The United States Department of Justice plans to investigate Federal Reserve Governor Lisa Cook, with a top official informing Federal Reserve Chair Jerome Powell of the probe and encouraging him to remove her, Bloomberg News has reported.
A letter to Powell from Ed Martin, a Department of Justice (DOJ) official who has led similar investigations into Senator Adam Schiff of California and New York Attorney General Letitia James, said Cook’s case “requires further examination”, Bloomberg reported on Thursday.
“At this time, I encourage you to remove Ms Cook from your Board,” Martin wrote, according to Bloomberg. “Do it today before it is too late! After all, no American thinks it is appropriate that she serve during this time with a cloud hanging over her.”
The DOJ did not immediately reply to a request for comment.
Asked about the report, a Fed spokesperson referred to Cook’s statement on Wednesday, when she said she had no intention of being “bullied” into resigning after President Donald Trump called for her to step down on the basis of allegations made by a member of his administration about mortgages she holds in Michigan and Georgia.
The Federal Reserve Act provides no authority for a Fed chair to remove another member of the Board of Governors.
Cook, the first Black woman to be a Fed governor, is serving a 14-year term that began after her second Senate confirmation in 2023.
The effort to remove Cook comes as the administration has unleashed a campaign against diversity, equity and inclusion (DEI), and intensifies Trump’s ongoing effort to gain influence over the US central bank and push it to lower interest rates.
Fed under pressure
Central bankers from around the world gathered on Thursday in Grand Teton National Park for the opening of the Kansas City Fed’s annual Jackson Hole symposium, where Powell will give a keynote speech on Friday, sketching out his view of the economy and, investors hope, where rates are headed.
“I would just say that I know her to be an outstanding economist and a person of high integrity,” Cleveland Fed President Beth Hammack told Yahoo Finance at the event.
US Federal Housing Finance Agency director William Pulte, who referred the allegations of Cook’s wrongdoing to the Department of Justice this week, said they arose as part of regular investigations into mortgage fraud by his agency and were not a “witch-hunt”.
“Defrauding people is nothing new,” Pulte told Bloomberg Television. “I believe that she committed mortgage fraud.” He said that public records clearly show fraud and that a special exemption should not be made for the powerful. He said the fraud is “self-evident”.
Cook has yet to expressly address Pulte’s accusation, saying only in Wednesday’s statement: “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 Fed has held borrowing costs steady all year in the 4.25 percent to 4.5 percent range out of concern that Trump’s tariffs could reignite inflation that is still running above the Fed’s 2 percent goal. Recent weaker labour market data – including a report showing job gains averaged a paltry 35,000 from May to July – has increased Fed policymaker concern that borrowing costs may be a bit too high, and financial markets are priced for the likelihood of a quarter-point interest-rate cut at the Fed’s September meeting.
That would be far short of the several percentage points that Trump has called for.
Trump can name a new chair when Powell’s term ends in May. US Treasury Secretary Scott Bessent, who is leading the search, has nearly a dozen candidates, and all have voiced their support for big rate cuts and big changes to the central bank. Traditionally, Fed chairs resign when their leadership term ends, but there is some speculation that Powell would stay on until his term as governor ends in 2028, denying Trump the chance to install more loyalists to consolidate his control over the central bank.
Trump has nominated Council of Economic Advisers Chairman Stephen Miran, a Fed critic and enthusiastic supporter of Trump’s tariffs and other policies, to serve at the Fed in the seat vacated by the surprise resignation this month of Adriana Kugler.
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