President Donald Trump announced late Monday that he has removed Federal Reserve Governor Lisa Cook from her post, escalating tensions between the White House and the Fed. The move follows allegations from members of his administration that Cook engaged in mortgage fraud related to the purchase of two properties earlier this decade. Trump shared a letter on social media stating:
“You are hereby removed from your position on the Board of Governors of the Federal Reserve, effective immediately. I have determined there is sufficient cause to remove you from your position.”
Cook, however, refused to step down, asserting that the president has no legal authority to fire her. In a statement released by her attorney, Abbe Lowell, she said:
“President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so. I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022.”
Lowell added that they will file a lawsuit to challenge what they call an illegal action, signaling a potentially prolonged legal battle that could ultimately reach the Supreme Court. The dispute represents an unprecedented challenge to the independence of the Federal Reserve, a cornerstone of U.S. monetary policy. The Fed declined to comment on the developments.
Trump’s letter cited what he described as conflicting declarations regarding Cook’s primary residence. Initially, she claimed her main home was in Michigan, but two weeks later signed a separate agreement listing a Georgia property as her primary residence. Trump characterized the discrepancy as “inconceivable” and “impossible” to reconcile, alleging it reflected “deceitful and potentially criminal conduct” and “gross negligence in financial transactions” that called into question her integrity and competence as a financial regulator.
The president had been pressing for Cook’s resignation after Federal Housing Finance Agency head Bill Pulte sent a letter to Attorney General Pam Bondi urging an investigation. Pulte’s August 15 letter alleged that Cook “falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud under the criminal statute.”
Earlier reporting from the Financial Times indicated that the Department of Justice had sent a letter to Fed Chair Jerome Powell recommending Cook’s removal. Trump publicly confirmed his intention to fire Cook shortly after Powell’s Jackson Hole speech, which appeared to leave the door open for a September interest rate cut—a move that critics say may have added political pressure to the situation.
Economists at Capital Economics noted that it remains unclear whether Trump’s letter will have any immediate effect on Fed policy. Markets reacted modestly on Tuesday, showing little volatility despite the unprecedented nature of the action. Analysts emphasize that the case highlights growing concerns about politicization of the Fed, and it may have long-term implications for the central bank’s independence and credibility.
As this situation unfolds, attention will focus on how the legal system responds, whether Cook remains in her role, and the potential ramifications for U.S. monetary policy, particularly in a climate of rising inflation and market uncertainty.
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