President Trump said on Monday that he was taking the extraordinary step of removing Lisa Cook from the Board of Governors of the Federal Reserve, in a legally dubious maneuver that could undermine the independence of the nation’s central bank.
Mr. Trump justified the firing, which he said was effective immediately, by pointing to allegations that Ms. Cook may have falsified records in order to obtain favorable terms on a mortgage, even though she has not been charged with wrongdoing or convicted of a crime.
In the days before Ms. Cook’s removal, the president had made no secret about his desire to remake the roster of the Fed, as he savaged its members, including Jerome H. Powell, the chair, for keeping interest rates too high.
Mr. Trump said the allegations of mortgage fraud undermined Ms. Cook, who was confirmed by the Senate in 2022. Claiming the matter had compromised her ability to perform as an effective financial regulator, Mr. Trump invoked a power in the Fed’s founding statute that allows him to fire members of the Fed board for cause.
Ms. Cook, the first Black woman to serve on the board, could seek to fight her firing, touching off what could be a landmark battle on the president’s power over the Fed. Many legal experts raised serious concerns late Monday with the manner of her dismissal, and the president’s justification for doing so, as they warned that Mr. Trump risked further eroding the independence of the central bank.
Peter Conti-Brown, a professor at the Wharton School of the University of Pennsylvania, said it would spell “the end of central bank independence as we know it” if Mr. Trump were to prevail, adding: “The president will run riot over the Federal Reserve by using the formidable resources of the U.S. government against our own central bank.”
With Ms. Cook’s dismissal, Mr. Trump could also effectively stand to gain a majority at the Fed, one composed of members he has appointed to the posts.
The allegations against Ms. Cook came from Bill Pulte, the director of the Federal Housing Finance Agency, who has spent weeks fanning Mr. Trump’s ire against the Fed over its approach to monetary policy. Mr. Pulte for months similarly drummed up accusations against Mr. Powell, accusing him of mismanaging a renovation of the Fed’s headquarters, while privately at one point urging the president to fire him.
Mr. Pulte specifically claimed that Ms. Cook had committed mortgage fraud, alleging that she improperly designated both a condominium in Atlanta and a home in Ann Arbor, Mich., as her primary residence when taking out loans. In doing so, Mr. Pulte said, Ms. Cook had “falsified bank documents and property records” in a way that allowed her to obtain a lower interest rate.
Unveiling his findings over a week of social media posts and television interviews, Mr. Pulte referred the case to the Justice Department, which opened a criminal investigation at his request, and he urged Mr. Trump to fire Ms. Cook, which the president later said he would do if she did not depart on her own.
By focusing on Ms. Cook’s mortgages, in particular, Mr. Pulte’s tactics fit an emerging pattern of political retribution. Both he and Mr. Trump have trotted out similar allegations of fraud against the president’s perceived enemies, including Senator Adam B. Schiff of California, who as a Democratic representative led congressional inquiries into Mr. Trump during his first term, and Letitia James, the New York State attorney general, who won a civil fraud trial against Mr. Trump before he returned to office.
By Monday, the president seized on the allegations to dismiss Ms. Cook, telling her in a letter posted to Truth Social that the accusations of mortgage fraud were sufficient “to remove you from your position.”
Under the Federal Reserve Act, the law that charters the central bank, Mr. Trump may dismiss a governor only if he can demonstrate cause, typically defined as professional neglect or malfeasance. In recent days, legal experts have questioned whether the president could satisfy that burden, given the fact that the allegations against Ms. Cook have not been proved in court and involve personal matters.
But Mr. Trump sought to make the case.
“The Federal Reserve has tremendous responsibility for setting interest rates and regulating reserve and member banks,” he said in his letter. “The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.”
Lev Menand, a professor at Columbia Law School and former economist at the Federal Reserve Bank of New York, said Ms. Cook’s dismissal appeared at first glance to be an “illegal firing,” since it did not appear that the president provided proper notice and allowed her an “opportunity to be heard.”
“I think that central bank independence was hanging by a thread before this,” Mr. Menand said, adding that the risks stood only to grow.
The Fed occupies a unique and defining role in the economy, assigned to monitor inflation and keep watch over the labor market. With Ms. Cook’s departure, Mr. Trump could appoint a new loyalist to the critical board who shares his desire for a swift and dramatic reduction in interest rates, even though economists fear that a premature reduction could cause severe damage.
“The illegal attempt to fire Lisa Cook is the latest example of a desperate president searching for a scapegoat to cover for his own failure to lower costs for Americans,” Senator Elizabeth Warren, Democrat of Massachusetts, said in a statement. “It’s an authoritarian power grab that blatantly violates the Federal Reserve Act, and must be overturned in court.”
In her sole comments, issued in a statement last week, Ms. Cook said she had “no intention of being bullied to step down from my position,” but pledged to “answer any legitimate questions and provide the facts.”
Her departure nonetheless would create a second vacancy for Mr. Trump to fill on the seven-member Federal Reserve Board, after another governor, Adriana Kugler, resigned unexpectedly earlier in August. The president has nominated Stephen Miran, currently the chairman of the White House Council of Economic Advisers, to fulfill Ms. Kugler’s term, which concludes in January. Both posts require Senate confirmation.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
Ben Casselman is the chief economics correspondent for The Times. He has reported on the economy for nearly 20 years.
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