Trump moves to fire Federal Reserve governor Lisa Cook, who insists she’s staying

President Donald Trump made a bold move on Monday night by firing Federal Reserve governor Lisa Cook, sparking a potential legal battle over the independence of the institution. In a letter posted on his Truth Social platform, Trump announced that Cook was being removed from her position effective immediately. The decision came after allegations of mortgage fraud made by Bill Pulte, a Trump appointee to an agency that oversees mortgage giants Fannie Mae and Freddie Mac.

Pulte claimed that Cook had misrepresented her primary residences in 2021 to secure better mortgage terms, an accusation that Cook vehemently denies. Despite the controversy, Cook has refused to step down, stating that Trump has no legal authority to fire her without cause.

The move to remove Cook is seen as a threat to the Fed’s political independence, which is crucial for its ability to combat inflation by making unpopular decisions like raising interest rates. If bond investors lose faith in the Fed’s ability to control inflation, it could lead to higher borrowing costs for mortgages, car loans, and business loans.

Cook, the first Black woman to serve as a Fed governor, was appointed by former President Joe Biden and confirmed by a tie-breaking vote from then-Vice President Kamala Harris. The law allows for a president to fire a Fed governor “for cause,” typically meaning for wrongdoing or neglect of duty. However, legal experts argue that proper procedures for a for-cause removal have not been followed in Cook’s case.

Trump’s move to remove Cook is part of a larger effort to assert control over independent agencies, including the Fed. His repeated criticisms of Fed chair Jerome Powell and desire for lower interest rates have raised concerns about political interference in monetary policy.

The decision to fire Cook is likely to face legal challenges and could have significant implications for the Fed’s future independence. With a conservative majority in the Supreme Court, the outcome of this battle remains uncertain. Trump’s efforts to reshape the Fed’s board with his appointees could have long-lasting effects on the institution’s ability to carry out its mandate effectively.