Jonathan Ernst/Reuters; Alex Brandon/AP
Lisa Cook filed a lawsuit Thursday challenging President Donald Trump’s attempt to fire her from the Federal Reserve’s board of governors, marking the start of a high-stakes courtroom showdown that will test the Federal Reserve’s independence.
Cook’s lawsuit, filed in Washington, DC, federal court, names Trump, the Federal Reserve Board, and Chairman Jerome Powell as defendants.
Trump posted a letter addressed to Cook on Truth Social Monday night announcing he was removing her from the Federal Reserve.
Because the Federal Reserve is an independent agency, presidents have limited power to remove its members. Its board members are appointed by the president and confirmed by the US Senate for staggered 14-year terms. Cook’s term is scheduled to end in 2038.
Cook vowed to challenge Trump’s attempted firing, saying the president did not have the authority to fire her. In a statement Tuesday, a Federal Reserve spokesperson said it would “abide by any court decision.”
“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.
Trump’s pressure on the Federal Reserve comes as he seeks lower interest rates, which he believes will help with his economic agenda.
The president said he was terminating Cook from her position for “cause” based on a criminal referral by one of his political appointees, Federal Housing Finance Agency Director Bill Pulte, who said Cook lied on mortgage paperwork.
“The conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator,” Trump wrote.
Cook has said she takes the allegations “seriously.”
On Wednesday, the White House stepped up its pressure on Cook. Kevin Hassett, director of the National Economic Council, said that Cook should make the “honorable” choice and go on leave.
“If I were her, in her circumstance, I would take leave right now,” Hassett told reporters, per the White House press pool.
Hassett, who Trump has said he is considering naming to replace Fed Chair Jerome Powell, said Cook was undermining the Fed’s reputation by not stepping aside.
“The fact that she is not doing that suggests that she is partisan and is trying to make a partisan stance, which is contrary to the independence of the Fed,” he said.
Cook’s lawsuit could eventually reach the Supreme Court, which has recently upended long-held legal norms about independent agencies.
The court has largely sided with Trump over legal battles in the firing of other independent agency leaders, but a majority of justices have said the Federal Reserve deserves special treatment.
In an unsigned decision on the Supreme Court’s emergency docket in May, the majority said Trump’s firing of board members of two other independent agencies could take effect while additional legal proceedings played out. Trump had issued those firings, of the National Labor Relations Board and the Merit Systems Protection Board, without citing any cause.
But the majority opinion also said the Federal Reserve had a different standard for protections, without offering any legal reasoning.
“The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” the court said.
In a dissent, the Supreme Court’s three Democratic appointees criticized the Federal Reserve’s “bespoke” treatment, which they said was contrary to previous rulings.
“Today’s order poses a puzzle,” Supreme Court Justice Elana Kagan wrote. “For the Federal Reserve’s independence rests on the same constitutional and analytic foundations as that of the NLRB, MSPB, FTC, FCC, and so on.”
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