Trump tries to fire Federal Reserve governor over mortgage fraud

President Trump fired Fed governor Lisa Cook on Monday evening over recent allegations of mortgage fraud, according to a letter shared by the White House on X.

But Cook, who was appointed by former President Biden in 2022, responded by saying Trump lacks the authority to fire her, and that she’ll continue in her job while suing to block the move.

• In a statement published Tuesday, the Federal Reserve said it plans to abide by any court decision on whether Trump can fire Cook.

Quick background: The move from Trump—who has consistently criticized the Fed in recent months for not lowering interest rates—came a week after Bill Pulte, a presidential appointee who’s the top federal housing regulator, accused Cook of mortgage fraud.

• Pulte says Cook illegally claimed two different primary residences within a 14-day period when applying for mortgages on two properties in 2021 (one in Ann Arbor, the other in Atlanta).
• He also said this information was submitted earlier this month to the Justice Department in a criminal referral.

Is Cook’s firing legal? We’re about to find out

Current federal law allows the President to fire a Fed governor “for cause,” which typically means they participated in some kind of wrongdoing or neglected their duties. In his letter, Trump said there’s “sufficient reason” to believe Cook committed mortgage fraud, which justifies her firing.

But critics of Trump’s move argue that establishing a for-cause removal typically requires some type of procedure that would allow Cook to answer the charges against her and present evidence, which had yet to happen when Trump fired her.

• Analysts widely expect that Trump’s attempt to fire Cook will kick off a lengthy legal battle that has a good chance of ending up in the Supreme Court.
• If Trump succeeds in her removal, it would mark the first termination of a governor in the bank’s 111-year history, and could erode the Fed’s political independence, which has been a hallmark of America’s central bank since the 1950s.

Big picture: Trump’s firing of Cook comes as the Fed has held interest rates steady at 4.25%–4.5% for five straight meetings so far this year, largely due to concerns that tariffs could raise inflation (currently above the Fed’s 2% target). But in a speech last week, Fed Chair Jerome Powell signaled the central bank could start lowering interest rates as soon as its next meeting in September due to labor market concerns—and with the resignation of a Biden-appointed governor earlier this month, Trump could fill a majority of board seats before Federal Reserve Chair Jerome Powell’s term ends next year.

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