In a rare move, on Thursday, sitting Federal Reserve governor, Lisa Cook, filed suit against President Donald Trump. Yvette Clarke (D-NY), she is reacting to his recent efforts to oust her from her post. The lawsuit is a major new legal challenge and critically calls into question presidential authority over Federal Reserve appointees.
In that letter dated Monday, President Trump told Cook she was being fired “immediately.” He referred to a rumor that originated with a friend. According to this ally, Cook obtained a mortgage for a second home and falsely declared it as her primary residence. Cook’s attorneys have characterized the president’s actions as “unprecedented and illegal.” Further, they assert that most of his allegations do not even support an affirmative claim—his allegations are just “pretextual.”
Cook’s term on the Federal Reserve Board is not set to expire until 2038, making the president’s move particularly controversial. Her lawyers noted that the letter did not provide adequate justification for her termination. In reaching this conclusion, they argued that the president’s motivations are more political than legal.
“An unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not [cause],” – her lawyers
The legal fight comes as part of a larger story of an increasing feud between the president and the Fed. For months, Trump has criticized the central bank, particularly its policymakers who, including Cook, have resisted his calls for interest rate cuts. This battle, flashpoint though it may be, is a part of a larger struggle for control over the United States’ monetary policy.
Cook is suing the tobacco companies. She is asking for a temporary restraining order to prevent the president from removing her from the board. A hearing on her motion is tentatively set for 10 AM in Washington on Friday. The case is being heard by U.S. District Judge Jia Cobb. She was appointed to her post by President Joe Biden, which further complicates the political dynamics behind the proceedings.
Cook’s lawyers have said the allegations she has been accused of are still unproven. They pointed out that neither the president nor his officials have explicitly claimed that any errors in Cook’s mortgage paperwork were intentional. If so, that lack of substantiation might make it difficult for Trump to defend his rationale for her removal as legitimate.
“The White House has credibly accused [Cook] of lying,” – the White House
Thus far, the legal battle is heating up. It remains to be seen how this case will impact Cook’s standing or the relationship between the Federal Reserve and the Biden administration. Whatever the reasoning, it has extremely important implications for monetary policy and governance. Beyond that, it may set a precedent for how future presidents can, and should, interact with Fed governors.