Trump Fires Federal Reserve Governor Lisa Cook in Unprecedented Challenge to Central Bank Independence

Details

On August 25, 2025, President Donald Trump announced he was removing Federal Reserve Governor Lisa Cook from the Board of Governors, citing allegations of mortgage fraud. The action marked the first time in the 112-year history of the Federal Reserve that a president attempted to fire a sitting governor. Cook, the first Black woman to serve on the Fed's board, immediately challenged the removal in court, and federal judges blocked her firing while litigation proceeded. The Supreme Court heard oral arguments on January 21, 2026, and on June 29, 2026, ruled 5–4 in Trump v. Cook that Cook must remain on the board while her challenge proceeds, holding that removal of a Fed governor "for cause" is subject to judicial review and that Trump had failed to afford Cook the notice and opportunity to respond the law requires. The decision—which the Financial Times and other outlets reported as breaking news the same day the Court, in a companion case, expanded the president's power to fire officials at other independent agencies—was one front in a broader campaign against the central bank that also included a criminal investigation of Fed Chair Jerome Powell, an investigation a federal judge found was meant to pressure Powell over interest rates and that the administration abandoned in April 2026, paving the way for the Senate to confirm Trump's chosen successor, Kevin Warsh.

Background

Lisa Cook was confirmed by the Senate in May 2022 on a 50–50 vote broken by Vice President Kamala Harris. She was reconfirmed in 2023 to a full 14-year term ending in 2038. An economist specializing in international economics and macroeconomic history, Cook previously served as a professor at Michigan State University and advised the Obama administration on economic policy.

Under the Federal Reserve Act of 1913, Fed governors can only be removed by the president "for cause"—historically understood to mean malfeasance or dereliction of duty, not policy disagreements. No president had ever attempted to use this provision to remove a governor.

The Mortgage Fraud Allegations

The allegations against Cook originated from Federal Housing Finance Agency Director Bill Pulte, who sent a criminal referral to Attorney General Pam Bondi on August 15, 2025. Pulte alleged that Cook committed mortgage fraud by claiming two properties—one in Ann Arbor, Michigan and one in Atlanta, Georgia—as her "primary residence" on mortgage applications within two weeks of each other in 2021, before she joined the Fed.

Trump wrote in his termination letter: "There is sufficient reason to believe you have made false statements on one or more mortgage agreements."

Evidence Contradicting the Allegations

Reuters, The Washington Post, and The Financial Times independently verified documents that appear to contradict the administration's claims:

• A loan estimate submitted for Cook's Atlanta property shows she declared it as a "vacation home", not a primary residence
• Cook's national security clearance form (SF-86) described the Atlanta property as a "2nd home"
• Cook's financial disclosure forms indicate her Atlanta mortgage carried an interest rate of 3.25%—slightly higher than prevailing rates for a primary residence at the time
• Property records show Cook never sought a primary residence tax exemption in Georgia

Cook's attorney, Abbe Lowell, stated that Cook "did not ever commit mortgage fraud" and that the case largely rests on "one stray reference" in a 2021 mortgage document that was "plainly innocuous in light of the several other truthful and more specific disclosures."

Cook has not been charged with any crime, and she maintains the allegations are politically motivated.

Legal Proceedings

Lower Court Rulings

Cook sued Trump on August 28, 2025, in the U.S. District Court for the District of Columbia. On September 9, Judge Jia Cobb issued a preliminary injunction blocking Cook's removal, writing that "Cook has made a strong showing that her purported removal was done in violation of the Federal Reserve Act's 'for cause' provision." The judge noted that the "for cause" clause "does not contemplate removing an individual purely for conduct that occurred before they began in office."

The D.C. Circuit Court of Appeals rejected an emergency appeal by the Trump administration on September 15, allowing Cook to participate in the Federal Open Market Committee meeting that month—the meeting at which the Fed lowered interest rates.

Supreme Court Arguments

On October 1, 2025, the Supreme Court declined to immediately remove Cook and scheduled oral arguments for January 21, 2026.

