Fed: Director Lisa Cook sues Trump

Lisa Cook, director of the Federal Reserve (Fed), filed a lawsuit against US President Donald Trump on Thursday (28), alleging that the Republican does not have the power to dismiss her from her position, initiating a legal battle that could redefine long-established norms for the central bank’s independence. Cook’s lawsuit states that Trump violated a federal law that allows the president to remove a Fed director only for just cause when he took the unprecedented step on August 25 of announcing that he would dismiss her. The case is likely to go to the Supreme Court, where a conservative majority has allowed, at least provisionally, Trump to dismiss employees of other agencies, but has recently signaled that the Fed may qualify as a rare exception to direct presidential control. Concerns about the Fed’s independence from the White House in setting monetary policy could have a cascading effect across the global economy. The dollar fell against other major currencies after Trump first announced he would remove Cook. A Fed spokesman said on Tuesday (26), before the lawsuit was filed, that the agency would comply with any court decision. Cook was appointed to the financial agency in 2022 by former President Joe Biden and is the first and only Black woman to serve on the board of the US central bank. The law that created the Fed does not define ‘cause’ or establish any standard or procedure for removal. No president has ever removed a member of the Fed’s board, and the law has never been tested in court. Several federal laws that require the president to have cause before firing members of other agencies say cause may include neglect of duty, misconduct, and inefficiency. These laws could be a guide for courts to determine if Trump has grounds to dismiss Cook. Doubts about Cook’s mortgages were first raised in August by William Pulte, a Trump ally appointed by him as director of the US Federal Housing Finance Agency. Cook took out mortgages in Michigan and Georgia in 2021, while she was an academic. An official financial disclosure form for 2024 lists three mortgages held by Cook, with two listed as personal residences, according to Pulte. The director denies the accusation. Primary residence loans may have lower rates than mortgages on investment properties, which are considered riskier by banks. Cook’s departure would allow Trump to appoint his fourth choice to the seven-member Fed board.