WASHINGTON — President Donald Trump’s attempt to fire one of the seven governors of the Federal Reserve will likely end up in court and could more clearly define the limits of the president’s legal powers over the traditionally independent institution.
Legal experts say the Republican president’s claim that he can fire Lisa Cook, who was appointed by Democratic President Joe Biden, is on shaky ground. But it’s an unprecedented move that hasn’t played out in the courts before, and the Supreme Court this year has been much more willing to let the president remove agency officials than in the past.
If Trump succeeds in removing Cook from the board, it could erode the Fed’s political independence, which is considered critical to its ability to fight inflation because it enables the Fed to take unpopular steps like raising interest rates. A less-independent Fed could leave Americans paying higher rates for mortgages, car loans and business loans, because investors could demand higher rates to own bonds to offset greater inflation, pushing up borrowing costs throughout the economy.
“It’s an illegal firing, but the president’s going to argue, ‘The Constitution lets me do it,'” said Lev Menand, a law professor at Columbia University and author of a book about the Fed. “And that argument’s worked in a few other cases so far this year.”
Menand said the Supreme Court construes the Constitution’s meaning, and “it can make new constitutional law in this case.”
The most likely next steps for Cook, who was appointed to the Fed’s board in 2022, are to seek an injunction against Trump’s order that would allow her to continue her work as a governor. But the situation puts the Fed in a difficult position.
“They have their own legal obligation to follow the law,” Menand said. “And that does not mean do whatever the president says. … The Fed is under an independent duty to reach its own conclusions about the legality of Lisa Cook’s removal.”
Trump said in a letter posted on his Truth Social platform late Monday that he was removing Cook effective immediately because of allegations she committed mortgage fraud.
Cook said Monday night that she would not step down. “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” she said in an emailed statement. “I will not resign.”
Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, made the accusations last week. Pulte alleged that Cook had claimed two primary residences — in Ann Arbor, Michigan, and in Atlanta — in 2021 to get better mortgage terms. Mortgage rates are often higher on second homes or those bought to rent.
Cook has retained Abbe Lowell, a prominent Washington attorney. Lowell said Trump’s “reflex to bully is flawed and his demands lack any proper process, basis or legal authority,” adding, “We will take whatever actions are needed to prevent his attempted illegal action.”
Cook is the first Black woman to serve as a governor. She was a Marshall Scholar and received degrees from Oxford University and Spelman College, and she has taught at Michigan State University and Harvard University’s Kennedy School of Government.