At the oral arguments, justices across the ideological spectrum expressed skepticism of the administration's position:

• Justice Brett Kavanaugh warned that the administration's stance "would weaken, if not shatter, the independence of the Federal Reserve" and cautioned that "once these tools are unleashed, they are used by both sides."
• Justice Neil Gorsuch questioned whether removal could be accomplished with "just a meeting across a conference table finished with 'You're fired'?"
• Justice Amy Coney Barrett questioned the lack of a hearing for Cook to respond to the allegations
• Chief Justice John Roberts appeared skeptical, asking whether the allegations might apply "in the case of an inadvertent mistake contradicted by other documents in the record"

Solicitor General John Sauer argued for the administration that the president's determination of "cause" is not reviewable by any court. Paul Clement, who served as solicitor general under President George W. Bush, represented Cook and argued that "if there's no judicial review, it's all kind of a joke."

Fed Chair Jerome Powell and former Fed Chair Ben Bernanke attended the oral arguments.

The Supreme Court's Ruling

On June 29, 2026, the Supreme Court ruled 5–4 in Cook's favor in Trump v. Cook (No. 25A312), denying the administration's request to remove her and allowing her to stay on the board while her case continues in the lower courts. Chief Justice John Roberts wrote the majority opinion, joined by Justice Brett Kavanaugh and the Court's three liberals—Justices Elena Kagan, Sonia Sotomayor, and Ketanji Brown Jackson.

The majority squarely rejected the administration's central claim that the president's determination of "cause" is unreviewable. Accepting that position, Roberts wrote, "would in effect transform the Federal Reserve's for-cause protection into at-will employment—an interpretive leap out of step with the statute Congress enacted." The Court held that removal of a Fed governor "for cause" is judicially reviewable, requires substantial cause, and must be preceded by notice of the charges, an explanation of the evidence, and a meaningful opportunity to respond—process Trump failed to give Cook before purporting to remove her. To hold otherwise, Roberts wrote, "would allow the President to remove a member of the Federal Reserve at any time, for any reason, without any notice before, and without any judicial check after." The opinion also emphasized the nation's long "tradition of central banking protected from political interference". The Court did not decide whether the mortgage-fraud allegations against Cook would themselves constitute cause; that merits question was set for oral argument in January, at the start of the Court's 2027 calendar, with Cook continuing her Fed duties in the meantime.

In a companion case decided the same day, Trump v. Slaughter (No. 25-332), the Court moved in the opposite direction—allowing Trump to remove Federal Trade Commission member Rebecca Kelly Slaughter and overturning the 1935 precedent Humphrey's Executor v. United States, which had shielded members of independent commissions from at-will removal. The two rulings together, as a Congressional Research Service analysis explains, ended for-cause removal protection for FTC- and NLRB-style independent agencies while carving out the Federal Reserve as a distinct exception—what one Just Security analysis called "the Federal Reserve exception to the Slaughter rule". The administration thus lost on Cook by a single vote even as it won a sweeping expansion of presidential removal power over the rest of the administrative state.

Three dissents were filed in Cook. Justice Clarence Thomas called the ruling "incorrect," wrote that the majority's case for an independent Fed amounted to "arguments against the Constitution," and described the decision as "an unprecedented incursion on the Executive Branch"—noting it was the first time in constitutional history that an injunction had blocked a presidential removal of an executive officer. Justice Samuel Alito, joined by Justice Neil Gorsuch, argued the Court should not have issued so sweeping a ruling at this early stage. Justice Amy Coney Barrett wrote that the decision amounted to "significant interference with the President's removal authority."

Broader Campaign Against Fed Independence

Criminal Investigation of Jerome Powell

The Cook firing was one front in a wider campaign against the central bank. Ten days before the Cook oral arguments, Fed Chair Jerome Powell disclosed that the Justice Department had served the Federal Reserve with grand jury subpoenas threatening a criminal indictment over his testimony about the Fed's headquarters renovation—a probe a federal judge later found was a pretext to pressure him on interest rates, and which the administration abandoned in April 2026 after the subpoenas were quashed, clearing the way for the Senate to confirm Trump's chosen successor, Kevin Warsh. (See the separate entry on the Justice Department's criminal probe of Jerome Powell for full detail.)

Pattern of Mortgage Fraud Allegations

Pulte's allegations against Cook follow similar claims against other prominent Democrats:

• Senator Adam Schiff (D-CA): Under DOJ investigation for alleged insurance fraud; his attorney denied the allegations as "transparently false, stale, and long debunked"
• New York Attorney General Letitia James: Indicted on October 9, 2025, on bank fraud charges; pleaded not guilty
• Rep. Eric Swalwell (D-CA): Sued Pulte, accusing him of using government databases to "concoct fanciful allegations"

Cook's lawyers noted that "each of Director Pulte's criminal referrals have notably been, at one time or another, political targets of President Trump's ire prior to any mortgage fraud allegations."

