President Donald Trump announced the removal of Federal Reserve Governor Lisa D. Cook, citing “for-cause” authority under the Federal Reserve Act and pointing to unproven allegations that Cook improperly claimed two properties as primary residences to obtain better mortgage terms in 2021. Cook has rejected the allegations and says the president lacks the legal power to dismiss her; she plans to sue to keep her seat. Markets and legal scholars are treating the move as unprecedented and likely headed for the courts, with implications for the Fed’s independence.
What happened
Trump said he was firing Cook after a recent referral alleged that Cook misrepresented occupancy on two mortgage applications prior to joining the Board in 2022. The referral was highlighted publicly and has not resulted in charges. The White House framed the action as a matter of integrity; Cook’s counsel, Abbe David Lowell, called the move unlawful and “without factual or legal basis. Reports describe the issue as whether Cook listed more than one home as a primary residence—an element that, if proven, can constitute mortgage fraud because primary residences typically qualify for lower rates. There has been no adjudication of wrongdoing. Cook denies misconduct and says she will not resign.
Can a president remove a Fed governor?
The Federal Reserve Act permits removal of governors “for cause,” but that standard is narrow and largely untested for Board members. Legal experts expect swift litigation and potentially a Supreme Court review. Until a court rules, the legality—and practical effect—of Trump’s order is uncertain. The Fed has emphasized its independence and said it will follow court decisions.
Why this matters
- Central bank independence: Attempted presidential removal of a sitting governor is extraordinary and could reshape the balance between the White House and the Fed. Analysts warn of longer-term costs if monetary policy becomes politicized.
- Policy outlook: Additional vacancies could allow the administration to nominate policymakers more aligned with aggressive rate cuts, though confirmation and court outcomes will determine the real impact. Early market reaction has been modest but attentive to the risk of institutional change.