Federal Reserve Governor Lisa Cook will file a lawsuit to block President Donald Trump’s attempt to remove her from office, her lawyer confirmed Tuesday. The legal battle could mark the first major test of presidential power over the independent U.S. central bank.
“His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action,” Cook’s attorney Abbe Lowell said in a statement. The controversy erupted after Trump accused Cook of “deceitful and potential criminal conduct” involving mortgage applications made before her Fed appointment.
Trump’s Claims Against Cook
Trump alleged Cook listed two separate homes in Michigan and Georgia as primary residences in 2021, a move that can lower borrowing costs.
“We need people that are 100% above board and it doesn’t seem like she was,” Trump told reporters during a Cabinet meeting. He hinted at having “good people” ready to replace her. Cook has denied wrongdoing, saying the president lacks authority to remove her. She intends to serve her full term, which runs until 2038.
Independence of the Fed at Stake
The Federal Reserve Act of 1913 permits governors to be removed only “for cause,” but the law has never been tested in court. Legal scholars say the case could redefine how independent the Fed truly is.
Peter Conti-Brown, a Fed historian at the Wharton School, argued that Cook’s past mortgages were already scrutinized during her Senate confirmation.
“The idea that you can then reach back and say, ‘All these things before now constitute fireable offenses,’ is incongruous with the concept of ‘for cause’ removal,” he said.
Market Reactions and Economic Stakes
Markets responded cautiously.
- Stocks: Wall Street indexes were flat.
- Dollar: Slipped modestly.
- Bonds: Short-term yields fell, signaling traders expect rate cuts; longer-term yields rose, reflecting worries about the Fed’s credibility.
Trump has escalated his pressure campaign on monetary policy, demanding sharp rate cuts and threatening to fire Fed Chair Jerome Powell. Analysts warn that undermining the Fed’s independence could rattle global markets.
Also Read: Trump Vs The Fed: Lisa Cook Strikes Back With Lawsuit Against Trump Over Her Firing
A Pattern of Targeting Officials
Cook, the first Black woman to serve on the Fed board, is not the first senior official Trump has pushed out. Since returning to office in January, he has:
- Overseen the departure of hundreds of thousands of civil servants.
- Dismantled agencies and blocked billions in congressional spending.
- Fired several Black women in top posts, including the head of the Library of Congress and the chair of the National Labor Relations Board.
The administration has also pursued other political opponents with similar mortgage-related accusations, including New York Attorney General Letitia James, who secured a fraud judgment against Trump last year.
What Comes Next?
The lawsuit, expected to be filed in federal court, could drag on for months. Legal experts say it will touch on:
- Executive power to remove central bank officials.
- The Fed’s unique status as a quasi-independent body.
- Whether Cook’s mortgage history meets the legal threshold of “cause.”
The timing is critical. The Fed’s next policy meeting is set for September 16–17, and Cook’s role in deliberations could be clouded by the court fight.
Broader Implications
Academic research shows that central banks perform better when insulated from politics. Now, that principle faces one of its biggest challenges. “The Fed as an institution escaped harm in the first Trump administration, and will not be so fortunate this time around,” said Tim Duy, chief U.S. economist at SGH Macro Advisors.
If Cook is removed, Trump will have power to appoint four of the seven Fed governors, a shift that could dramatically alter the course of U.S. interest rate policy—and with it, the global economy.