Response

Economists

An open letter signed by 593 economists on September 2, 2025, defended Federal Reserve independence and warned that firing Cook would erode trust in "one of America's most important institutions." Signatories included Nobel laureates Claudia Goldin, Joseph Stiglitz, Paul Romer, Alvin Roth, and Paul Milgrom, as well as former Council of Economic Advisers chairs Christina Romer (Obama) and Jared Bernstein (Biden).

The letter stated: "Good economic policy requires credible monetary institutions. Credible monetary institutions, in turn, require the independence of the Federal Reserve."

All three living former Fed chairs—Alan Greenspan, Ben Bernanke, and Janet Yellen—signed a separate brief to the Supreme Court arguing against Cook's removal, along with former Treasury secretaries and other economic officials from both parties.

Republican Senators

Several Republican senators on the Banking Committee expressed concern:

• Senator Thom Tillis (R-NC) announced he would "oppose the confirmation of any nominee for the Fed—including the upcoming Fed Chair vacancy—until this legal matter is fully resolved." In a Senate floor speech, Tillis said that "if there were any remaining doubt whether advisers within the Trump Administration are actively pushing to end the independence of the Federal Reserve, there should now be none."
• Senator Mike Rounds (R-SD) said he would not consider any Cook replacement until "she has had due process"
• Senator Lisa Murkowski (R-AK) joined Tillis in pushing back on the administration's approach
• Senator John Kennedy (R-LA) said he would be "stunned" if Powell "did anything wrong"

The Banking Committee has 13 Republicans and 11 Democrats, meaning a single Republican defection creates a tie vote that could stall confirmations.

Democratic Senators

• Senator Elizabeth Warren (D-MA), ranking member of the Banking Committee, called the action "an authoritarian power grab that blatantly violates the Federal Reserve Act"
• Democrats broadly characterized the move as an attempt to undermine Fed independence

Context: Trump and Interest Rates

Trump has repeatedly demanded that the Federal Reserve cut interest rates more aggressively. The Fed cut rates three times in the second half of 2025 but signaled a slower pace of cuts going forward due to inflation concerns.

Trump has publicly stated he will appoint a new Fed chair who "believes in lower interest rates, by a lot." Powell's term as chair ended in May 2026, though his term as a governor extends until 2028.

The Powell Probe Collapses and Warsh Is Confirmed

The parallel pressure campaign against Powell broke in the spring of 2026: a federal judge quashed the Justice Department's subpoenas as a pretext to pressure Powell on interest rates, the administration abandoned the criminal investigation in April, and the Senate then confirmed Kevin Warsh as Fed chair, 54–45—the closest such vote in the modern era—after Senator Thom Tillis released the hold he had placed pending the probe's resolution. Powell stepped down as chair when his term expired on May 15 but took the unusual step of retaining his Board of Governors seat through January 2028, denying Trump a vacancy and keeping a vote at every policy meeting. (The probe, the ruling, and the Warsh confirmation are covered in full in the separate entry on the criminal investigation of Jerome Powell.)

What Happens Next

The June 29 ruling keeps Cook on the board but does not end the case. The Court established that "for cause" removal of a Fed governor is judicially reviewable, demands substantial cause, and requires notice and an opportunity to respond—but it did not decide whether the mortgage-fraud allegations against Cook, all concerning conduct predating her appointment, could satisfy that standard. That merits question is scheduled for oral argument in January, at the opening of the Court's next calendar, while Cook continues to carry out her duties and vote at policy meetings. Legal analysts described the outcome as a significant but not final victory for Fed independence.

By pairing the Cook decision with Trump v. Slaughter—which overturned Humphrey's Executor and expanded the president's power to fire officials at other independent agencies—the Court signaled that it views the Federal Reserve as constitutionally distinct, reaffirming the statutory protections that have shielded the central bank from political interference since 1913. Commentators note the settlement may be unstable: a SCOTUSblog analysis published in July 2026 anticipated further fights over the boundaries of the "Federal Reserve exception," including the possibility of abrupt removals at other agencies now stripped of for-cause protection. For now, Trump does not gain the additional seat on the seven-member Board of Governors that Cook's removal would have opened. The central bank enters this new chapter with a Trump-chosen chair in Warsh, a returned Powell still holding a vote through 2028, and its independence tested but, for the moment, preserved.