DOJ Official Urges Powell to Fire Cook. That Isn’t the Fed Chair’s Call.

Fed Governor Lisa Cook can only be fired by the president for cause. Photo: Al Drago/Bloomberg

A Department of Justice official tasked with investigating Federal Reserve Governor Lisa Cook on Thursday urged Chair Jerome Powell to proactively remove her from the board.

But there is no mechanism currently in place that would allow the Fed chair to remove a fellow governor; only the president can remove a governor—and only then for cause.

Ed Martin, who has been appointed to investigate the Federal Housing Finance Agency’s allegations of mortgage fraud against several government officials including Cook, sent Powell a letter encouraging him to remove Cook from the board after President Donald Trump publicly called for her to resign on Wednesday.

“Do it today before it is too late!” Martin wrote. “What I am seeing requires further examination, but I write to encourage you to aid efforts to fight public corruption and the appearance of such.”

Cook said Wednesday that she won’t be “bullied” into stepping down from her position, adding that she will be defending herself against the claims made by Bill Pulte, the director of the FHFA. Pulte sent a criminal referral letter to Attorney General Pam Bondi last week and posted the letter on X on Wednesday.

“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” Cook said. “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.”

The criminal referral accuses Cook of misrepresenting two homes as primary residences “in order to potentially secure lower interest rates and more favorable loan terms” in 2021.

Cook is currently serving a full 14-year term on the board that ends in January 2038. She was appointed in 2022 by then-President Joe Biden to fill an unexpired term. She was reappointed in 2023 to her current term.

Trump and his allies have been waging a multipronged offensive against the Fed in a bid to remake the independent agency responsible for setting interest-rate policy.

The president has been clear that he wants to see lower borrowing costs, faster economic growth, and a compliant Fed. Previous attacks have focused on Powell more directly, with Trump nicknaming him “Too Late” and raising concerns regarding the $2.5 billion renovation of the Fed’s Washington, D.C., headquarters.

Powell’s time as Fed chair is set to end next year. Trump has, at times, called for Powell to resign sooner.

Because the Fed is an independent agency, the Federal Reserve Act and case law only allow the president to remove a sitting governor from the board “for cause,” a standard that would necessitate proving malfeasance or gross misconduct. Policy disagreements wouldn’t constitute a just cause.

The attack on Cook suggests that replacing the Fed chair isn’t sufficient to get the monetary policy decisions the administration wants to see, Kathryn Judge, professor at Columbia Law School told Barron’s on Thursday. “This is being used as pretext to strong arm the FOMC to move to a more accommodative stance on monetary policy.”

To advance monetary policy decisions, Trump would need to hold sway over at least 7 of the 12 voting members of the Federal Open Market Committee. There are 19 members of the FOMC. Governors and the president of the Federal Reserve Bank of New York are all permanent voting members, but four regional bank presidents rotate in on an annual basis.

Cook’s removal or resignation would provide the Trump administration with another seat on the board of governors after Adriana Kugler resigned months before her term was set to expire in January 2026. Trump has nominated economist Stephen Miran, current chair of the White House Council of Economic Advisers and a sharp critic of the Fed, to replace her.

Miran’s appointment is expected to be temporary. Trump is expected to nominate a second candidate in the coming months for a full 14-year term who will likely serve as the successor to Powell.

While Powell’s time as Fed chair expires in May, his term on the board doesn’t expire until January 2028. Traditionally, Fed chairs depart the board, but Powell has declined to say what his plans will be yet.

Write to Megan Leonhardt at megan.leonhardt@barrons.com