Topline
Federal Reserve Governor Lisa Cook sued President Donald Trump in federal court on Thursday, court records show, launching what’s expected to be a significant court battle to determine to what extent the president can exert control over the nation’s central bank.
Lisa Cook is sworn in during a Senate Banking nominations hearing on June 21, 2023 in Washington, DC.
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Key Facts
Cook filed a lawsuit against Trump on Thursday in federal court, taking aim at the president’s allegedly “unprecedented and illegal attempt” to remove her from the Federal Reserve’s Board of Governors and argued he fired her because of his desire to exert control over the Federal Reserve.
Trump said Monday night he was firing Cook, citing alleged issues with her mortgage agreements, a decision that came after the president has long railed publicly against the Federal Reserve and chair Jerome Powell for not lowering interest rates.
Cook has protested her firing and refused to leave the Federal Reserve, however, arguing Trump does not have the legal authority to fire her, and her attorney Abbe Lowell had said Tuesday that a lawsuit against Trump was coming.
Federal law allows the president to fire members of the Federal Governor’s board, but only “for cause,” which is not specifically defined in the law, but traditionally refers to some kind of gross misconduct on the job.
Cook alleged in her lawsuit that Trump’s “unsubstantiated allegation about private mortgage applications” are not sufficient “cause” for firing under the law and are just a “pretext” to fire her so he can appoint a replacement, also arguing the president violated her rights to due process and the chance to have a hearing where she could defend herself.
Members of the board can only be fired in “instances of inefficiency, neglect of duty, malfeasance in office, or comparable misconduct,” Cook alleged, citing Supreme Court precedent on the issue, and argued she cannot be fired based on “a specious assertion that a one ‘potentially’ committed a crime—one which is unproven, uncharged, and unrelated to official conduct.”
Crucial Quote
“President Trump’s conception of ‘cause’ … would allow him to remove any Federal Reserve Board member with whom he disagrees about policy based on chalked up allegations,” Cook’s lawsuit argues. “That the President says he has found (or created) some basis for removing a Governor does not magically make such a basis grounds for a “for cause” removal under the [Federal Reserve Act].”
Chief Critic
In a statement to Forbes on Thursday, White House spokesperson Kush Desai said Trump had “exercised his lawful authority to remove a governor on the Federal Board of Governors for cause” and “determined there was cause to remove a governor who was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions.” Removing Cook “for cause improves the Federal Reserve Board’s accountability and credibility for both the markets and American people,” Desai added. Trump has previously also defended his decision to fire Cook. “She seems to have had an infraction, and she can’t have an infraction,” Trump said at a Cabinet meeting on Tuesday when asked about her firing. “Especially that infraction because she’s in charge of, if you think about it, mortgages, and we need people that are 100 percent above-board, and it doesn’t seem like she was.”
What To Watch For
Cook’s lawsuit asks for the court to declare Trump’s firing of Cook is null and void and that she is still a member of the Federal Reserve’s board. It also asks for the court to bar the Federal Reserve from taking any action against Cook in response to Trump’s letter firing her, and for a declaration that Trump’s attempted termination was unlawful and violated her rights. It’s unclear how long the legal dispute could take to play out, though it’s widely expected it could reach the Supreme Court.
Will Courts Uphold Lisa Cook’s Firing?
It’s unclear. Since the Federal Reserve Act doesn’t specifically define what “for cause” means when it comes to the president being able to fire governors, legal experts have said Trump’s firing falls within a legal grey area that makes it difficult to know what the courts could do. Many legal experts have argued the firing doesn’t constitute “cause” under the law, citing the fact that Cook didn’t have any ability to defend herself before she was fired and that the alleged false disclosures took place prior to her joining the board and are totally separate from her work for the Fed. That being said, it remains to be seen how the 6-3 conservative Supreme Court could rule. The court’s conservative majority has so far been pretty permissive when it comes to Trump firing members of traditionally independent boards, clearing the way in May for him to fire a member of the National Labor Relations Board and a member of the Merit Systems Protection Board. Justices said in that ruling that their reasoning allowing the firings did not apply to the Federal Reserve, however, which they said is “a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”
What Are The Mortgage Allegations Against Lisa Cook?
Trump’s decision to fire Cook is based on allegations that she listed two residences as both being her “primary” residence on mortgage documents. The alleged disclosures took place in 2021, prior to her being appointed to the Federal Reserve in 2022, and, if true, may have allowed her to secure a lower mortgage rate, as rates are typically lower for primary residences than for vacation or investment properties. Bill Pulte, Trump’s director of the Federal Housing Finance Agency, first made the allegations against Cook in a letter last week, kicking off the controversy that led to Trump’s termination decision. Experts have said there’s no clear evidence of wrongdoing by Cook at this point, however, and Pulte has not given sufficient information to conclude that Cook committed fraud. In order to be found guilty of fraud, Cook would have had to not only write false information on her mortgage agreement, but also have done so knowing that her statements were fraudulent. Cook has so far not responded substantially to the allegations, saying only that she takes “any questions about my financial history seriously as a member of the Federal Reserve, and so I am gathering the accurate information to answer any legitimate questions and provide the facts.”
Why Does Firing Lisa Cook Matter?
Trump’s decision to fire cook comes after the president has publicly railed against the Federal Reserve for months, attacking the bank and Powell for refusing to lower interest rates as the president wants. The Federal Reserve has long been viewed as an independent institution free from political influence, and this independence is considered to be essential for the health of the nation’s economy. By firing Powell, whose term isn’t set to end until 2038, Trump would be able to replace her with a new board member who would be willing to do the president’s bidding and have a majority of the Fed board be made up of his appointees.
Further Reading
Source: https://www.forbes.com/sites/alisondurkee/2025/08/28/fed-governor-lisa-cook-sues-trump-over-firing/
