- Federal Reserve Gov. Lisa Cook plans to sue President Donald Trump to prevent her firing.
- Trump accused Cook of deceitful conduct related to mortgage applications in 2021.
- The showdown follows largely successful efforts to bring other elements of the government under Trump's direct control.
WASHINGTON — Federal Reserve Gov. Lisa Cook will file a lawsuit to prevent President Donald Trump from firing her, a lawyer for the embattled central bank official said on Tuesday, kicking off what could be a protracted legal fight over the White House's effort to shape 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," Cook's lawyer, prominent Washington attorney Abbe Lowell, said in a statement.
The statement was issued a day after Trump said he would fire Cook, the first Black woman to serve on the Federal Reserve's governing body, for alleged "deceitful and potential criminal conduct" related to mortgages she took out in 2021.
"We need people that are 100% above board, and it doesn't seem like she was," Trump told reporters at a meeting. He said he had several "good people" in mind to replace Cook but would abide by any court decision that left her in her job.
Trump's showdown with the nominally independent central bank follows other largely successful efforts to bring other elements of the government under his direct control. Since returning to office in January, the president has overseen the departure of hundreds of thousands of civil servants, dismantled several agencies and withheld billions of dollars of spending authorized by Congress.
Trump pressured the Fed to lower interest rates during his first term in the White House, and he has escalated that campaign in recent months. The president has demanded that rates be cut by several percentage points and threatened to fire Fed Chair Jerome Powell, although he recently backed away from that saber-rattling.
Cook's departure would allow Trump to pick a majority of the Fed's seven-member board, including two incumbents and the pending nomination of White House economist Stephen Miran.
The Fed said in a statement that Cook and other board members serve 14-year tenures and cannot be removed easily from office in order to ensure that monetary policy decisions are based on economic data and "the long-term interests of the American people."
We need people that are 100% above board and it doesn't seem like she was.
–President Donald Trump
The attempt to influence monetary policy has knocked confidence in the dollar and sovereign debt and sparked fears of global financial turmoil. But market reaction to Trump's latest Fed gambit was tame on Tuesday.
Wall Street's main equities indexes were largely flat on the day, while the dollar dropped. Yields on two-year, five-year and 10-year Treasury notes fell, reflecting higher expectations of a near-term rate cut, and rose on longer-dated bonds, in a sign the Fed's inflation-fighting credentials might weaken.
Trump said in a letter to Cook on Monday that he had "sufficient cause" to fire her because she had described separate properties in Michigan and Georgia as primary residences on mortgage applications before she joined the Fed in 2022.
In recent months, Trump has fired several Black women who held senior government positions, including the head of the Library of Congress and the chairwoman of the National Labor Relations Board.
The Trump administration has also targeted other political opponents with similar accusations of mortgage fraud, including New York Attorney General Letitia James, a Black woman who secured a half billion-dollar civil fraud judgment against Trump last year. A New York appeals court threw out the penalty last week, while preserving the case.
Mortgage questions
William Pulte, a Trump appointee who is director of the Federal Housing Finance Agency, first raised questions about Cook's mortgages last week and referred the matter to Attorney General Pam Bondi for investigation. Bondi has yet to say whether the Justice Department will take action.
Trump accused Cook on Monday of having "deceitful and criminal conduct in a financial matter" and said he did not have confidence in her "integrity."
Cook took out the two mortgages in question when she was an academic. Loans for primary residences can carry lower rates than mortgages on investment properties, which are considered riskier by banks. Cook listed three mortgages, including two personal residences, on a 2024 financial disclosure form.
She is due to serve on the Fed board through 2038, but the Federal Reserve Act of 1913 allows removal of a sitting governor "for cause."
Until now, that power has not been tested by presidents, who largely have taken a hands-off approach to Fed matters as a way to ensure confidence in monetary policy.
Peter Conti-Brown, a scholar of the Fed's history at the University of Pennsylvania's Wharton School, noted that the mortgage transactions preceded her appointment to the Fed and were in the public record when she was vetted and confirmed by the Senate.
"The idea that you can then reach back, turn the clock backward and say, you know, 'All these things that have happened before now constitute fireable offenses from your official position,' is to me incongruous with the entire concept of 'for cause' removal," Conti-Brown said.
It is unclear how the matter might play out ahead of the Fed's next policy meeting on Sept. 16-17.
Academic research has consistently found that policymakers who are allowed to manage inflation independent of political meddling generally achieve better outcomes, a principle that may now be tested at the world's most influential central bank.
"The Fed as an institution escaped harm in the first Trump administration, and will not be so fortunate this time around," said Tim Duy, chief economist at SGH Macro Advisors.
Contributing: Michael S. Derby and Nicole Jeanine Johnson
