Federal Reserve governor Lisa Cook has filed a lawsuit against President Donald Trump, challenging his attempt to remove her from office. The case sets the stage for a potential constitutional and legal battle with major implications for the independence of the US central bank.
Lawsuit challenges presidential authority
Cook has petitioned the court to declare Trump’s dismissal order “unlawful and void,” naming both the president and Fed chair Jerome Powell as defendants.
Trump justified his move by alleging that Cook had made false statements in mortgage applications, arguing that his constitutional powers gave him authority to act. Cook has rejected the allegations, insisting there is “no cause under the law” for her removal.
Her lawsuit highlights the uniqueness of the case, noting that no Fed governor has ever been forcibly dismissed in the institution’s history. Abbe Lowell, Cook’s attorney, wrote:
“This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position. It would subvert the Federal Reserve Act, which explicitly requires a showing of ‘cause’ for removal—an allegation about private mortgage applications does not meet that standard.”
White house defends move
White House spokesperson Kush Desai defended the president’s actions, telling the BBC:
“The president exercised his lawful authority to remove Governor Cook. The decision was based on credible accusations of falsifying financial documents. Removing a governor for cause strengthens the Fed’s accountability and credibility for both the markets and the American people.”
While the Federal Reserve Act allows removal “for cause,” it does not grant the president sweeping powers to dismiss governors at will. Legal scholars have expressed skepticism over the legitimacy of Trump’s claim.
Mortgage allegations fuel controversy
The allegations against Cook originated in a public letter by Bill Pulte, a Trump ally and housing finance regulator. He accused Cook of signing conflicting documents in which she declared two different homes as her primary residence within a short timeframe.
No formal charges have been filed, and Cook’s lawsuit does not address the substance of these claims. She has consistently denied any misconduct.
Implications for monetary policy
Cook is one of seven members of the Fed’s board of governors and sits on the 12-member Federal Open Market Committee (FOMC), which sets US interest rates. Her removal would give Trump the opportunity to nominate a replacement potentially more aligned with his calls for aggressive rate cuts to stimulate the economy.
At the Fed’s most recent policy meeting in late July, Cook voted with Powell and the majority to hold rates steady. The decision was closely watched by global markets, as US interest rate policy influences borrowing costs, savings returns, and international monetary strategies.
Outlook
Thursday’s lawsuit is expected to trigger an extended legal battle that could ultimately reach the Supreme Court. If successful, Cook’s case may reaffirm statutory limits on presidential authority over the Federal Reserve, a cornerstone of central bank independence. If Trump prevails, it could mark the first dismissal of a Fed governor in history—reshaping the balance of power between the White House and the central bank.
