for attempting to remove her from office. Cook, appointed by the Biden administration, argues that the Republican lacks the authority to dismiss her and has asked the courts to block the action, in a case that promises a fierce legal battle over the central bank’s independence.

In her filings, the governor asks the courts to block her dismissal and allow her to continue performing her duties while the case is resolved — a process that could take months. This would, among other things, allow her to vote when the Board of Governors meets on the 16 and 17 of September to decide on a potential interest rate cut.

The lawsuit, filed this Thursday in a Washington district court, names not only Trump but also the Fed’s Board of Governors and its Chair, Jerome Powell. According to the documents prepared by Cook’s lawyers, the reason is that the Board and Powell could make decisions that follow presidential directives. The case has been assigned to Judge Jia Cobb, appointed to the district court during Joe Biden’s presidency.

Since the beginning of his term, Trump has sought to interfere in the Fed’s monetary policy decisions and has targeted Fed Chair Jerome Powell, who so far has resisted lowering interest rates despite the president’s pressure. Replacing Cook with a like-minded governor would increase Trump’s control over the seven-member Board of Governors.

If Cook is replaced, it would mark Trump’s fourth appointment to the Board of Governors. Earlier this month, he announced the selection of Stephen Miran to replace Adriane Kruger, a Democrat, who had resigned. According to Bloomberg, Republicans could attempt to fast-track the Senate confirmation of Trump’s former Chairman of the Council of Economic Advisers so he could join the Board in September.

Trump announced on Monday night via social media that he had dismissed Cook, including the letter he sent her in which he claimed to be firing her “for cause” due to alleged irregularities in a mortgage application from years ago.

That phrase — and what exactly constitutes “for cause” — is shaping up to be the central issue in the legal battle now unfolding.

Trump decided to dismiss Cook after one of his senior officials alleged that the former academic had committed mortgage fraud in 2021 by declaring two different homes as her primary residence. Banks typically offer lower interest rates on primary residences because they are considered less risky.

As an independent institution, Federal Reserve rules stipulate that the president can only remove a governor “for cause”—something no White House occupant has ever attempted in history. The allegation of mortgage fraud against Cook has not been proven, nor have any charges been filed. The supposed irregularity would have occurred before she joined the Fed. She has also not been given the opportunity to contest the allegations, nor to review the alleged evidence.

Cook was appointed to the Federal Reserve Board in 2022 during president Joe Biden’s term, and her term does not expire until 2038. She is the first Black woman to serve on the Fed’s Board of Governors.

In the 24-page lawsuit, Cook’s lawyers argue that the attempted dismissal is “unprecedented,” “illegal” and would endanger the entire system of protections established by Congress for the Federal Reserve. The lawyers also note that their client was not given the chance to respond to the accusations before Trump signed the dismissal letter.

“The unsubstantiated mortgage fraud allegations that allegedly occurred prior to Governor Cook’s Senate confirmation do not amount to ‘inefficiency, neglect of duty, or malfeasance in office,’ nor has the president alleged that they do,” the complaint argues.

It continues: “The president would not have ‘cause’ to remove a Federal Reserve governor even if he possessed smoking gun evidence that she jaywalked in college.”

The outcome of the lawsuit — which could be appealed up to the Supreme Court — is expected to be crucial for the future of the Federal Reserve as an independent institution. If the courts side with Trump, the president would have far greater freedom to remove governors and appoint individuals more to his liking.

Last May, the Supreme Court ruled that the Federal Reserve, unlike other government agencies where Trump and his administration have carried out widespread firings, is beyond the reach of the White House. The conservative-majority court, which often aligns with Trump’s positions, noted that the Fed is a “uniquely structured, quasi-private entity.”

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