Embattled Fed governor sues Trump to block firing

Federal Reserve governor Lisa Cook filed a federal lawsuit on Thursday aiming to block an attempt by President Donald Trump to fire her over allegations of wrongdoing related to mortgage loan applications processed in 2021.

In a letter posted to Truth Social on Monday, Trump followed through on an earlier threat to fire Cook if she didn’t resign.

“Pursuant to my authority under Article II of the Constitution of the United States and the Federal Reserve Act of 1913, as amended, you are hereby removed from your position on the Board of Governors of the Federal Reserve, effective immediately,” Trump wrote.

Cook’s legal action, filed in U.S. District Court for the District of Columbia, argues Trump’s move is an “illegal and unprecedented” attempt to remove Cook based on “unsubstantiated allegations”.

“This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would the first of its kind in the Board’s history,” Abbe Lowell, Cook’s attorney, wrote in the lawsuit.

Last week, Bill Pulte, director of the Federal Housing Finance Agency, posted a letter on X addressed to U.S. Attorney General Pam Bondi in which he alleges that in 2021 Cook applied for two mortgage loans, one in Atlanta and one in Michigan, and indicated in each application that the properties would be her “primary residence.”

The loan applications were submitted two weeks apart in June and July of that year. Pulte’s social media post includes images of what appear to be Cook’s signature, but no other evidence backing his accusation.

Cook, an economist and former professor at Michigan State University, was appointed to her governor’s position in 2022 by President Joe Biden. She is the first African American woman to be appointed to the Fed board. Cook had previously served on the board of directors of the Federal Reserve Bank of Chicago.

Cook, so far, has not been charged with a crime. Her lawsuit sets the stage for a legal battle that could ultimately be decided by the Supreme Court. If Trump is successful in removing Cook, it opens the door for another appointee to the U.S. central bank that would be more supportive of Trump’s view of monetary policy, which has included demands to lower the body’s benchmark federal funds interest rate.

Cook’s lawyer argues that Trump’s attempt to fire the Fed governor subvert’s the Federal Reserve act, which explicitly requires the showing of “cause” for a governor’s removal.

Many experts questioned the legality of Trump’s actions, pointing out that the allegations against Cook were unproven and involved conduct that predated her time at the Fed, according to a New York Times report. Nor was Cook afforded an opportunity to review the evidence and respond to the claims formally, which struck many observers as legally problematic.

What is Trump’s beef with the Fed?

During his second term, Trump has leveled consistent criticism at the Fed and more specifically at Jerome Powell, including threats to fire or remove the chairman, for not moving fast enough to lower interest rates, which the president has argued are three points higher than they should be. The Fed’s intra-bank overnight rate has held steady at 4.25% to 4.5% since December 2024.

Ironically, perhaps, Trump provided the gateway to Powell’s leadership position at the Fed, thanks to a 2017 presidential appointment that flew through the Senate Banking Committee and was confirmed by the full Senate in early 2018.

Powell, a Republican and former private equity executive, joined the Federal Reserve in 2012 and ascended to the chairmanship in 2018 via Trump’s appointment. Biden renewed Powell’s term in 2022, which runs through May 2026.

Powell and the Fed’s governors are in Jackson Hole, Wyoming, this week participating in the U.S. central bank’s annual meeting. Powell is scheduled to deliver a speech on Friday at the conclusion of the gathering.