Lisa Cook, the current governor of the U.S. Federal Reserve, is embroiled in a legal battle with former President Donald Trump over allegations that could impact her tenure. Cook’s lawsuit challenges Trump’s authority to remove Cook from office. This move comes under the shadow of several allegations of mortgage fraud that have been made since her Senate confirmation.
Attorney Abbe Lowell argues that Cook lied to law enforcement officials about what her main place of residence was. This fraud took place while she was applying for federally backed mortgages. The lawsuit addresses these allegations in detail, if at all. It stresses that they predate her confirmation and have never been thoroughly investigated.
During her testimony at the Peterson Institute for International Economics in Washington, D.C., on October 6th, 2022, Cook sounded sure of herself. For her part, Pawlenty rebutted those allegations, claiming that they do not rise to the legal standard needed for her to be removed from office. If Trump wins here, he would achieve a 4-3 majority on board appointments at the Federal Reserve.
The heart of the legal argument boils down to whether Cook actually misrepresented anything on her mortgage applications. Cook’s team argues that even if this mistake occurred, it wouldn’t remotely warrant dismissal. They argue it lacks the legal buzzword requirements.
“Even if the President had been more careful in obscuring his real justification for targeting Governor Cook, the President’s concocted basis for removal — the unsubstantiated and unproven allegation that Governor Cook ‘potentially’ erred in filling out a mortgage form prior to her Senate confirmation — does not amount to ’cause’ within the meaning of the FRA and is unsupported by caselaw.” – Abbe Lowell
Former Trump associate Bill Pulte has voiced his concerns over Cook’s role at the Federal Reserve, questioning the integrity of her mortgage dealings and suggesting that they contradict the institution’s standards.
“In her filing, Ms. Cook does not deny that these are her mortgage documents, so one has to wonder why she, or [Fed Chair] Jerome Powell, would want this to be a part of the Federal Reserve, which is supposed to have preeminent integrity and which is critical to the safety and soundness of the U.S. Mortgage Market.” – Bill Pulte
Experts counter that kind of omission as a legal filing standard. This is particularly the case when attempting to refute baseless claims. As Robert Hockett explained here, there was strategic importance in failing to provide all of the nitty gritty information that might have given credence to Trump’s accusations.
“I’m not surprised at all that the lawsuit wouldn’t include paragraph after paragraph providing the details of her mortgage applications. Because, that would, in effect, be conceding that there’s something legitimate about what Trump is doing.” – Robert Hockett
Hockett issued a vigorous caution from diving into what he dubs “his game.” He implored observers not to legitimize Trump’s tactic by engaging in it.
Market analysts are already debating the ramifications of this ongoing legal battle. As they point out, it may be a harbinger of a bigger trend at the Federal Reserve. Krishna Guha expressed concern that investors are overly fixated on this conflict and are missing the larger picture surrounding what he termed the “Trumpification” of the Fed.
“We have no privileged knowledge of the legal facts, but believe if it were established Cook committed even accidental mortgage misrepresentation, she would have to go.” – Krishna Guha
Cook’s governorship ends in May 2026. Even more importantly, the ultimate result of this lawsuit has the potential to significantly shape the composition and direction of the Federal Reserve Board itself. If Fed Chair Jerome Powell does indeed resign, that balance could shift even further. Or perhaps a 5-2 split in favor of Trump’s appointees.