Lisa Cook, a governor on the US Federal Reserve Board, sued president Donald Trump on Thursday over his decision to fire her from the nation’s central bank, arguing that she should be able to retain her position because the White House had no authority to order her dismissal.
Ms Cook’s lawsuit, which was filed in the US District Court for the District of Columbia, sets the stage for a landmark legal battle with lasting implications for the Fed, an independent institution that Mr Trump has savaged for months in a bid to install political loyalists and force down interest rates. The lawsuit also listed the Fed and Jerome Powell, its chair, as defendants alongside Mr Trump. That reflected their ability to take actions that adhered to the president’s orders, the lawsuit said.
Ms Cook officially embarked on her legal campaign three days after Mr Trump announced he would fire her in a letter posted to social media. The president claimed that Ms Cook, who was confirmed by the Senate in 2022, had engaged in mortgage fraud, as he invoked a power in the Fed’s founding statute that allowed him to dismiss governors for cause.
But Ms Cook, the first black woman to serve as Fed governor, has not been charged or convicted of any crime. Many experts questioned the legality of Mr Trump’s actions, pointing out that the allegations against Ms Cook were unproven and involved conduct that predated her time at the Fed. Nor was Ms Cook afforded an opportunity to review the evidence and respond to the claims formally, which struck many observers as legally problematic.
RM Block
In a 24-page filing, lawyers for Ms Cook described the firing as “unprecedented and illegal”, and said it would “subvert” the central bank’s congressionally mandated protections as laid out in the Federal Reserve Act. The filing said Mr Trump violated Ms Cook’s right to due process, highlighting that she had no chance to respond to the allegations before the president announced her termination.
The lawsuit did not provide an explanation for why Ms Cook listed two residences as her primary residence, which is the issue at the crux of the campaign against her. Instead, it sought to paint the firing as purely political and not based on anything other than a desire to oust a governor who was not ready to fall in line with the president’s directives on interest rates.
“The unsubstantiated mortgage fraud allegations that allegedly occurred prior to governor Cook’s Senate confirmation do not amount to ‘inefficiency, neglect of duty, or malfeasance in office’,” the lawsuit read, “nor has the president alleged that they do.”
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The lawyers asked the district court to allow Ms Cook to continue serving at the Fed on a temporary basis while she contested the legality of her firing. That could allow her to cast a vote on the direction of interest rates at the next Fed meeting to discuss borrowing costs in September.
Ms Cook retained her own counsel in the lawsuit, and she is not represented by the Federal Reserve. The central bank in recent days has sought to emphasise its independence while offering no comment about the legality of Mr Trump’s actions or the allegations levied against one of its own members, even though the case could carry stark ramifications for others on the Fed board, potentially leaving them vulnerable to dismissal by Mr Trump.
A final verdict in the case is expected to take many months. In the meantime, Mr Trump has signalled he has started to explore potential replacements for Ms Cook. His administration is also likely to appeal any ruling that reinstates Ms Cook temporarily, priming the battle for the Supreme Court, where the justices in recent months have allowed the president to dismiss the leaders of some independent federal agencies at will.
While the justices have acknowledged there may be special protections afforded to the Fed, court observers say Ms Cook’s case may nonetheless present a series of novel legal issues to resolve, including what constitutes a cause that would allow a president to fire a sitting governor. The term is generally understood to mean professional neglect or malfeasance, though it is not clearly defined in the Fed statute.
The White House did not immediately respond to a request for comment. The Justice Department also did not immediately respond.
Mr Trump issued his order to fire Ms Cook more than a week after the federal housing director, Bill Pulte, claimed he had unearthed evidence showing that the Fed governor had wrongly identified two homes as her primary residence on mortgage applications before she was appointed to the Fed. That, according to Mr Pulte, allowed Ms Cook to obtain favourable loan terms.
Mr Pulte referred the matter to the Department of Justice, which opened a criminal investigation, as he insisted his agency would continue to root out fraud. But his accusations fit a familiar pattern, one that has seen Mr Pulte leverage the powers of his office – as the director of the Federal Housing Finance Agency – to investigate or attack Mr Trump’s most recognisable political enemies.
In doing so, both Mr Trump and Mr Pulte have frequently expressed their disdain for the Fed and its approach to interest rates, which the central bank has left unchanged for months out of concern that the president’s policies could cause inflation. The two men have each attacked Mr Powell while drumming up allegations that he committed fraud in overseeing a renovation of the central bank’s headquarters.
At one point, Mr Pulte privately encouraged Mr Trump to fire Mr Powell.
This article originally appeared in The New York Times
