Trump Cites Mortgage Fraud in Firing Federal Reserve Governor Lisa Cook

President Donald Trump announced on Monday night that he is removing Federal Reserve Governor Lisa Cook from her position, effective immediately. This action marks an unprecedented step in the ongoing efforts by the president to influence the Federal Reserve, an institution traditionally regarded as independent from daily political pressures.
In a statement posted on his social media platform, the president cited allegations of mortgage fraud as the reason for Cook’s removal.
Cook responded by stating that she will not resign, asserting, “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.”
The allegations were made by Bill Pulte, a Trump appointee to a government agency overseeing mortgage finance companies. Pulte claimed that Cook had designated two primary residences—in Ann Arbor, Michigan, and Atlanta—in 2021 to obtain more favourable mortgage terms, as mortgage rates are typically higher for second homes or rental properties.
This move by the president is expected to lead to a legal challenge, potentially reaching the Supreme Court, and could have implications for financial markets. Following the announcement, stock futures and the value of the U.S. dollar declined slightly.
If Cook is removed, it could weaken the Federal Reserve’s political independence, which is considered essential for its ability to address inflation effectively, including making difficult decisions like raising interest rates. A loss of confidence in the Fed’s independence could lead bond investors to demand higher yields, increasing borrowing costs for consumers and businesses.
Cook has retained a prominent attorney to challenge the removal, who criticised the president’s actions as lacking proper legal basis or procedure and stated that they would take necessary steps to prevent the removal.
Cook was appointed to the Federal Reserve Board in 2022 and is the first Black woman to hold the position. She holds advanced academic credentials and has served as a professor at several universities. Her appointment was confirmed by a closely divided Senate vote.
Under current law, a president may remove a Federal Reserve governor only “for cause,” which generally means misconduct or failure to perform duties. Removal based solely on disagreements over monetary policy is not permitted.
Legal experts note that a for-cause removal typically requires a formal process allowing the governor to respond to charges, a process that has not been initiated in this case.
Federal Reserve governors serve staggered 14-year terms designed to protect the institution’s independence. Unlike cabinet members, they are not subject to removal at the president’s discretion.
While past presidents have expressed disagreements with Federal Reserve leadership, no president has previously attempted to remove a governor from the board. Historical pressure on the Fed to keep interest rates low has previously been linked to inflationary periods.
The Supreme Court has indicated that Federal Reserve officials may have stronger protections against removal than officials at other independent agencies, but it is unclear how this applies to the current situation.
The Federal Reserve’s board votes on interest rate decisions and financial regulation. Though governors are appointed by the president and confirmed by the Senate, their long terms are intended to insulate them from political influence.
The president has expressed a preference for Federal Reserve officials who support lower interest rates. Recently, he appointed an economic adviser to fill a vacant governor seat and previously appointed two governors during his term.
If Cook is removed, the president’s appointees would hold a majority on the board.
In his letter to Cook, the president expressed concerns about her integrity, citing alleged misconduct. He stated that removing her was necessary to uphold the law.
Cook is expected to contest the removal through legal channels. The Federal Reserve as an institution is not initiating the challenge.
The announcement received criticism from various figures who described the removal attempt as illegal and an effort to exert undue influence over the Federal Reserve.
The president has also criticized Federal Reserve Chair Jerome Powell for not lowering interest rates and has threatened to remove him. While Powell’s term extends until 2026, the Federal Reserve’s interest rate decisions are made by a committee, meaning that even replacing the chair does not guarantee a change in policy direction.