Fed Gov. Lisa Cook Will Challenge Trump’s Firing With Lawsuit, Her Lawyer Says

Lisa Cook, a Fed governor, during a Fed Listens event in Washington, D.C. (Al Drago/Bloomberg)

President Donald Trump says he removed Lisa Cook from her job as Federal Reserve governor, prompting a lawsuit challenging the action.

“I have determined that there is sufficient cause to remove you from your position,” according to an image of the letter addressed Trump posted on Truth Social on Monday night. It says the removal is effective immediately.

The firing comes days after Federal Housing Finance Agency Director Bill Pulte sent a criminal referral to Attorney General Pam Bondi, alleging Cook made false claims on mortgage agreements. Trump later said he would fire Cook, the first Black woman to serve on the Fed’s board, if she didn’t step down.

Cook is taking steps to dispute the termination. “President Trump has no authority to remove Federal Reserve Governor Lisa Cook,” said Abbe David Lowell, counsel to Cook, in a statement sent to Barron’s 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,” Lowell added.

Cook’s lawsuit aims to “seek a judicial decision that would confirm her ability to continue to fulfill her responsibilities as a Senate-confirmed member of the Board of Governors of the Federal Reserve System,” a Fed spokesperson said in a statement.

“Congress, through the Federal Reserve Act, directs that governors serve in long, fixed terms and may be removed by the president only ‘for cause.’ Long tenures and removal protections for governors serve as a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people,” the spokesperson said.

In the interim, the Fed will continue to carry out its duties as established by law, which include promoting maximum employment, stable prices, and a well-functioning financial system. The spokesperson said the central bank will abide by any court decision on the issue of Cook’s continued employment.

After Pulte posted the criminal referral on social media, Cook said that she intended “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.”

Only the president can fire a Fed governor—and can only do so for cause. That requires proving malfeasance or gross misconduct.

In the letter, Trump cited Article II of the Constitution and, specifically, the Federal Reserve Act of 1913 as giving him the power to dismiss Cook for cause. The letter also says that “the conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and truthfulness as a financial regulator.”

Investors will inevitably view this as an assault on Fed independence, noted UBS chief economist Paul Donovan. “ If the dismissal survives the courts, the Senate must confirm any successor. Fed presidents still have policy votes. Faith in these checks may limit the negative market reaction,” he added.

With Trump’s move seen as further escalating the administration’s bid to influence the Fed, the dollar saw an immediate drop of 0.4%, later reversing to gain 0.2% by early Tuesday.

The two-year U.S. Treasury yield fell to 3.698% while the 10-year yield rose to 4.278%. The steepening Treasury curve suggests that markets now see increased odds that interest rates will be lower in the short term but higher in the long term.

The S&P 500 , the Dow Jones Industrial Average , and the tech-heavy Nasdaq were all 0.2% higher.

Write to Matthew Bemer at matt.bemer@barrons.com and Elsa Ohlen at elsa.ohlen@barrons.com