A historic first may be unfolding at the Federal Reserve
Federal Reserve governor Lisa Cook's legal battle against president Donald Trump’s attempt to remove her from office has set up a potential Supreme Court case that could determine the central bank’s independence.
An emergency court hearing Friday ended without a ruling on Cook’s request for a temporary restraining order. Cook’s lawyers called Trump’s firing “unlawful and void” and asked the court to block the president from removing her.
Cook’s attorney, Abbe Lowell, argued his client should remain in her position while the lawsuit proceeds. “She should not be taken out of her office, she shouldn’t be disconnected from her electronics,” Lowell told the court. “She should do all the things that she did a week ago before all this started, because that is the status quo.”
Justice Department attorney Yaakov Roth countered that grounds existed to dismiss Cook and said Trump’s desire to remove her was not tied to gaining more influence over the Federal Reserve.
Mortgage allegations at center of case
Trump cited “sufficient reason” to believe Cook made false statements on her mortgage and referenced constitutional powers allowing her removal. The allegations stem from a public letter by housing finance regulator Bill Pulte, a Trump ally, who accused Cook of falsifying mortgage records.
The letter claims Cook signed two documents two weeks apart, stating that two homes in different states were both her primary residence. No charges have been filed against Cook, and her lawsuit does not address the mortgage allegations, according to BBC.
Roth argued that “cause” for removal requires more than policy disagreements and depends on a person’s ability to perform their job. He said a “very senior financial regulatory official” making “contradictory” statements on financial documents could constitute reasonable cause.
Fed independence at stake
The case highlights tensions between Trump and the Federal Reserve over interest rates. Since returning to office, Trump has pressured Fed chair Jerome Powell over what he views as unwillingness to lower rates.
Cook serves on the 12-member committee responsible for setting US interest rates and voted with Powell to maintain current rates at the Fed’s last meeting in July. Her removal would mark the first firing of a Fed governor in the board’s history.
Economic implications emerge
Investment experts warn the dispute could damage Fed credibility and market confidence. Rebecca Patterson, a former Bridgewater Associates strategist and current Council on Foreign Relations fellow, called the situation “a big deal.”
“We shouldn’t ignore this at all,” Patterson told CNBC’s Fast Money. She warned that politicizing the Fed could lead to weaker stock performance, higher inflation, and reduced foreign investment.
Patterson noted that replacing Cook would likely represent Trump’s first move to install loyal policymakers who favor lower rates. While markets might initially welcome rate cuts, she cautioned about longer-term consequences.
The Federal Reserve Act allows presidential removal of Fed officials only “for cause,” not at will. White House spokesperson Kush Desai defended the action, saying Trump “exercised his lawful authority to remove” Cook based on credible accusations regarding financial documents.
The legal challenge could reach the Supreme Court and establish precedent for presidential authority over Fed appointments, with implications extending far beyond Cook’s individual case.
What do you think about the implications of the president’s attempt to remove a Fed governor? Share your insights in the comments below.
