Fed Gov. Lisa Cook sues Trump administration to block attempted firing

Fed Governor Challenges Dismissal in Court

Lisa Cook lawsuit over mortgage fraud allegations could test limits of presidential removal power

Case represents first attempt in Federal Reserve's 112-year history to fire sitting governor

Federal Reserve Governor Lisa Cook filed a federal lawsuit challenging President Donald Trump's attempt to fire her over mortgage fraud allegations, setting up an unprecedented legal battle that could reshape the constitutional foundations of central banking independence in America.

The lawsuit, filed through attorney Abbe David Lowell on Tuesday, represents the first time in the Fed's 112-year history that a sitting governor has been terminated by a president. The case is expected to ultimately reach the Supreme Court, where justices will weigh the president's removal powers against congressional intent to insulate monetary policy from political interference.

---

Who Is Lisa Cook?

Education and Early Career: Born in 1964, Lisa DeNell Cook earned a BA in physics and philosophy magna cum laude from Spelman College in 1986, where she was named a Harry S. Truman Scholar. As Spelman's first Marshall Scholar, she earned another BA in philosophy, politics, and economics from Oxford University in 1988. She completed a PhD in economics from UC Berkeley in 1997, focusing on banking system development in czarist and post-Soviet Russia.

Academic and Policy Background: Cook spent nearly two decades as a professor of economics and international relations at Michigan State University. Her research focused on racial disparities in economics, financial institutions, innovation, and African-American economic history. She served as a senior economist on President Barack Obama's Council of Economic Advisers (2011-2012) and as a senior adviser in the Treasury Department's Office of International Affairs (2000-2001).

Financial Standing: According to federal financial disclosures, Cook's assets include retirement accounts, investment funds, and the two properties central to the current mortgage allegations—her Michigan residence and Atlanta condominium. She has disclosed no significant financial conflicts related to her Fed role.

Path to the Fed: President Biden nominated Cook in January 2022, making her the first Black woman nominated to the Fed's Board of Governors. After a contentious confirmation process that deadlocked in committee along party lines, the Senate confirmed her 50-50 with Vice President Kamala Harris casting the tie-breaking vote in May 2022. She took office May 23, 2022, initially serving an unexpired term, then was reconfirmed in September 2023 for a full term ending January 2038.

Fed Record: As a governor, Cook has generally voted in alignment with Chair Jerome Powell's monetary policy decisions, including supporting the aggressive rate hikes in 2022-2023 to combat inflation. She has frequently spoken about artificial intelligence's economic implications and has advocated for considering economic disparities in Fed policy decisions.

---

Mortgage Fraud Allegations Spark Crisis

Trump's decision to fire Cook stemmed from a criminal referral sent to the Justice Department by Federal Housing Finance Agency Director Bill Pulte, who has emerged as a key figure in the Trump administration's campaign against Federal Reserve leadership.

Pulte's August 15 letter to Attorney General Pam Bondi alleged that Cook "falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud" by claiming two different properties as her primary residence on separate mortgage applications in 2021.

According to the criminal referral, Cook acquired a loan on a property in Ann Arbor, Michigan on June 18, 2021, representing that she would "use the Property as Borrower's principal residence within 60 days." Two weeks later, she obtained another mortgage on an Atlanta condominium, also designating it as her primary residence. Pulte further alleged that while the Atlanta property was later listed as a rental in 2022, Cook's federal financial disclosures for 2022 and 2023 showed no rental income from that address.

Cook has not been charged with any crime, and she responded that she "learned from the media" about Pulte's referral and had "no intention of being bullied to step down from my position because of some questions raised in a tweet." She stated she would gather information to address any legitimate questions about her financial history.

The Justice Department has opened an investigation into the allegations as part of a broader pattern of mortgage fraud referrals Pulte has made against prominent Democratic figures, including California Senator Adam Schiff and New York Attorney General Letitia James.

Constitutional Battle Over Removal Authority

The legal challenge centers on the Federal Reserve Act's "for cause" removal standard and its intersection with Article II of the Constitution. The Federal Reserve Act specifies that governors "may be removed for cause by the President" but provides no further definition of what constitutes sufficient cause.

This ambiguity raises a fundamental question about who interprets the standard. While Trump's position implies that the Article II chief executive has authority to define "for cause" absent explicit statutory guidance, legal precedent suggests otherwise. In Humphrey's Executor (1935), the Supreme Court rejected President Franklin Roosevelt's broad interpretation of removal authority, holding that when Congress creates statutory removal restrictions, the president cannot remove officials "for reasons other than those so specified" in the law.

The Court established that "for cause" removal provisions create an "exclusive" list of permissible grounds, requiring judicial rather than executive interpretation when disputes arise. This principle has been reinforced through decades of administrative law, where courts—not presidents—determine whether alleged misconduct meets statutory removal standards.

