Trump targets Fed governor Lisa Cook, sparking court fight over White House authority

President Donald Trump’s attempt to remove one of the Federal Reserve’s seven governors is likely to end up in court, which could clarify the president’s legal powers over the historically autonomous organisation.

Legal experts say the Republican president’s argument that he may fire Lisa Cook, who was nominated by Democratic President Joe Biden, is questionable. However, it is an extraordinary step that has never occurred in the courts before, and the Supreme Court has been considerably more inclined to let the president to remove agency executives this year than in previous years.

If Trump succeeds in removing Cook from the board, it may diminish the Fed’s political independence, which is regarded to be crucial to the Fed’s capacity to combat inflation since it allows the Fed to take unpopular actions such as raising interest rates. A less independent Fed may force Americans to pay higher interest rates on mortgages, car loans, and business loans, as investors may demand higher interest rates to hold bonds in order to counter higher inflation, raising borrowing costs across the economy.

“It’s an illegal firing, but the president’s going to argue, ‘The Constitution lets me do it,’” said Lev Menand, a law professor at Columbia University and author of a book about the Fed. “And that argument’s worked in a few other cases so far this year.”

Menand said the Supreme Court construes the Constitution’s meaning, and “it can make new constitutional law in this case.”

The most likely next steps for Cook, who was appointed to the Fed’s board in 2022, are to seek an injunction against Trump’s order that would allow her to continue her work as a governor. But the situation puts the Fed in a difficult position.

“They have their own legal obligation to follow the law,” Menand said. “And that does not mean do whatever the president says. … The Fed is under an independent duty to reach its own conclusions about the legality of Lisa Cook’s removal.”

Trump said in a letter posted on his Truth Social platform late Monday that he was removing Cook effective immediately because of allegations she committed mortgage fraud.

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.”

Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, made the accusations last week. Pulte alleged that Cook had claimed two primary residences – in Ann Arbor, Michigan, and in Atlanta – in 2021 to get better mortgage terms. Mortgage rates are often higher on second homes or those bought to rent.

Cook has retained Abbe Lowell, a prominent Washington attorney. Lowell said Trump’s “reflex to bully is flawed and his demands lack any proper process, basis or legal authority,” adding, “We will take whatever actions are needed to prevent his attempted illegal action.”

Cook is the first Black woman to serve as a governor. She was a Marshall Scholar and received degrees from Oxford University and Spelman College, and she has taught at Michigan State University and Harvard University’s Kennedy School of Government.