US Federal Reserve Governor Lisa Cook is set to challenge Donald Trump's attempts to remove her from her job in court, marking the latest chapter in the President's dispute with the US central bank.
Mr Trump on Monday night said he had fired Ms Cook over allegations of mortgage fraud, drastically escalating his efforts to exert greater control over the Fed, which has defied his calls to lower interest rates.
"President Trump has no authority to remove Federal Reserve Governor Lisa Cook," Abbe Lowell, Ms Cook's lawyer, said on Tuesday. "His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action."
It is the first time in Fed history that a governor has been fired. The case now looks set to go before the Supreme Court. Mr Trump said the allegations had given him "sufficient reason" to remove her from the Fed board.
Ms Cook said she would not resign and that Mr Trump "purported to fire me ‘for cause’, when no cause exists under the law and he has no authority to do so".
Allegations of mortgage fraud were first raised last week by Federal housing finance director Bill Pulte. He said his agency had referred the matter to the Department of Justice. Ed Martin, a Justice Department official, then called for an investigation into Ms Cook and in a letter encouraged Fed chair Jerome Powell to fire her, although Mr Powell has no legal authority to do so.
Ms Cook said in a statement at the time that she had “no intention of being bullied to step down from my position because of some questions raised in a tweet”.
She also said she takes “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”.
The mortgage fraud allegation centres on two properties Ms Cook listed as her primary residence when taking out loans in 2021 – a condominium in Atlanta, Georgia, and a house in Ann Arbor, Michigan.
“There is sufficient reason to believe you have made false statements on one or more mortgage agreements,” Mr Trump wrote. He also said it is “inconceivable” that Ms Cook was unaware of her “first commitment when making the statement”, adding that “it is impossible that you intended to honour both”.
The National has contacted the Federal Reserve for comment.
It remains unclear if Mr Trump has the legal authority to fire Ms Cook over the allegations. Fed officials can only be fired “for cause”, which is generally thought to mean neglect of duty or an act of malfeasance, though this has never been clearly defined.
A Supreme Court ruling earlier this year upheld the notion that legal reasoning the White House has used to fire officials at other independent federal agencies does not apply to the Fed.
“The uncertainty in the meantime, even if the courts hear the case quickly, could plunge US financial markets and perhaps even fiscal sustainability into turmoil,” Derek Tang, an economist at LHMeyer/Monetary Policy Analytics in Washington, wrote to clients.
The ICE US Dollar Index fell as much as 0.30 per cent following the Monday night announcement. Gold futures rose more than 0.3 per cent to $3,428.80 per ounce.
The yield on the two-year Treasury, which is sensitive to Fed rate moves, fell as much as 4 basis points to 3.706 per cent.
Fed independence under strain
The historic attempt to fire an official comes as Mr Trump pushes for greater control over the Federal Reserve, which has thus far remained defiant in the face of his repeated calls to lower interest rates.
The Fed, which sets monetary policy independently from the White House, has kept interest rates steady at 4.25 to 4.50 per cent this year.
In an address in Jackson Hole, Wyoming, last week, Mr Powell said changes in labour market conditions “may warrant” a change in policy, which traders believe he is telegraphing a rate cut at the central bank's meeting from September 16 to 17.
Mr Powell has also become a regular target for Mr Trump, who at times said he was considering firing the Fed chair although has since backed off on that threat.
Ms Cook held a permanent vote on the rate-setting Federal Open Market Committee (FOMC). The FOMC consists of seven Fed governors, the president of the New York Fed and four regional bank presidents who serve rotating terms on a one-year basis.
As Fed governor, Ms Cook consistently voted in line with Mr Powell on monetary policy decisions.
Removing Ms Cook from the Fed's board gives Mr Trump the opportunity to install another appointee after the surprise resignation of former Fed Governor Adriana Kugler allowed him to nominate top ally Stephen Miran to fill the seat in a temporary capacity.
Ms Cook was appointed to the Federal Reserve board by former president Joe Biden in 2022. Her term was due to run through 2038.
The seven members on the Fed's board of governors are nominated by the president and confirmed by the Senate. A full term is 14 years.
