The lawsuit brought by federal reserve governor Lisa Cook alleges that the president has no authority to appoint her successor. This could set off a legal battle between the president and the central bank.
Three days after Trump released a letter  in which Cook was fired from her job, the lawsuit was filed on Thursday.
Cook contends that Trump’s attempt to remove her from her position violated federal law. Presidents may only remove a Federal Reserve governor “for cause,” as defined by the Federal Reserve Act of 1913, with high standards for serious misconduct or dereliction of duty.
The Federal Reserve is regarded as independent from political subdivisions like the presidency or Congress because it is the nation’s central banking system. That theoretically enables it to determine monetary policy without using political maneuvers.
However, worries about whether Trump will allow the Fed to maintain its independence from the White House may have a negative impact on the global economy. After Trump first announced that he would remove Cook, the US dollar stumbled against other major currencies.
Former National Economic Council deputy director Sameera Fazili told Al Jazeera that “President Trump’s attempt to fire Dr. Lisa Cook is adding uncertainty and chaos to the US economy.”
According to Fazili, who previously worked for the Federal Reserve Bank of Atlanta, disruptions at the central bank would have a negative effect on US businesses.
Stable and predictable laws are necessary for the operation of an economy. She continued, “I applaud Dr. Cook for standing up and fighting for the rule of law,” noting that that is how you can get investors’ trust and raise money for your businesses.
A conservative majority has at least tentatively permitted Trump to fire officials from other agencies, so Cook’s lawsuit is likely headed to the Supreme Court.
However, the court recently indicated that a limited number of exceptions might apply to the Federal Reserve.
The Supreme Court argued in its May decision in Trump v. Wilcox that Federal Reserve governors are distinct from other federal employees because the bank “is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.”
allegations of mortgages
Despite this, Trump, a Republican president, has argued that Cook should be fired from her position.
He charged Cook of mortgage fraud in 2021, one year before she became the head of the Federal Reserve, in his letter from August 25.
The members of the Federal Reserve tasked with setting policy and overseeing it must be able to have complete confidence in their honesty, he wrote.
They cannot and do not have such confidence in your integrity because of your deceitful and potentially criminal behavior in a financial situation.
The Federal Reserve Act does not specify what “for cause” means or establish any removal standards or procedures.
Trump has asserted that Cook’s actions constitute “gross negligence,” despite the fact that she has refuted the claims.
No president has ever removed a member from the Federal Reserve Board, and the legal framework for such removals has never been put to the test in court.
Before the lawsuit was filed, a Federal Reserve spokesperson stated on Tuesday that the bank would abide by any court order.
Former Democratic President Joe Biden appointed Cook to the Federal Reserve in 2022, making her the first Black woman to hold office.
William Pulte, a Trump appointee who is the director of the Federal Housing Finance Agency, first raised concerns about Cook’s mortgages in August.
Attorney General Pamela Bondi was given the opportunity to investigate Pulte.
When she was an academic studying and teaching economics, Cook took out the mortgages in Georgia and Michigan in 2021.
Three mortgages, two of which Cook held as personal residences, are listed on an official financial disclosure form for 2024. Mortgages on investment properties, which are viewed by banks as riskier, have lower interest rates than loans for primary residences.
Some experts have questioned whether Cook’s appointment to the Federal Reserve would have been a sufficient motivating factor. After all, Cook’s mortgages were already on the Senate’s 2022 vetted and confirmed records.
Trump has made numerous allegations of mortgage fraud against alleged political foes, including Democratic Senator Adam Schiff of California and New York Attorney General Letitia James, both of whom are Democrats.
Schiff and James have both refuted accusations of misconduct.
attempting to influence the Federal Reserve
For her part, Cook asserted earlier this week in a statement that “Trump has no authority” to revoke her from her job and that “no causes exist under the law.”
Trump’s attorneys have also claimed that the demands don’t have a proper legal foundation, proper process, or legal authority.
Criticism has been leveled at Trump by his supporters as he seeks to have broad powers beyond the presidency, across all branches of government, since he ran for a second term in January.
Despite federal regulations that protect their employment, he has attempted to remove inspectors general and the heads of independent agencies he thought were hostile to his policies.
The president must state clearly why he or she should resign from office. Those causes include inefficiency, malfeasance, and neglect of duty.
The Federal Reserve Act’s definitions of those causes could serve as a guide for courts in deciding whether or not Trump can fire Cook.
Cook’s attorneys argued in the lawsuit on Thursday that nothing she had done would constitute a “cause.”
Even if the President’s claims were accurate, which they are not, neither the type of offense the President cited nor the lack of evidence against Governor Cook would qualify as “cause” for expulsion, they wrote.
Even if a Federal Reserve Governor had smoking gun evidence while she jaywalked in college, “the President would not have ‘ cause’ to remove him.”
The president attempted to resign from her position without giving any notice, according to the lawsuit.
Trump has faced legal action in addition to the Trump v. Wilcox case.
Gwynne Wilcox, the first Black woman to serve on the board that hears labor disputes between the private sector, was the subject of that case.
Trump would be able to name his fourth pick for the bank’s seven-member board with Cook’s departure from the Federal Reserve, though.
Jerome Powell, the president’s chair, has been berated repeatedly by the president for allegedly handling a multibillion-dollar renovation project poorly and for not lowering interest rates.
Trump has since resisted making those statements even though he has previously threatened to remove Powell before his term expires in May.
