Federal Reserve Board Governor Lisa Cook — who is on unpaid leave from her job as a professor at Michigan State University — has sued President Donald Trump for attempting to fire her from the board, saying he has overstepped his legal authority by trying to do so and threatened the independence of the Fed, which helps set monetary policy for the nation.
The lawsuit was filed Aug. 28 in U.S. District Court in Washington D.C. by Cook’s lawyer, Abbe David Lowell, and names not only Trump but Federal Reserve Board Chairman Jerome Powell and the other board members collectively and individually. It asks the court to ensure none of them take any action “to effectuate President Trump’s purported termination of Governor Cook.”
Three days earlier, on Aug. 25, Trump posted a letter on social media purporting to fire Cook, a Michigan State University professor of economics and international relations who was nominated in 2022 by former President Joe Biden and is the first Black woman to sit on the board, accusing her of “deceitful and potentially criminal conduct” in obtaining mortgages for her personal property prior to her confirmation.
It was the first time a U.S. president had attempted to unilaterally remove a member of the Fed’s board. Since Trump first raised the specter of firing her, Cook has refused to step down as a member of the board.
White House Press Secretary Karoline Leavitt said a few hours after the lawsuit was filed that Trump was within his rights to fire Cook. “He has the cause he needs to fire this individual. He laid it out in a letter he provided to her and to the public,” she said.
U.S. District Judge Jia Cobb set an initial hearing on the lawsuit for the morning of Friday, Aug. 29.
Trump, in his letter of Aug. 25, made reference to a criminal referral sent to the Justice Department by Federal Housing Finance Agency Director Bill Pulte in which Pulte claimed Cook filed mortgage application documents in both Michigan and Georgia indicating each would be her primary residence, a characterization often used by lenders to help set repayment terms. (It’s also a characterization used by many localities to help determine tax rates, though that has not been raised as a question here.) Pulte characterized Cook as “potentially committing mortgage fraud” in the referral and has also made repeated references to it on social media.
In the lawsuit, which was reported on by multiple media organizations, including Politico, the Wall Street Journal and others, Cook doesn’t directly address those claims other than to say they are “unsubstantiated and unproven” and that she has been given no chance to address them as her Fifth Amendment right to due process provides her. But she and her lawyers argue that even if they were true and she “‘potentially’ erred in filling out a mortgage form prior to her Senate confirmation,” that would not justify her firing under the Federal Reserve Act. That, it said, requires a showing of “cause,” a term which constitutes “inefficiency, neglect of duty, malfeasance in office, or comparable misconduct” stemming from her position.
Trump’s argument that his allegations against her of mortgage fraud prior to her confirmation in 2022 constitute cause have “no limiting principle” against his powers to remove a member of the Fed board, Cook said in the lawsuit, noting her purported firing and the claims against her come after months of Trump’s and Pulte’s railing against Powell and the Fed to reduce interest rates.
Cook, who initially filled a short, unexpired term to the Fed before being renominated and confirmed to a full 14-year term by the Senate in 2023, and the other members of the seven-member Fed board sit on the Federal Open Market Committee that sets interest rates for the nation’s reserve banks, a key authority in setting fiscal policy. If Trump can remove her, he could potentially nominate a replacement who would be amenable to setting policy as the White House desires.
“Allowing the president to remove members of the board over policy disagreements would also render illusory the board’s independence,” the lawsuit said, adding that the Supreme Court has said the Fed’s independence must be protected, in the past.
The lawsuit argued that threatening that independence could put the nation’s finances at dire risk.
“The operational independence of the Federal Reserve is vital to its ability to make sound economic decisions, free from the political pressures of an election cycle,” the lawsuit said. “This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would (be) the first of its kind in the board’s history.”
“An independent Federal Reserve is essential for a stable economy, as the short-term political interests of a president often clash with sound monetary policy,” the lawsuit continued. “Presidents, facing pressure to boost the economy, may favor lower interest rates and a more expansive policy to achieve a temporary economic lift. However, this approach often fuels long-term inflation. A politically insulated Board of Governors can make appropriate, albeit unpopular, decisions — such as raising interest rates to combat inflation — that are crucial for the nation’s long-term financial health.”
Cook’s lawsuit requests a court declaration that Trump’s letter firing her is “unlawful and void” and that she remains a member of the Federal Reserve Board. It also asks for a statement making clear the conditions under which a member can be removed for cause under the law that notes “an unsubstantiated allegation of mortgage fraud prior to a governor’s confirmation is not” one of them.
The lawsuit also seeks an injunction against “non-presidential” parties named in it, prohibiting them from attempting to remove or sideline her from the board as a continuation of Trump’s purported firing of her.
This story has been updated with new information.
Staff writers Susan Tompor and Dave Boucher contributed to this story. Contact Todd Spangler: tspangler@freepress.com. Follow him on Twitter@tsspangler.
This article originally appeared on Detroit Free Press: Lisa Cook sues Trump, says attempt to fire her threatens Fed’s independence and US economy
Reporting by Todd Spangler, Detroit Free Press / Detroit Free Press
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