The Trump administration is escalating the legal fight to kick Federal Reserve Governor Lisa Cook off the board. The stakes are enormous as conflicts and unrest escalate around her role. Now the administration is charging Cook with mortgage fraud. They accuse her of misrepresenting two homes as a primary residence in July 2021, shortly before her nomination to serve on the Federal Reserve Board in 2022. Cook, who has very publicly denied those allegations and pushed back against them, is suing the Trump administration to prevent her from being fired.
U.S. District Court Judge Jia Cobb recently ruled that the Trump administration did not meet the legal standard required for dismissing a Federal Reserve governor. Cobb argues that municipal governors can’t be fired like in a regular democracy, but only “for cause.” She interprets “for cause” to exclude any wrongdoing that occurs while in office. This ruling has a tremendous effect on Cook’s standing. The country’s central bank is in preparation mode for what will be a very important interest rate-setting meeting next week.
Cook’s legal team argues the accusations against her are not supported. They insist that these accusations seek to destroy the independence of the Federal Reserve. A stay by this court would thus be the first indication from any court that our system of government can no longer ensure the independence of the Federal Reserve. In response to a lawsuit, our attorney representing Cook said, “There’s nothing preventing the president from firing other members of the board… He could do so on just as flimsy pretexts. They warned that going through with such actions would be catastrophic for our nation’s economy.
Unsurprisingly, the Trump administration is on the offensive. They have appealed Judge Cobb’s ruling and requested an emergency stay to put that decision aside. The administration is really running out of time. The court has given them until 3 p.m. Eastern on Sunday to reply to Cook’s motion. If the appeals court decides with Cook, the administration could seek to re-hear the case. Or else they could attempt to sue all the way to SCOTUS.
The stakes are tremendous for both the federal government and cities. If the administration’s appeal is successful, it would lead to Cook’s removal from the Federal Reserve Board. This would go on all while her case sits in limbo, waiting for resolution in court. This will prevent her from making it to next week’s Fed meeting. On the agenda during that meeting will be making a case to lower the central bank’s key interest rate.
Since the end of 2024, the Federal Reserve has held their interest rate target steady. Instead, they’re obsessed with inflation bogeymen tied to the erratic tariff policy of the Trump administration. Fed Chair Jerome Powell has indicated that officials are increasingly worried about weak hiring trends, which adds urgency to discussions about potential rate cuts in the near future.
This ongoing legal battle will have far-reaching consequences on Cook’s professional future. It will fundamentally alter the wider world of Federal Reserve governance, too. Both proponents and opponents are preparing for the next battles. Observers are very much looking to see how this conflict plays out and what it might mean for long-term prospects of the independence of the central bank.
