The Federal Reserve is emphasizing its independence as Lisa Cook makes it clear she isn’t going down without a fight.
In its first comments on the showdown, the Federal Reserve said through a spokesperson that the central bank will let the court system have the final word.
“The Federal Reserve reaffirms its commitment to transparency, accountability, and independence in the service of American families, communities, and businesses,” a spokesperson for the Fed said in a statement on Tuesday.
Cook plans to file a lawsuit challenging President Donald Trump’s attempt to fire her from her position on the Federal Reserve’s board of governors, her attorney said earlier in the day.
“President Trump has no authority to remove Federal Reserve Governor Lisa Cook,” her lawyer Abbe Lowell said in a statement. “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.”
Alluding to the core of the coming fight, the Fed praised the long tenures of its governors, which are the foundation of its ability to fend off political interference.
“Long tenures and removal protections for governors serve as a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people,” the spokesperson said. They also said the Fed “will abide by any court decision.”
The Fed’s independence was once boilerplate. The unprecedented presidential firing of a sitting governor reminds us that the central bank may not go quietly amid Trump’s efforts to forcibly reshape it.
It remains unclear what Cook will do in the meantime. A spokesperson for the Fed did not respond to Business Insider’s question on whether she showed up to work on Tuesday. Security officers outside the central bank said they were unaware.
White House spokesperson Kush Desai told Business Insider that Trump “exercised his lawful authority to remove a governor on the federal board of governors for cause.”
“The President 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,” Desai said.
Trump told reporters that he would also obey a final ruling. The legal fight could reach the Supreme Court, which already addressed the role of the Fed in an unrelated case earlier this year.
“I abide by the court, yeah, I abide by the court,” Trump told reporters at the White House on Tuesday.
Cook may want a resolution quickly. The Fed’s Open Markets Committee will make another rate-setting decision next month. If an FOMC member cannot attend, an alternate can vote in their place, though it is rare for a governor to miss such a vote.
Trump’s pressure on the Fed isn’t new
The showdown between Cook and Trump comes as Trump has exerted pressure on the Federal Reserve to lower interest rates.
Over the past several months, he’s frequently criticized Federal Reserve Board Chairman Jerome Powell, whom he appointed to the position in his first term, and other members of the board for keeping interest rates high.
Trump published a letter Thursday night saying he was firing Cook for “cause,” accusing her of lying on mortgage documents.
Cook said in a statement that she took the allegations — which were first raised by Trump ally Bill Pulte, the director of the Federal Housing Finance Agency — seriously. But she said Trump did not have the authority to fire her.
“President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” Cook said in a statement following Trump’s letter.
In a cabinet meeting Tuesday, Trump cited Cook’s role in the Federal Reserve, which influences interest rates set by financial institutions.
“She seems to have had an infraction, and she can’t have an infraction,” Trump said. “Especially that infraction. Because she’s in charge of, if you think about it, mortgages, and we need people who are 100% above board. And it doesn’t seem like she was.”
Federal Reserve governors serve staggered 14-year terms after they are appointed by the president and confirmed by the US Senate.
The term for Cook, an appointee of former President Joe Biden, is scheduled to conclude in 2038. Another Biden appointee, Adriana Kugler, resigned from the board earlier in August.
Trump previously nominated Stephen Miran, who leads Trump’s Council of Economic Advisors, to serve out the remainder of Kugler’s term. He has said that he wants Miran to be confirmed before the Fed’s September meeting. On Tuesday, Trump told reporters that he was considering naming Miran to replace Cook, though Cook is contesting that her seat is even open.
If Trump is able to replace both Kugler and Cook, he will have appointed a majority of the sitting Federal Reserve governors, potentially letting him reshape the central bank’s fiscal policy in his image. Trump appointed Fed Govs. Christopher Waller and Michelle Bowman during his first term. All Federal Reserve governors must be confirmed by the US Senate, though Trump’s picks could be confirmed without a single Senate Democrat voting in their favor.
Because the Federal Reserve is an independent agency, presidents have limited power to fire its members.
Cook’s legal challenge puts Trump on a collision course with the Supreme Court, which has so far been friendly toward his decisions to fire members of independent agencies.
Earlier this year, the Supreme Court sided with Trump in pushing out members from their posts in two other independent agencies while additional legal battles played out. In those cases, Trump said he was firing the appointees without citing any cause.
But in one of the unsigned opinions, in May, the Supreme Court majority said their decision would not “implicate the constitutionality of for-cause removal protections” of Federal Reserve members, without explaining what they meant.
“The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” the justices wrote.
To challenge her firing, Cook hired Lowell, a pugilistic Washington attorney who recently founded Lowell & Associates, a firm focused on representing Trump’s political targets.
Lowell’s firm represents New York Attorney General Letitia James, whom Trump and Pulte have also criticized over her personal mortgage filings.
Lowell is also suing the administration on behalf of Mark Zaid, a national security lawyer who represents whistleblowers, and Miles Taylor, an official in Trump’s first presidential administration who has since publicly criticized him.
This story has been updated with the Fed’s statement
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