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By Shane Croucher
Senior Editor
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Lisa Cook has filed a lawsuit in federal court to challenge President Donald Trump's move to fire her as a governor of the Federal Reserve. Cook names Trump and Fed Chair Jerome Powell as defendants in the lawsuit filed in the District of Columbia.
Cook's lawyers said Trump had no cause to fire her and, in doing so, breached her rights. They are seeking an immediate injunction against the firing that confirms her position on the Fed's Board of Governors. The suit called the allegations of mortgage fraud unsubstantiated.
"The President exercised his lawful authority to remove a governor on the Federal Board of Governors for cause under 12 U.S.C. 242," White House spokesman Kush Desai said in a statement to Newsweek.
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"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 removal of a governor for cause improves the Federal Reserve Board's accountability and credibility for both the markets and American people."
A representative of the Federal Reserve's Board of Governors told Newsweek they had no comment.
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Cook Lawsuit Tests Fed Independence Under Trump
The case will test the limits of Trump's power over the Federal Reserve as he tries to exert greater influence and control. No other president has sought to fire a Fed governor in the institution's 112-year history.
Trump has sidestepped norms on central bank independence to openly criticize and threaten its top policymakers over their monetary policy decisions.
The Fed's independence is a cornerstone of the American economy and allows it to take politically unpopular but necessary decisions, such as raising rates.
A less-independent Fed could leave Americans paying higher rates because investors would demand a higher yield to own bonds to offset potentially greater inflation in the future, pushing up borrowing costs throughout the economy.
What Cook's Lawsuit Says
Cook's lawsuit calls Trump's firing of her "unprecedented and illegal," and called allegations of mortgage fraud that underpinned the president's action "unsubstantiated."
Her lawyers argue that Cook's firing subverts the Federal Reserve Act's (FRA) requirement that there be "cause" for a governor's removal.
They also say in the lawsuit that Trump's actions violate Cook's Fifth Amendment due process rights and her statutory right to notice and a hearing under the FRA.
She is seeking an immediate injunction against the firing and her reinstatement to the Fed's Board of Governors.
Did Cook Commit Mortgage Fraud?
Cook strenuously denies any wrongdoing in relation to the mortgage application at the center of this dispute.
Bill Pulte, director of the Federal Housing Finance Agency, called for Cook to resign after alleging that she had "falsified bank documents and property records to acquire more favorable loan terms, potentially committing mortgage fraud" in a letter to Attorney General Pam Bondi.
Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, alleged that Cook had claimed two primary residences—in Ann Arbor, Michigan, and in Atlanta, Georgia—in 2021 to get better mortgage terms. Mortgage rates are often higher on second homes or those bought to rent.
Cook said she is gathering information to respond properly to the allegations.
"I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts," she said in a previous statement.
Who Is Lisa Cook?
Cook, an economist, was appointed to the Fed's board by President Joe Biden in 2022. Her nomination was opposed by most Senate Republicans, and she was approved on a 50-50 vote with the tie broken by then-Vice President Kamala Harris.
When she took office, Cook became the first Black woman to serve as a Fed governor in the institution's history. She initially filled an unexpired term and was reappointed the following year. Her appointment runs through January 2038.
Cook has taught economics and international relations at Michigan State University, and previously was on the faculty of Harvard University's Kennedy School of Government.
She has received degrees from Oxford University, Spelman College and the University of California, Berkeley. Some of her most well-known research has focused on the impact of racial violence on African-American innovation and consequently wider economic growth.
Cook served as a senior economist on the Council of Economic Advisers under President Barack Obama from 2011 and 2012—as well as a senior adviser on finance and development in the Treasury Department's Office of International Affairs from 2000 to 2001, under presidents Bill Clinton and George W. Bush.
Trump Puts Pressure on Fed
Trump has sought to pressure the Fed in recent months, chastizing policymakers, and Powell in particular, for not cutting interest rates sooner. The president has accused them of damaging the U.S. economy by keeping borrowing costs artificially high.
But the board has been waiting to see how Trump's tariff war impacts inflation, fearing it will push up consumer prices, a situation that lower rates could worsen.
In his recent Jackson Hole speech, Powell cautiously signaled that a rate cut is likely to come in September.
Trump has talked of firing Powell ahead of the Fed chair's term ending in 2026, though he walked that back after markets were spooked by the suggestion.
This article includes reporting by The Associated Press.
Update 8/28/25, 10:40 a.m. ET: This article was updated with more information.
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