Fed board member Lisa Cook sues to block Trump's attempt to fire her

Washington — Federal Reserve Governor Lisa Cook filed suit against President Trump, Chair Jerome Powell and the Fed's Board of Governors on Thursday, asking a federal judge to block the president's attempt to fire her from the central bank.

Mr. Trump announced Cook's termination from the Fed late Monday, citing allegations she had committed mortgage fraud, which he described as "deceitful and potentially criminal." The move came after the president spent months railing against the Fed and Powell for leaving interest rates relatively high so far this year.

Cook filed her lawsuit in the U.S. District Court for the District of Columbia on Thursday, teeing up a legal showdown that seems destined to ultimately be settled by the Supreme Court. Her legal team asked the district court to declare that Mr. Trump's attempted firing is "unlawful and void" and that Cook "remains an active member of the Board of Governors of the Federal Reserve."

"Governor Cook seeks immediate declaratory and injunctive relief to confirm her status as a member of the Board of Governors, safeguard her and the Board's congressionally mandated independence, and allow Governor Cook and the Federal Reserve to continue its critical work," the suit said.

Members of the Fed board are confirmed by the Senate and serve for 14-year terms. Under the Federal Reserve Act of 1913, the president can only remove them early "for cause." The law doesn't specify what qualifies as "cause," and it has never been tested in court, but it is generally understood to be malfeasance.

In her suit, Cook's lawyers Abbe Lowell and Norm Eisen asked the court to state that Fed board members "can only be removed for cause, meaning instances of inefficiency, neglect of duty, malfeasance in office, or comparable misconduct," citing Supreme Court precedent and relevant federal law. Even if the court disagrees with that standard, they wrote, the law "clearly does not support removal for policy disagreements."

Powell and the Fed board are named in the suit because Cook asked the court for an injunction ordering them to "refrain from effectuating President Trump's illegal attempt to fire Governor Cook and treat Governor Cook as a member of the Board of Governors."

In response to the lawsuit, White House spokesman Kush Desai said the president "exercised his lawful authority" in removing Cook.

"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 said in a statement. "The removal of a governor for cause improves the Federal Reserve Board's accountability and credibility for both the markets and American people."

The Trump administration has argued in the past that the president has the legal right to remove at will members of federal boards that exercise "substantial executive power," like the National Labor Relations Board.

The Supreme Court has upheld Mr. Trump's power to fire some board members, but said in May that the Federal Reserve is a separate case, calling it a "uniquely structured, quasi-private entity."

Earlier this month, the Trump-appointed director of the Federal Housing Finance Agency, Bill Pulte, accused Cook of falsifying mortgage documents by claiming two homes that she bought in 2021 as her primary residence. He alleged that Cook — an economist who has served on the Fed board since 2022 — had committed mortgage fraud, and referred the matter to Attorney General Pam Bondi and Justice Department special attorney Ed Martin.

Days later, Mr. Trump publicly called on Cook to resign.

At the time, Cook didn't address the substance of Pulte's allegations directly, but said in a statement that she had "no intention of being bullied to step down from my position because of some questions raised in a tweet." She added that she would "take any questions about my financial history seriously" and said she was gathering more information.

Lowell, her lawyer, said Monday that Mr. Trump didn't have the legal right to fire Cook "based solely on a referral letter" to Justice Department leadership, a point her legal team reiterated in Thursday's lawsuit.

"[R]emoval 'for cause' requires some connection to official conduct, prohibiting removal based on an unsubstantiated allegation of private misconduct (which in this case allegedly occurred prior to her Senate confirmation)," the complaint said. "And even to the extent that private misconduct could bear on a particular officer's official conduct in certain cases, 'cause' requires a factual basis supporting such asserted misconduct."

The broadside against Cook came as Mr. Trump pressures the Fed to lower interest rates. The central bank's rate-setting committee — which Cook and Powell both sit on — has opted to leave interest rates relatively high so far this year, fearing that inflation could resurge. Last week, Powell hinted that the central bank may cut rates soon, but it will "proceed carefully."

The president favors immediate rate cuts, which could boost economic growth and make it cheaper to borrow money, though at the risk of causing higher inflation. He has floated firing Powell at various times over the past few months and has encouraged other Fed officials to overrule him and slash rates.

The Fed typically makes interest rate decisions independently. Mr. Trump is hardly the first president to criticize the Fed for leaving rates high, but he's been unusually assertive. Last year, he argued he should have "at least [a] say" in the moves made by the central bank.

Many experts believe it's important for central banks to operate independently so they can make decisions based on economic data, not politics. If elected officials are in charge of monetary policy, they could opt for the politically popular short-term benefits of low interest rates — like a hotter economy and cheaper borrowing costs — even if that leads to higher inflation in the long run, Brookings Institution senior fellow David Wessel noted earlier this year.

Kathryn Watson and Jacob Rosen contributed to this report.