Federal Reserve governor Lisa Cook says she'll sue Trump administration to keep her job

ruff says Fed regulator Lisa prepare is fired. She insists she's staying

federal soldier Reserve Gov. Lisa Cook will sue U.S. President Donald Trump's administration to try to prevent him from firing her, her lawyer said Tuesday. "President Trump has no authority to remove Federal Reserve Governor Lisa Cook," said Abbe Lowell, a longtime Washington lawyer who has represented figures from both major political parties.

"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."

Trump said Monday night he's firing Cook, an unprecedented move that would constitute a sharp escalation in his battle to exert greater control over what has long been considered an independent institution.

Trump said in a letter posted on his Truth Social platform that he is removing Cook effective immediately. Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, last week accused Cook of committing mortgage fraud, though she faces no existing civil or criminal action.

Pulte alleged that Cook had claimed two primary residences — in Ann Arbor, Mich., and Atlanta — in 2021 to get better mortgage terms. Mortgage rates are often higher on second homes or those purchased to rent.

"The American people must have the full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve," Trump wrote in his letter addressed to Cook. "In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity."

Cook said Monday night that she would not step down.

"President Trump purported to fire me 'for cause' when no cause exists under the law, and he has no authority to do so," she said in an emailed statement. "I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022."

The case is likely to end up at the U.S. Supreme Court and could more clearly define the limits of the president's legal authority over the traditionally independent institution. 

Democratic Sen. Elizabeth Warren of Massachusetts, who sits on the chamber's finance and banking committees, called Trump's move "an authoritarian power grab that blatantly violates the Federal Reserve Act."

The top court has a 6-3 majority of conservative jurists, three appointed by Trump in his first term. In a May decision that supported the executive authority to remove officials from independent agencies, the top court referred to the Fed as distinct, characterizing it as a "uniquely structured, quasi-private entity"

Trump has moved to remove Democratic-appointed officials from the National Labor Relations Board, the Equal Opportunity Commission and the U.S. Nuclear Regulatory Commission, among other entities. He also signed an executive order to give the White House direct control of independent federal regulators such as the Securities and Exchange Commission, the Federal Trade Commission and the Federal Communications Commission.

Stock futures declined slightly late Monday, as did the dollar against other major currencies. If Trump succeeds in removing Cook from the board, it could erode the Fed's political independence, which is considered critical to its ability to fight inflation because it enables it to take unpopular steps like raising interest rates.

If bond investors start to lose faith that the Fed will be able to control inflation, they will demand higher rates to own bonds, pushing up borrowing costs for mortgages, car loans and business loans.

"It's another crack in the edifice of the United States and its investibility," said Kyle Rodda, a senior financial market analyst at Capital.com in Melbourne.

Cook was appointed to the Fed's board by then-president Joe Biden and is the first Black woman to serve as a governor. She was confirmed after a 50-50 tie in the Senate over her nomination was broken by the vice-president at the time, Kamala Harris.

The law allows a president to fire a Fed governor "for cause," which typically means for some kind of wrongdoing or dereliction of duty.  

Establishing a for-cause removal typically requires some type of proceeding that would allow Cook to answer the charges and present evidence, legal experts say, which hasn't happened in this case.

"We're in uncharted waters in a sense that it's very difficult to predict that if Lisa Cook goes to court what will happen," said Lev Menand, a law professor at Columbia law school and author of The Fed Unbound. Menand said for-cause firings are typically related to misconduct while in office, rather than based on private misconduct from before an official's appointment.

Fed governors vote on the central bank's interest rate decisions and on issues of financial regulation. While they are appointed by the president and confirmed by the Senate, they don't serve at the pleasure of the president. They serve 14-year terms that are staggered in an effort to insulate the Fed from political influence.

While presidents have clashed with Fed chairs before, no president has sought to fire a Fed governor.

Sarah Binder, a senior fellow at the Brookings Institution, said the president's use of the "for cause" provision is likely an effort to mask his true intent.

"It seems like a fig leaf to get what we wants, which is muscling someone on the board to lower rates," she said.

Trump has said he would only appoint officials who would support cutting rates. 

Trump nominated Jerome Powell in November 2017 to succeed Janet Yellen as Fed chair, but has repeatedly attacked Powell in public comments for not cutting its short-term interest rate, and even threatened to fire him.

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Powell signalled last week that the Fed may cut rates soon, even as inflation risks remain moderate.

Trump will be able to replace Powell in May 2026, when Powell's term expires. However, 12 members of the Fed's interest-rate setting committee have a vote on whether to raise or lower interest rates, so even replacing the chair might not guarantee that Fed policy will shift the way Trump wants.

Trump recently named Stephen Miran, a top White House economic adviser, to replace another governor, Adriana Kugler, who stepped down about five months before her term officially ended Aug. 1.

Trump appointed two governors in his first term, Christopher Waller and Michelle Bowman, so replacing Cook would give Trump appointees a 4-3 majority on the Fed's board. 

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