Trump's firing letter, posted Monday evening on social media, cited the mortgage fraud allegations from Pulte's criminal referral. Trump wrote that "there is sufficient reason to believe you have made false statements on one or more mortgage agreements" and tied the allegations to public perception of Cook's role as a Fed governor.

Cook's legal team argues that "the unsubstantiated and unproven allegation that Governor Cook 'potentially' erred in filling out a mortgage form prior to her Senate confirmation—does not amount to 'cause'" and that the allegations are pretextual to remove her over policy disagreements on interest rates. The lawsuit contends that the mortgage allegations are "pretextual, in order to effectuate her prompt removal and vacate a seat for President Trump to fill and forward his agenda to undermine the independence of the Federal Reserve."

How Fed Governors Are Normally Removed

In the Federal Reserve's 112-year history, no sitting governor has ever been fired by a president, making Trump's action unprecedented. The established process for removing Fed governors involves several key procedures typically absent in Cook's case.

Under normal circumstances, removal "for cause" historically requires due process protections including notice, an opportunity to respond to allegations, and a hearing or investigative process. The Federal Reserve Act's legislative history suggests Congress intended "for cause" to mirror civil service standards: "inefficiency, neglect of duty, or malfeasance in office" while performing official duties.

The only historical precedent for presidential removal of independent agency heads with "for cause" protection occurred in 1912-1913, when President William Taft removed two members of the Board of General Appraisers after formal hearings with written findings of misconduct. President Richard Nixon later removed Raymond Lapin from the Federal National Mortgage Association for "good cause" but without conducting hearings.

Internal disciplinary matters at the Fed are typically handled through the Board's internal procedures, including investigations by the Fed's Office of Inspector General for misconduct allegations. The Board can also self-police through formal censure or pressure for resignation. Fed officials facing serious legal issues usually resign rather than face removal proceedings.

Fed governors who have departed early typically resign for personal reasons, policy disagreements, or new opportunities. The median tenure is approximately five years, well short of the 14-year terms, suggesting most departures are voluntary rather than forced.

Supreme Court Precedent at Stake

The case implicates the 1935 Supreme Court decision in Humphrey's Executor v. United States, which established that presidents cannot remove members of independent agencies except for cause. That landmark ruling held that Congress could limit presidential removal power for officials of agencies that are "quasi-legislative" or "quasi-judicial" in nature.

However, the current Supreme Court has been chipping away at that precedent, ruling in recent years that presidents can fire the heads of single-director agencies like the Consumer Financial Protection Bureau. The court has distinguished the Fed as having special constitutional protection.

In a May 2025 order, the Supreme Court described the Federal Reserve as "a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States", suggesting the justices view it differently from other independent agencies.

The constitutional basis for independent agencies rests on Congress's power to structure executive branch operations and the practical need for expertise-driven decision-making insulated from political cycles. Legal scholars note that the Supreme Court's modern precedent requires Congress to clearly state when it wishes to restrict presidential removal power.

The Trump Justice Department has argued that "for-cause removal provisions that apply to members of multi-member regulatory commissions are unconstitutional," with Solicitor General D. John Sauer stating that "the president should not be forced to delegate his executive power to agency heads who are demonstrably at odds with the administration's policy objectives".

Market Implications and Political Stakes

Financial markets worldwide have been rattled by Trump's announcement, marking a sharp escalation in his effort to exert greater control over what has long been considered an institution independent from day-to-day politics.

The president has repeatedly criticized Fed Chair Jerome Powell for not cutting interest rates more aggressively. At 4.3%, the federal funds rate has drawn Trump's ire as he pushes for monetary easing to boost economic growth.

If Trump succeeds in removing Cook and getting her successor confirmed, along with the confirmation of his nominee Stephen Miran to fill another vacant seat, it would give Trump a 4-to-3 majority of appointees on the seven-member board.

Markets could face increased volatility if central bank independence is compromised, as investors typically demand higher yields to offset potentially greater inflation risks when monetary policy becomes politicized.

Judicial Process and Likely Outcome

Cook's lawsuit will follow standard federal litigation procedures, beginning in district court where she will seek a preliminary injunction to block her removal while the case proceeds. The Supreme Court's recent ruling in Trump v. CASA limiting universal injunctions means Cook will likely receive only party-specific relief rather than a broader ruling on presidential removal power.

Legal experts predict the district court will likely grant Cook's injunction request, citing the established Humphrey's Executor precedent and the Supreme Court's May 2025 language protecting the Fed's "uniquely structured" independence. The Trump administration would then appeal to a federal circuit court, with the case ultimately reaching the Supreme Court within 12-18 months.

