US Federal Reserve Governor Lisa Cook is set to file a lawsuit against President Donald Trump’s attempt to fire her, citing a lack of factual and legal basis for the action. The move comes after Trump announced his intention to dismiss Cook, the first Black woman to serve on the central bank’s governing body, over allegations of “deceitful and potentially criminal conduct” related to mortgages she took out in 2021.
According to Cook’s lawyer, Abbe Lowell, the president’s decision is based solely on a referral letter and lacks any substantive evidence. The lawyer stated that they will be filing a lawsuit challenging this “illegal action.” The Federal Reserve Act of 1913 allows for the removal of a sitting governor “for cause,” but Cook’s team argues that Trump’s reasons do not meet this threshold.
The dispute has sparked concerns about the independence of the US central bank and the potential impact on monetary policy. Trump has been pressuring the Fed to lower interest rates, and Cook’s departure could allow him to appoint a majority of the Fed’s seven-member board. The president has already nominated White House economist Stephen Miran for a temporary seat on the Fed board, and there are reports that former World Bank Group President David Malpass, a longtime Trump ally, may also be considered for the position.
The Fed has pushed back against Trump’s attempt to fire Cook, stating that board members serve 14-year tenures and cannot be easily removed from office. The central bank’s independence is seen as crucial for ensuring that monetary policy decisions are based on economic data and the long-term interests of the American people.
The attempted removal of Cook has shaken confidence in the dollar and US sovereign debt, sparking fears of global financial turmoil. Wall Street’s main equities indexes closed slightly higher on Tuesday, while the dollar dropped and the yield curve on US Treasuries steepened.
The issue is set to come to a head in the coming weeks, with the Fed’s next meeting to set interest rates scheduled for September 16-17. Cook’s status remains unchanged, according to the Fed, and it appears that it would take a court ruling to prevent her from participating in the meeting. The lawsuit filed by Cook’s team is likely to be closely watched, as it raises important questions about the limits of presidential power and the independence of the US central bank.
