Though Lael Brainard Cook, one of the 15 members of the Federal Reserve’s Board of Governors, has already lost in court. Her new lawsuit, filed in the U.S. District Court for the District of Columbia. The lawsuit seeks to block former President Donald Trump’s attempts to remove her from office. It further describes his actions as “illegal and unprecedented.” Cook alleges that in doing so, Trump infringes her constitutional right to due process. She further claims that in doing so he violated her rights to due process under the Federal Reserve Act.
Cook is now suing after being falsely accused by a former Trump administration official. Yet this public servant cannot escape the truth that she perpetrated mortgage fraud. Perhaps most noteworthy is that the investigations stem from Cook not yet being charged with any misconduct connected to these serious allegations. Her attorney has called the charges a cover for her politically motivated removal and characterized them as frivolous and meritless.
One of the lawsuits blames Jerome Powell, the current Chair of the Federal Reserve. It further adds the entire Federal Reserve Board of Governors as co-defendants. Cook contends that if Trump is able to replace her, his appointees will have a majority on the board. Should this forecast prove true, this shift will likely alter the Federal Reserve’s policy direction, particularly as she has overruled interest rate cuts more often.
Cook’s lawsuit makes a broader assertion that Trump’s claim to have discovered “cause” for her removal fails the test. In a statement from her legal team, they argue, “That the President says he has found (or created) some basis for removing a Governor does not magically make such a basis grounds for a ‘for cause’ removal.” Furthermore, the lawsuit contends that “The President had no ’cause’ to remove Governor Cook.”
A judge has tentatively already agreed to a hearing set for Friday morning, just hours after Cook first filed her lawsuit. This rapid-fire response by the Court serves as a clear signal about the exceptional urgency at play here. What the White House is saying in response to the lawsuit. Spokesperson Kush Desai repeated the refrain that Trump did not violate the law since he exercised his authority under 12 U.S.C. 242 to remove Cook for cause. Desai stated, “The President determined there was cause to remove a governor who was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions.”
Desai emphasized that “The removal of a governor for cause improves the Federal Reserve Board’s accountability and credibility for both the markets and American people.” This statement is a welcome indication that the administration means to be serious about protecting integrity from political influence in financial oversight.
In light of the allegations and the subsequent actions taken against her, Cook has pledged to be transparent. She intends to gather her financial documents to address “any legitimate questions and provide the facts.” This forward-looking strategy is intended to preempt even the most indirect consequences that may arise from the allegations levied against her.
The case has also brought up simmering political tensions over both the Federal Reserve and its governance. In response, critics of Trump point to how his approach looks more like a “fire by tweet” strategy. That should raise alarm bells about the politicization of economic policy, particularly around DEIA efforts. Such dynamics could have major implications not just for Cook but for the entire economy.
As this situation has developed, the Federal Reserve has made it clear that it is intent on leaning into its mandate and mission as designed in statute. A spokesperson stated, “The Federal Reserve will continue to carry out its duties as established by law,” underscoring its independence despite external pressures.