Marbury v. Madison and Judicial Review

While Marbury v. Madison (1803) established the foundational principle of judicial review—the court's power to declare government actions unconstitutional—it will not directly control the Cook case outcome. Marbury primarily addressed whether courts can review and strike down congressional legislation, whereas Cook's case involves interpreting existing statutory language and presidential authority under Article II.

However, Marbury's underlying principle that courts must interpret what the law requires will guide judicial analysis of whether the Federal Reserve Act's "for cause" standard has been met and whether Trump's removal authority extends to policy disagreements disguised as misconduct allegations.

Probable Supreme Court Outcome

Legal scholars assess Cook has a strong likelihood of prevailing based on several factors. The Supreme Court's explicit May 2025 statement that the Federal Reserve "is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States" signals the conservative majority's intent to preserve Fed independence even while dismantling other agency protections.

The Court's recent decisions striking down single-director agency independence while preserving multi-member board protections also favors Cook's position. Most significantly, mortgage application irregularities from before government service likely fail the "for cause" standard, which historically requires misconduct while in office or gross incompetence in official duties.

Political considerations may also influence the outcome. Financial markets have already reacted negatively to uncertainty around Fed independence, and further volatility could pressure justices to preserve monetary policy stability. A ruling allowing political removal of Fed governors could trigger capital flight and undermine the dollar's reserve currency status.

Historical Context and Broader Implications

No president has ever attempted to remove a member of the Federal Reserve Board since the central bank's founding in 1913. The Fed's independence was deliberately structured by Congress through long, staggered terms and removal protections.

The 1935 Banking Act removed ex officio Treasury and Comptroller positions from the Fed board and established the current seven-member presidentially appointed structure specifically to enhance independence from political influence.

The Cook case arrives as the conservative Supreme Court majority has been systematically questioning the constitutional foundations of the modern administrative state. Some legal scholars warn that the court's reasoning in other cases, if applied consistently, could have far-reaching consequences for federal agency independence.

The outcome could fundamentally alter the balance of power between the executive branch and independent agencies that Congress has established to carry out specialized government functions, with implications extending far beyond monetary policy to financial regulation, labor relations, and other areas where expertise and continuity have been deemed essential for effective governance.

---

Sources:

1. Associated Press. "Trump's power challenged in court by a key member of the Federal Reserve that he's trying to fire." San Diego Union-Tribune, August 28, 2025. https://www.sandiegouniontribune.com/2025/08/28/trump-federal-reserve-lisa-cook/
2. CNN Business. "Fed Governor Cook's attorney says he will file suit over Trump's attempt to fire her." August 26, 2025. https://www.cnn.com/2025/08/26/business/cook-fed-lawsuit
3. CNBC. "Fed responds to Trump effort to fire Lisa Cook, notes president needs 'cause'." August 26, 2025. https://www.cnbc.com/2025/08/26/trump-fed-cook-respond-court.html
4. NBC News. "Trump says he's removing Fed governor Lisa Cook, citing his administration's allegations of mortgage fraud." August 26, 2025. https://www.nbcnews.com/politics/white-house/trump-removing-federal-reserve-governor-lisa-cook-rcna227138
5. Brookings Institution. "Why is the Federal Reserve independent, and what does that mean in practice?" May 23, 2025. https://www.brookings.edu/articles/why-is-the-federal-reserve-independent-and-what-does-that-mean-in-practice/
6. Federal Reserve Board. "Section 10. Board of Governors of the Federal Reserve System." https://www.federalreserve.gov/aboutthefed/section10.htm
7. Wikipedia. "Humphrey's Executor v. United States." Accessed August 28, 2025. https://en.wikipedia.org/wiki/Humphrey's_Executor_v._United_States
8. Southern California Law Review. "The Federal Reserve and the Constitution." July 9, 2024. https://southerncalifornialawreview.com/2024/05/14/the-federal-reserve-and-the-constitution/
9. Cornell Law Review. "Article II and the Federal Reserve." 2024. https://publications.lawschool.cornell.edu/lawreview/2024/08/01/article-ii-and-the-federal-reserve/
10. SCOTUSblog. "Why the justices defended the Federal Reserve." August 2025. https://www.scotusblog.com/2025/08/why-the-justices-defended-the-federal-reserve/
11. CNN Politics. "How Bill Pulte launched Trump's firing of Fed governor Lisa Cook." August 26, 2025. https://edition.cnn.com/2025/08/26/politics/bill-pulte-lisa-cook-federal-reserve-mortgage
12. CNBC. "Fed's Lisa Cook says she will not resign over mortgage fraud claims." August 20, 2025. https://www.cnbc.com/2025/08/20/trump-fed-cook-pulte-mortgage-bondi.html