President Donald Trump has announced plans to remove Federal Reserve Governor Lisa Cook after accusing her of falsifying mortgage documents. The dramatic decision pushes Washington into untested legal territory.
Trump posted a letter on Truth Social saying he had “sufficient cause” to dismiss Cook over her loan applications. He accused her of giving false information on mortgages and questioned her financial integrity.
Cook, who became the first Black woman to serve on the Fed Board in 2022, quickly rejected Trump’s order. She said he has no authority to remove her and she will not quit.
“This action is illegal and baseless,” Cook said in a statement released by her attorney Abbe Lowell. “I intend to keep working to support the American economy as I always have.”
Lowell said they are preparing to take legal action to block Trump’s attempt. The courts may now decide if the president has the power to remove a Fed governor before their term ends.
Trump’s move comes after Federal Housing Finance Agency Director Bill Pulte accused Cook of lying on two loan applications. He claimed she said two different homes were her primary residence in the same year.
Trump argued that Cook knew those rules but ignored them to secure better terms. He called her actions “gross negligence” and said her role as a financial regulator requires honesty above all else.
If Trump succeeds in removing Cook, he will gain another appointment to the seven-member Fed Board. That could hand him greater influence over central bank policy, an outcome that alarms many economists.
“The independence of the Fed is under direct attack,” said Aaron Klein, a Brookings Institution scholar. “Trump is trying to force the board to follow his will on interest rates.”
Markets reacted quickly. The dollar dropped by as much as 0.3 percent and gold prices climbed by 0.6 percent. Both reversed slightly after Cook confirmed she would not resign.
Bloomberg economist Anna Wong said this is different from past threats against the Fed. “Trump actually took action this time. If Cook is removed, the Fed’s makeup could shift toward Trump’s views.”
No president has ever removed a Fed governor before. By law, board members can only be dismissed “for cause.” That includes neglecting duties, inefficiency, or wrongdoing while in office.
Legal experts say the case may focus on whether alleged actions before joining the Fed count as valid cause. That question has never been tested at the Supreme Court.
“This is a moment to define the scope of legal protection for Fed members,” said Peter Conti-Brown, a professor at the University of Pennsylvania. “The courts may decide if misconduct before office counts.”
Cook has denied wrongdoing and said she is gathering records to answer questions. She promised to remain transparent but dismissed the accusations as efforts to pressure her from office.
The Justice Department confirmed it is reviewing the claims after receiving a criminal referral from Pulte. No charges have been filed and officials are still assessing whether to launch a full investigation.
Pulte thanked Trump for acting on the allegations. “If you commit mortgage fraud in America, we will come after you, no matter your title,” he said on social media after the announcement.
Democrats quickly pushed back, saying Trump is trying to undermine the central bank’s independence. Senator Elizabeth Warren called the move “an illegal power grab” designed to cover for higher consumer costs.
“Forcing out Cook violates the Federal Reserve Act,” Warren said in a statement. “This is an authoritarian stunt and the courts must stop it before lasting damage is done.”
The Fed itself has not commented on the situation. Chair Jerome Powell has stressed the need to keep the institution free from political pressure even as Trump demands faster rate cuts.
Earlier this year, ratings agency S&P Global warned that attacks on central bank independence could hurt America’s credit standing. It said rising doubts over strong institutions would weigh on long-term policymaking.
Cook’s term was not set to expire until 2038, a remarkable 14 years away. Removing her early would give Trump the chance to select another ally and tilt the Fed toward his goals.
While Trump continues pressuring the Fed to lower borrowing costs, the central bank has held its benchmark rate steady. Policymakers have resisted Trump, warning that tariffs and fiscal moves may fuel inflation.
In recent weeks, Powell hinted that a rate cut may come soon due to slowing hiring. Cook herself said in early August that job losses were troubling signs for the economy’s future.
For now, Cook has no plans to give ground. By refusing to resign, she sets up a historic legal battle over central bank independence and the limits of presidential authority.
The outcome could reshape how markets view the United States. It will also decide whether presidents can use untested claims to clear out independent regulators standing in the way of their policies, according to Bloomberg.
