The lawsuit is a major escalation of the growing clash between the White House and the Fed, which has resisted Trump’s demands to lower interest rates even as Trump has repeatedly attacked Jerome Powell. The Fed chair has also resisted the president’s demands to resign.
Cook’s firing “would subvert the Federal Reserve Act, which explicitly requires a showing of ‘cause’ for a Governor’s removal, which an unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not,” according to the complaint.Rulings in the case in the coming days and weeks could add to investors’ concerns that the president’s efforts will undermine the independence of the central bank — a bedrock assumption of US markets that underpins the nation’s credit ratings.
Cook sued days after Trump wrote a letter to her, which he posted on social media, saying that he was removing her from her post immediately in light of her “deceitful and potentially criminal conduct in a financial matter.” Cook has not been formally investigated or charged with any wrongdoing.
White House spokespeople didn’t immediately respond to requests for comment. Representatives for Cook’s lawyers and the Fed declined to comment.
The clash erupted after Federal Housing Finance Agency Director Bill Pulte alleged on social media that Cook lied on 2021 loan applications for two properties — in Michigan and Georgia — by claiming she would use each property as her primary residence to secure more favorable loan terms. He said the applications were filed two weeks apart.
The suit says the alleged mortgage fraud occurred before her Senate confirmation and that she wasn’t given an opportunity to respond to the allegations before Pulte referred the matter for a criminal investigation.
Cook asked the judge to void Trump’s purported firing of her and issue a ruling affirming that she’s an active member of the Board of Governors of the Federal Reserve. She also seeks a declaration from the court that “unsubstantiated allegation of mortgage fraud prior to a Governor’s confirmation is not cause for removal under the Federal Reserve Act.”
‘For Cause’
The case could hinge on whether a judge agrees that Trump has “cause” under US law to fire Cook. Section 10 of the Federal Reserve Act, the 1913 law that governs the central bank, says members of the Fed’s Board of Governors can be “removed for cause,” although the statute doesn’t specify exactly what “cause” means.
Laws that do describe “for cause” generally define the term as encompassing three possibilities: inefficiency; neglect of duty; and malfeasance, meaning wrongdoing, in office. It’s far from clear that the mortgage allegations against Cook are enough to meet that bar. There hasn’t yet been a formal investigation and she hasn’t been charged with anything, let alone convicted.
Trump’s move against Cook is the latest in a series of efforts by his administration to increase legal scrutiny of Democratic figures, in addition to pressuring the central bank. Similar mortgage fraud claims have been made against California Senator Adam Schiff and New York Attorney General Letitia James, two high-profile critics of the president.
Cook became the first Black woman to serve on the Fed’s Board of Governors in Washington when she was appointed by President Joe Biden in 2022. During her initial confirmation process, Cook faced intense scrutiny from Republican lawmakers who accused her of misrepresenting parts of her resume and tried to use that to sink her nomination. She strongly denied the claims and was confirmed on a party-line vote in the Senate, with then-Vice President Kamala Harris stepping in to break the 50-50 tie.
