An unprecedented legal showdown could test the limits of presidential power
A top economic advisor to President Trump has suggested that Federal Reserve governor Lisa Cook, who finds herself at the center of a firestorm over mortgage fraud allegations, should step down at least temporarily while a legal battle plays out.
“If I were her in her circumstance, I would take leave,” Kevin Hassett, director of the National Economic Council, told reporters outside the White House. “I think it’s the honorable thing to do.” He also defended Trump’s authority to remove Fed governors “for cause.”
Cook will file a lawsuit to challenge president Donald Trump’s attempt to remove her from the central bank’s governing board, her attorney announced Tuesday. The case marks an unprecedented confrontation over presidential power and Fed independence.
“His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action,” said Cook’s lawyer, Abbe Lowell, in a statement to Reuters.
The announcement followed Trump’s social media post Monday claiming to dismiss Cook “for cause” over mortgage fraud allegations. Confirmed in 2022, Cook is the first Black woman to serve on the Fed’s seven-member board.
Cook said she will not resign and will continue performing her duties. The Fed issued a statement affirming her status remains unchanged, noting governors serve 14-year terms designed to shield monetary policy from political influence.
“President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” Cook said in a statement shared with CNN. “I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022.”
Supreme Court clash likely
The dispute could reach the Supreme Court, which has given presidents broad removal authority but has treated the Fed as a “uniquely structured” agency. “The firing of Lisa Cook ‘for cause’ may be pretextual but is not obviously illegal,” Harvard law professor Jack Goldsmith said on social media. “The big question is how the markets react.”
The controversy began after Federal Housing Finance Agency (FHFA) director Bill Pulte questioned mortgages Cook obtained in 2021, before joining the Fed. Trump’s letter alleged she described two properties in Michigan and Georgia as primary residences. The Justice Department has said it will review the matter, but Cook has not been charged. Legal experts note the mortgages were already part of the public record during her Senate confirmation.
Markets showed limited response to the confrontation. According to Reuters, Wall Street’s main equity indexes closed slightly higher Tuesday, while the dollar fell and Treasury yield curves steepened on concerns about Fed independence.
The central bank is scheduled to meet September 16-17 to set interest rates, and Cook is expected to participate unless a court rules otherwise. The legal battle represents Trump’s most direct challenge to Fed independence in his second term, following months of pressure for deeper interest rate cuts.
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