Markets watch as Fed leadership uncertainty unfolds
Federal Housing Finance Agency (FHFA) director Bill Pulte has filed a new criminal referral against Federal Reserve governor Lisa Cook as tensions between the Trump administration and the central bank rumble on.
The new referral focuses on a third property in Massachusetts and alleges that Cook claimed the property was a second home, but had earned up to $50,000 in rental income eight months later and declared it as an investment property.
Pulte's latest referral arrives after Cook filed a lawsuit against President Trump, seeking to block her removal from the central bank’s board over allegations tied to mortgage filings.
The case, filed Thursday in federal court in Washington, argues that Trump’s action violated the Federal Reserve Act (FRA) and her Fifth Amendment rights, according to Yahoo! Finance.
Cook, appointed in 2022 to a term expiring in 2038, is requesting an injunction that would confirm her active status while the case proceeds. A hearing on the injunction is scheduled Friday before Judge Jia Cobb. The outcome of the temporary restraining order could determine whether Cook participates in the upcoming Federal Open Market Committee meeting on Sept. 17.
Mortgage filing dispute and legal arguments
The president announced Cook’s dismissal Monday, citing allegations that she listed two properties as her primary residence on separate mortgage applications. According to The New York Post, the allegations originated from Federal Housing Finance Agency Director Bill Pulte, who claimed Cook misrepresented her residency status in 2021.
Cook’s legal team, led by attorney Abbe Lowell, contends that the filings were at most a “clerical error” made before her Senate confirmation and that there is no evidence of intentional misconduct. Court documents reviewed by The Guardian state that an unsubstantiated allegation tied to a private mortgage “is not cause” for removal under the FRA, which limits termination of a governor to proven “inefficiency, neglect of duty, or malfeasance in office.”
Cook’s lawyers also argue that she was denied due process because she received no formal notice or hearing before her removal was made public. They assert that the president’s action aims to open a board seat to further his policy agenda.
White House spokesperson Kush Desai told The New York Post that the president “exercised his lawful authority to remove a governor on the Federal Board of Governors for cause,” saying the move “improves the Federal Reserve Board’s accountability and credibility.”
The dispute has drawn attention to the balance of power between the presidency and the central bank. The case could set a precedent for future interpretations of the FRA’s “for cause” removal protections, a cornerstone of the Fed’s independence since 1913.
Cook has stated she will continue to perform her duties while the matter is litigated, maintaining that the president lacks authority to remove her under the current circumstances.
