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Fed director Cook sues Trump for challenging presidential dismissal
Overseas Chinese News Federal Reserve director Lisa Cook filed a lawsuit Thursday (August 28) saying U.S. President Donald Trump has no right to remove him from office.The case could redefine the Fed’s long-standing norm of independence.
According to Reuters, Cook’s lawsuit pointed out that federal law stipulates that the president can only “have a legitimate reason” to remove the Fed from his post, and Trump’s move to announce his release on August 25 is unprecedented. Trump accused Cook of alleged mortgage fraud in 2021 — a year before joining the Fed Council. Cook denied the allegations and stressed that even if they exist, they would not be enough to constitute a reason for dismissal.
Cook also filed a motion for a temporary injunction, requiring the court to determine Trump’s firing illegality and prevent the Federal Reserve from taking dismissal measures during the lawsuit. “Even if the president has solid evidence of her random roads in college, it is not enough to constitute a ‘just reason’ to dismiss the Fed’s director.” The lawsuit also accused Trump of firing her without notice or hearing, infringing on due process rights guaranteed by the Constitution. The case was taken by U.S. District Judge Jia Cobb, a judge nominated by former President Joe Biden.
The case is likely to be appealed to the Supreme Court, and although the conservative majority have allowed Trump to fire officials from other agencies, recent signals show that the Fed may become an exception to the president’s direct control because of its special structure and “unique historical traditions.” In the lawsuit, Cook cited a court ruling in May to distinguish the Fed from other government agencies.
Threats to the independence of the Federal Reserve may also affect the global economy.The dollar fell against other major currencies after Trump first announced the firing of Cook. On Thursday, traders bet on the Fed could cut interest rates next month, and the dollar continued its downward trend. A Fed spokesman said it would comply with any court ruling. The White House and the Federal Reserve did not immediately respond to requests for comment on the same day.
Cook, appointed by Biden in 2022, is the first African-American woman to serve as a director of the Federal Reserve. Trump also fired Gwynne Wilcox, the first African-American female member of the National Labor Relations Board earlier this year and removed several long-time agency officials deemed independent of the White House.
The law that created the Federal Reserve did not define “justified reasons” and did not state the process of termination. No president has ever removed the Fed from his post as a director, and the law has not been tested in court. Other federal laws that require the president to have a legitimate reason to fire a member, usually including dereliction of duty, malfeasance, or inefficiency, can provide reference for court judgments.
William Pulte, the head of the Federal Housing Finance Agency, who was first appointed by Trump, filed in August and submitted to Attorney General Pamela Bondi for investigation. Most of the mortgage loans in Michigan and Georgia obtained by Cook in 2021 are self-occupied housing loans, with interest rates lower than investment property loans. Some experts question whether these transactions, which were publicly disclosed before Cook was confirmed by the Senate, constitute a reason for dismissal.
Trump wrote to Cook on August 25, accusing her of “fraud and illegal” in financial affairs, expressing distrust of her integrity. If Cook is removed from office, Trump can nominate the fourth director to fill a seat in the seven-member Fed’s board of directors. The president has repeatedly criticized Fed Chairman Jerome Powell for not cutting interest rates and said he mishandled his multi-billion dollar renovation project, but stopped warning of dismissal before Powell’s term ended. The Trump administration also filed similar mortgage fraud charges against Senator Adam Schiff and New York Attorney General Letitia James, both of whom denied the violation of the law.
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