US Federal Reserve governor Lisa Cook filed a lawsuit against President Donald Trump on Thursday over his attempts to fire her, setting up an unprecedented legal battle.
Mr Trump said on Monday that he had fired Ms Cook over allegations of mortgage fraud, although no charges have been filed against her. Mr Trump, in a letter posted to Truth Social, said the allegations gave him “sufficient cause” to fire Ms Cook, who was first nominated to the Federal Reserve's Board of Governors by former president Joe Biden.
Her term is set to run through January 2038.
In a lawsuit filed in the federal district court in Washington, lawyers for Ms Cook said Mr Trump's attempt to fire her is “illegal” and, “if allowed to occur, would be the first of its kind in the board’s history”.
“It would subvert the Federal Reserve Act [FRA], which explicitly requires a showing of 'cause' for a governor’s removal, which an unsubstantiated allegation about private mortgage applications submitted by Governor Cook before her Senate confirmation is not,” the lawsuit reads.
Fed officials can only be fired "for cause", which is generally understood to mean neglect of duty or malfeasance.
Fed chair Jerome Powell and the Federal Reserve Board are being sued to the extent that they are able "to effectuate President Trump’s purported termination of Governor Cook".
A hearing for the motion is set for 10am ET on Friday.
White House spokesman Kush Desai said in a statement that Mr Trump had exercised his lawful duty after determining there was cause to remove Ms Cook, which he said "was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions".
"The removal of a governor for cause improves the Federal Reserve Board’s accountability and credibility for both the markets and American people," Mr Desai said.
The Federal Reserve declined to comment.
Fed governor Christopher Waller also declined to comment on the situation when asked by a moderator after remarks at the Economic Club of Miami.
Mr Trump's attempt to remove Ms Cook comes as he seeks to exert greater control over the Federal Reserve, which this year has held US interest rates steady despite the President's demands to lower them. The President has publicly made clear his wish for lower rates, and has repeatedly attacked Mr Powell and the wider Fed board for not lowering rates.
If he is successful in ousting Ms Cook, Mr Trump could then have a majority on the seven-member Fed board, a situation he acknowledged this week. His nomination to fill former Fed governor Adriana Kugler's seat in a temporary capacity, with top economic adviser Stephen Miran, is on track to be confirmed by the US Senate before the Fed's next rate-setting meeting in September.
"It is clear from the circumstances surrounding Governor Cook’s purported removal from the Federal Reserve Board that the mortgage allegations against her 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," Ms Cook's lawyers Abbe Lowell and Norm Eisen argued in the lawsuit.
Allegations of mortgage fraud were first raised last week by federal housing finance director Bill Pulte. Those accusations centre on two properties Ms Cook listed as her primary residence when taking out loans in 2021 – a condominium in Atlanta, Georgia, and a house in Ann Arbor, Michigan.
Mr Pulte sent a criminal referral to the Department of Justice, which said it will investigate the claims against her. The White House has demanded that Ms Cook step away from her duties until the accusations are resolved, although Ms Cook has remained adamant that she will continue her business as usual.
