Federal Reserve governor Lisa Cook filed a lawsuit against President Donald Trump Thursday over her firing, setting up a legal battle with major implications for the independence of the central bank.
The lawsuit, filed in federal court in Washington, D.C., has the potential to make its way to the Supreme Court. Through it, Cook seeks an injunction to stop Trump’s attempt this week to fire her over allegations that she committed mortgage fraud.
Cook is challenging Trump’s legal authority to fire her. Through her lawyer, she contends that Trump’s attempt to show cause subverts the Federal Reserve Act. The lawsuit said that an “unsubstantiated allegation about private mortgage applications” doesn’t meet that burden.
“This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would the first of its kind in the Board’s history,” the lawsuit reads.
Trump is arguing that the allegations of mortgage fraud were the cause he needed to fire Cook. Trump announced the firing in a note posted to Truth Social in which he accused Cook of “deceitful and potentially criminal conduct.”
Additionally, Cook argues that Trump’s actions violate her Fifth Amendment due process rights and her statutory right to a notice and hearing as part of the Federal Reserve Act.
“Accordingly, Governor Cook seeks immediate declaratory and injunctive relief to confirm her status as a member of the Board of Governors, safeguard her and the Board’s congressionally mandated independence, and allow Governor Cook and the Federal Reserve to continue its critical work,” the lawsuit reads.
Cook’s lawyer, Abbe David Lowell, called the move to terminate Cook an “illegal action” in a statement ahead of the lawsuit.
“President Trump has no authority to remove Federal Reserve Governor Lisa Cook,” Lowell said. “His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis.”
While the Supreme Court ruled earlier this year that the president generally has the power to remove independent agency members, the conservative majority stipulated in that case that Federal Reserve board members can only be fired for cause.
The Fed was created by Congress to conduct monetary policy independently of the political process. It would be a significant precedent if Trump succeeds in removing Cook and replacing her with an official more aligned with his policy preferences.
The push to oust Cook began after Federal Housing Finance Agency Director Bill Pulte, who oversees the government-sponsored enterprises Fannie Mae and Freddie Mac, sent a criminal referral to Attorney General Pam Bondi, claiming that Cook listed two homes, one in Michigan and one in Georgia, concurrently as her primary residence months before she was nominated to the Fed board.
In the letter to Bondi, Pulte said it appears Cook “falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud under the criminal statute.”
“This has included falsifying residence statuses for an Ann Arbor, Michigan-based residence and an Atlanta, Georgia-based property in order to potentially secure lower interest rates and more favorable loan terms,” Pulte wrote.
Cook’s lawsuit did not address the specific accusations about the mortgage applications.
Democrats have pushed back against the firing, criticizing it as playing politics with the Fed. Senate Banking Committee Ranking Member Elizabeth Warren (D-MA) called it “an authoritarian power grab.”
IT IS UNCLEAR IF FEDERAL RESERVE GOVERNOR LISA COOK SHOWED UP TO WORK AFTER TRUMP FIRING
Trump has been pushing for lower interest rates, and if he is able to replace Cook, he will have another vote on the 12-person Fed board. Adriana Kugler, another Fed governor who voted to hold interest rates steady, recently and unexpectedly resigned, handing Trump another opening on the board.
Two members of the Federal Open Market Committee, Christopher Waller and Michelle Bowman, voted to lower interest rates at the last meeting.
