President Donald Trump’s attempt to oust Federal Reserve Governor Lisa Cook — a move without precedent in American history — sets the stage for a high-stakes legal battle likely bound for the U.S. Supreme Court.
Tensions reached a new fever pitch Thursday morning after Cook sued the Trump administration over its attempt to remove her, an effort she argued is an “unprecedented and illegal” pretext by which Trump is looking to wrest control of the independent Federal Reserve, and install someone who would “fill and forward” his own economic agenda.
The case was assigned to U.S. District Judge Jia Cobb, who was appointed by former President Joe Biden, and has since ordered both parties to court on Friday for a status hearing, signaling she wants to move quickly to consider the matter.
FEDERAL RESERVE GOVERNOR LISA COOK SUES TRUMP
What happened?
The allegations of mortgage fraud were brought forward by Bill Pulte, a Trump appointee to an agency that regulates Fannie Mae and Freddie Mac. Pulte accused Cook of claiming two primary residences, one in Michigan and another in Georgia in 2021, with the goal of getting more favorable loan conditions.
On Aug. 15, Pulte sent the Justice Department a criminal referral regarding Cook in which he accused her of falsifying bank documents and property records. On the heels of Pulte’s referral, Cook said on Aug. 20 that she had “no intention of being bullied to step down.”
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“I do intend to take 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,” Cook wrote in a statement.
This was followed up by an Aug. 25 letter from Trump to Cook posted via Truth Social, saying he had “sufficient cause” to fire her and that her dismissal was “effective immediately.”
What does the lawsuit say?
Cook’s lawsuit, filed in federal trial court on Thursday, names Trump, the Board of Governors of the Federal Reserve System, and Federal Reserve Chairman Jerome Powell.
Abbe Lowell, one of Cook’s attorneys, argued that Trump’s attempt to fire her violates her due process rights under the Fifth Amendment, as well as her statutory right to notice and a hearing under the Federal Reserve Act, or FRA.
Lowell has previously represented Hunter Biden, Centers for Disease Control and Prevention Director Susan Monarez, New York Attorney General Letitia James as well as Jared Kushner and Ivanka Trump.
That law blocks a president from removing members of the Fed’s Board of Governors unless they are doing so “for cause” — a requirement often thought to necessitate evidence of malfeasance, or dereliction of duty.
“President Trump’s conception of ‘cause’ has no limiting principle,” Cook’s attorneys said in her lawsuit Thursday. “It would allow him to remove any Federal Reserve Board member with whom he disagrees about policy based on chalked-up allegations.”
The complaint calls for judicial intervention to confirm her standing on the Fed board and protect her ability to carry out her duties at the Federal Reserve.
Is there a legal precedent?
Congress designed the Federal Reserve to stand apart from politics, granting its top members a staggered 14-year term, longer than any presidency, to shield the institution from partisan influence.
The Federal Reserve Board of Governors, commonly known as the Fed board, is composed of seven members, or governors, who are nominated by the president and confirmed by the Senate. This panel of central bankers is tasked with charting the nation’s economic path.
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A president has never tried to oust a Federal Reserve governor for cause and the courts have never been asked to test that authority.
Legal experts say her continued tenure at the bank could turn on whether the court finds sufficient evidence exists of alleged “malfeasance,” and then weigh the discretion the president might have to determine whether that bar has been sufficiently met.
Will this head to the Supreme Court?
The case, which is something of a novelty, is almost certain to be kicked up to the Supreme Court for review.
And while it’s not immediately clear how the court might rule, justices on the 6-3 conservative majority bench might be sympathetic to the Trump administration, at least by dint of former administrative stays granted in similar cases.
The Supreme Court in May voted to uphold Trump’s removal of two Democratic appointees from two multi-member federal boards — the National Labor Relations Board (NLRB) and Merit Systems Protection Board (MSPB) —both of whom had challenged their firings by Trump earlier this year as “unlawful.”
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The Supreme Court also emphasized the uniqueness of the Federal Reserve, which the justices noted in the two-page, unsigned opinion is a “uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States” — differentiating it, to a degree, from other independent agencies.
The Trump administration would almost certainly also seek near-term relief via the so-called “shadow docket,” by filing for an administrative stay. Given the court’s action on the NLRB and MSPB members, some say it’s not unlikely that they would be inclined to side with Trump and allow Cook’s removal, at least for now.
What has Cook said?
The day after Trump’s letter, which saw the U.S. dollar soften across the board, Cook reiterated her position and said she would not resign from her post at the Federal Reserve, the world’s most powerful central bank.
“I will continue to carry out my duties to help the American economy as I have been doing since 2022,” Cook wrote in a statement.
Cook’s ascension marked a historic first, as she became the first Black woman to serve on the Fed board. Now, her potential removal, entangled in legal action, could set another historic precedent.
Her term on the Fed board runs through January 2038.
What has Trump said?
A day after firing Cook via letter, Trump said during a marathon three-hour Cabinet meeting on Aug. 26 that he was “always” ready for a legal fight, referencing Cook’s potential suit.
“She seems to have had an infraction and she can’t have an infraction. And especially that infraction, because she’s in charge of, if you think about it, mortgages. We need people that are 100% above board, and it doesn’t seem like she was,” Trump told reporters at the White House, referencing Cook’s alleged mortgage fraud tied to dual residences.
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When asked about replacing Cook on the Fed board, Trump told reporters that he has some “very good people for that position.”
“We’ll have a majority very shortly,” Trump said of the number of governors he has appointed to the Fed board. “So that’ll be great.” Trump has repeatedly called on the Federal Reserve to lower the federal funds target rate, which he says could save the nation “hundreds of billions of dollars.”
Has Federal Reserve Chairman Jerome Powell said anything?
Federal Reserve Chairman Powell has not publicly commented on the matter and is not expected to, given his status as a defendant in the case. Meanwhile, the Fed has said little publicly, and declined to comment on the heels of Cook’s new legal filing.
A Fed spokesperson previously acknowledged Cook’s legal action against Trump in an Aug. 26 statement, saying it will “abide by any court decision.”
The spokesperson reiterated that a president may remove a governor only “for cause,” adding that long tenures and removal protections safeguard monetary policy from politics. The “for cause” provision enshrined in the FRA has long been taken to mean inefficiency, neglect, or malfeasance while in office.
Is Cook still working at the Fed?
It is not immediately clear if Cook has attempted to enter the Federal Reserve’s main headquarters in the Foggy Bottom neighborhood in D.C. since Trump’s letter terminating her. The Federal Reserve declined to say whether Cook has tried to work from her office, is working remotely, or retains access to the email and other resources she needs for her job.
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