Federal Reserve governor Lisa Cook will sue Trump over firing attempt

Federal Reserve Governor Lisa Cook will file a lawsuit to prevent President Donald Trump from removing her from office, a lawyer for the central bank official said on Tuesday, potentially setting up a prolonged legal battle over the White House’s attempt to influence U.S. monetary policy.

“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,” said Abbe Lowell, Cook’s attorney, in a statement.

The statement came a day after Trump announced he would fire Cook, the first Black woman to serve on the Fed’s governing board, citing alleged “deceitful and potential criminal conduct” related to mortgages she took out in 2021.

Trump’s move to remove her is unprecedented in the 111-year history of the Federal Reserve Board and aligns with his broader pattern of breaking institutional norms and prompting legal challenges.

Since returning to office in January, Trump has overseen the departure of hundreds of thousands of civil servants, dismantled agencies, and withheld billions in spending authorised by Congress.

“We need people that are 100% above board and it doesn’t seem like she was,” Trump told reporters, adding he had “good people” in mind to replace Cook but would abide by any court ruling that leaves her in her post.

During his first term, Trump repeatedly pressured the Fed to lower interest rates and has recently renewed those demands, even threatening to fire Fed Chair Jerome Powell, though he has since backed down.

Cook’s departure would give Trump the opportunity to appoint a majority of the Fed’s seven-member board. Two current incumbents and the pending nomination of White House economist Stephen Miran would be joined by Trump’s selection should Cook be removed.

The Wall Street Journal reported that former World Bank President David Malpass, a longtime Trump ally, has also been discussed for the position.

The Fed emphasised that Cook and other governors serve 14-year terms and cannot be easily removed, in order to ensure monetary policy decisions are based on economic data and “the long-term interests of the American people.”

Though Trump said on Monday that Cook’s firing was “effective immediately,” the Fed maintains her status as unchanged. The central bank meets to set interest rates on 16-17 September, and a court ruling may be required before she can be prevented from participating.

Trump’s letter to Cook cited her description of separate properties in Michigan and Georgia as primary residences on mortgage applications before joining the Fed in 2022 as “sufficient cause” for removal.

Questions about Cook’s mortgages were first raised last week by William Pulte, director of the Federal Housing Finance Agency, a Trump appointee, who referred the matter to U.S. Attorney General Pamela Bondi. Bondi has not yet indicated whether the Justice Department will take action.

Cook took out the two mortgages while an academic and is due to serve on the Fed board through 2038. The Federal Reserve Act of 1913 allows removal of a sitting governor “for cause,” a provision that has never been tested.

U.S. presidents historically take a hands-off approach to the Fed to preserve confidence in monetary policy.

Peter Conti-Brown, a Fed historian at the University of Pennsylvania’s Wharton School, noted that Cook’s mortgage transactions preceded her appointment and were publicly known during Senate confirmation.

“The idea that you can then reach back… and say these prior actions are fireable offenses from your official position is incongruous with the concept of ‘for cause’ removal,” he said.

Academic research indicates that independent monetary policymaking produces better outcomes. Tim Duy, chief U.S. economist at SGH Macro Advisors, warned, “The Fed as an institution escaped harm in the first Trump administration, and will not be so fortunate this time around.”

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