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Fed’s Lisa Cook Takes Trump, Powell to Court on Firing Decision

A recent lawsuit filed in federal court is challenging President Donald Trump’s decision to fire Federal Reserve Governor Lisa Cook. The lawsuit names both the president and Fed Chair Jerome Powell as defendants.

Cook’s lawsuit argues that the president’s action was “unprecedented and illegal” and that there was no “cause” for her dismissal, which is required by the Federal Reserve Act. It also alleges that the firing violates Cook’s Fifth Amendment due process rights and her statutory right to notice and a hearing. The lawsuit seeks an immediate injunction to reverse the firing and reinstate Cook to her position on the Fed’s Board of Governors.

The Administration’s Justification and the Accusations
A White House spokesperson stated that the president exercised his “lawful authority” to remove a governor “for cause.” The spokesperson claimed that Cook was “credibly accused of lying in financial documents” during a mortgage application process. This removal, according to the White House, improves the Fed’s “accountability and credibility.” The Federal Reserve Board of Governors declined to comment.

The accusations of mortgage fraud stem from a claim that Cook had allegedly “falsified bank documents and property records” to get better loan terms by claiming two primary residences in 2021. Cook has “strenuously” denied any wrongdoing and is in the process of gathering information to respond to the allegations.


A Historic Challenge to the Fed’s Independence
This case is a landmark moment, as no other president has attempted to fire a Fed governor in the institution’s 112-year history. The president has been openly critical of the Fed’s monetary policy decisions, and this lawsuit tests the limits of his power over the central bank. The Fed’s independence is considered a cornerstone of the American economy, allowing it to make necessary but potentially unpopular decisions, such as raising interest rates, without political pressure.

A less independent Fed could lead to higher borrowing costs for Americans, as investors might demand a higher yield on bonds to offset the risk of greater future inflation. The president has repeatedly pressured the Fed to cut interest rates, accusing it of harming the economy. The central bank, however, has been cautious, waiting to see how the president’s tariff policies will impact inflation. The Fed chair has recently signaled that a rate cut is likely to occur in September.


Who Is Lisa Cook?
Appointed in 2022, Lisa Cook made history as the first Black woman to serve on the Fed’s board. Her initial nomination was met with opposition from most Senate Republicans. An economist by trade, she has taught at prominent universities and has served in various government roles. Her research has notably focused on the economic impact of racial violence on African-American innovation. Cook’s term on the Board of Governors is set to run through January 2038.

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