Federal Reserve Governor Lisa Cook filed a lawsuit Thursday claiming President Trump lacks the authority to remove her, setting up a major clash over presidential power and the independence of the central bank.
The lawsuit, filed in federal court in Washington, says Mr. Trump’s allegations of mortgage fraud against Ms. Cook are “unsubstantiated.”
Ms. Cook’s lawyer, Abbe Lowell, wants the court to declare Mr. Trump’s firing null and void so she can remain on the Fed board of governors.
“This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would be the first of its kind in the Board’s history,” the lawsuit said.
Mr. Lowell, in the suit, argued the Federal Reserve Act explicitly required a showing of “cause” to remove a Fed governor, “which an unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not.”
Mr. Trump fired Ms. Cook after a housing regulator, Bill Pulte, flagged personal mortgage documents that Ms. Cook filed in 2021.
In them, she listed a Michigan property and a Georgia property as primary residences. The Georgia property was later put up for rent.
The administration said it is a clear case of fraud in which Ms. Cook sought better loan terms and that it required her dismissal.
Ms. Cook hasn’t explained why her loan documents said what they did. Her lawsuit focuses instead on the fact patterns that led to her firing, including Mr. Trump’s repeated attempts to pressure the Fed into lowering interest rates.
The 24-page lawsuit says the alleged infraction occurred before President Biden appointed Ms. Cook to the Fed in 2022 and that “Governor Cook was never given any opportunity to respond to the allegations before the criminal referral was sent.”
Ms. Cook’s removal and replacement, alongside confirmation of a pending governor nominee, would give the White House a Trump-appointed majority on the Fed board as he seeks lower interest rates from central bankers.
Mr. Trump pointed to laws that say a president can fire a Fed governor “for cause,” though what that means is up to interpretation. The legal fight over Ms. Cook could reach the Supreme Court and shape presidential authority over the central bank.
The lawsuit lists Mr. Trump, the Fed board of governors and Fed Chairmain Jerome Powell as defendants.
Listing the Fed members appeared to be a technical matter. The lawsuit said they were cited “to the extent that any individual Governor has the ability to take any action to effectuate President Trump’s purported termination of Governor Cook.”
The White House on Thursday stood by its decision to fire Ms. Cook, saying Mr. Trump exercised his lawful authority.
“The president determined there was cause to remove a governor who was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions,” White House spokesman Kush Desai said. “The removal of a governor for cause improves the Federal Reserve Board’s accountability and credibility for both the markets and American people.”
