Federal Reserve Governor Sues Trump Over Alleged Unlawful Dismissal

Federal Reserve Governor Lisa Cook has initiated a lawsuit against President Donald Trump, contesting his attempt to remove her from office over unproven mortgage fraud allegations. This legal confrontation, filed on August 28, 2025, in the United States District Court for the District of Columbia, challenges the boundaries of presidential authority and underscores the importance of the Federal Reserve's independence.

The dispute centers on President Trump's August 25 announcement of Cook's dismissal, citing allegations that she misrepresented multiple properties as primary residences in 2021 to secure favorable mortgage rates. These claims, originating from a referral by Federal Housing Finance Agency Director Bill Pulte, have not been substantiated. Cook's lawsuit argues that these unproven allegations do not meet the "for cause" requirement stipulated by the Federal Reserve Act for the removal of a governor.

Lisa Cook, appointed to the Federal Reserve Board in 2022, is the first Black woman to serve as a governor in the institution's history. Her term is set to conclude in 2038. The Federal Reserve Act allows the president to remove a member of the Board of Governors only "for cause," a term traditionally interpreted to mean inefficiency, neglect of duty, or malfeasance. In the Federal Reserve's 112-year history, no president has attempted to remove a governor, making this case unprecedented.

In her lawsuit, Cook stated, "President Trump purported to fire me 'for cause' when no cause exists under the law, and he has no authority to do so." Her attorney, Abbe Lowell, emphasized that the president's attempt to fire her "lacks any factual or legal basis." The White House, however, maintains that the president acted within his authority. Spokesman Kush 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."

The Federal Reserve has responded cautiously. A spokesperson noted, "The Federal Reserve will continue to carry out its duties as established by law... As always, the Federal Reserve will abide by any court decision." The case has been assigned to Judge Jia M. Cobb of the United States District Court for the District of Columbia, with a hearing on Cook's request to block her removal set for August 29, 2025.

This legal battle has broader implications for the independence of the Federal Reserve and the extent of presidential power over independent federal agencies. The outcome could set a precedent regarding the balance of power between the executive branch and the nation's central bank. Following the announcement of Cook's removal, the U.S. dollar declined against major currencies, reflecting investor concerns about potential political interference in monetary policy.

In a related development, the U.S. Justice Department has initiated a criminal mortgage fraud investigation into Cook, following allegations that she claimed multiple properties as her primary residence to secure lower mortgage interest rates. Grand jury subpoenas have been issued in Georgia and Michigan. Cook's lawyer criticized the probe as politically motivated and an attempt to support Trump's decision. Cook argues that all relevant mortgage information was disclosed during her 2022 vetting process.

The lawsuit filed by Lisa Cook against President Trump marks a significant moment in the history of the Federal Reserve, raising critical questions about the balance of power between the presidency and independent federal agencies. The outcome of this case could have lasting implications for the governance of the nation's monetary policy and the broader principle of institutional independence.