Federal Reserve Governor, Lisa Cook, has filed a lawsuit arguing that President Donald Trump does not have the authority to remove her from office as Federal Reserve governor.
According to Reuters, the case could shape how much independence the Fed has from the White House.
Cook’s suit says Trump violated federal law, which allows the removal of a Fed governor only for cause, when he announced on August 25 that she would be fired. Trump has accused her of committing mortgage fraud in 2021, before she joined the Fed board.
The case is expected to reach the Supreme Court. While the Court has previously allowed presidents to remove officials from other agencies, it has also suggested the Fed might be treated differently. Questions over the Fed’s independence have already unsettled markets, with the dollar dropping after Trump’s announcement.
A Fed spokesperson said before the lawsuit was filed that the institution would follow any court ruling. Cook, appointed in 2022 by President Joe Biden, is the first Black woman to serve on the Fed’s governing board.
Trump earlier removed Gwynne Wilcox, the first Black woman on the National Labor Relations Board, and has dismissed officials from agencies traditionally viewed as independent. The law that created the Fed does not define “cause” for removal, and no Fed governor has ever been removed before. Courts could look to other statutes, where cause has been interpreted to include neglect of duty, malfeasance, or inefficiency.
The mortgage issue was first raised in August by William Pulte, head of the Federal Housing Finance Agency. He referred the matter to Attorney General Pamela Bondi.
Cook’s financial disclosures list three mortgages, with two marked as primary residences, which typically qualify for lower rates. Some experts question whether loans taken before her Fed appointment could justify her removal.
Trump’s administration may argue that any protection against removal conflicts with presidential powers to control the executive branch. In his August 25 letter to Cook, Trump accused her of “deceitful and criminal conduct in a financial matter” and said he lacked confidence in her integrity.
Cook responded that “no causes exist under the law, and (Trump) has no authority” to remove her. Her lawyers added that Trump’s “demands lack any proper process, basis or legal authority.”
If Cook is removed, Trump would gain his fourth appointment to the Fed’s seven-member board. He has frequently criticized Fed Chair Jerome Powell for not cutting interest rates and for handling a major renovation project, though he has stopped short of trying to remove Powell before his term ends in May.
The Trump administration has also leveled mortgage fraud allegations against political opponents, including Senator Adam Schiff and New York Attorney General Letitia James, both of whom deny wrongdoing.