Donald Trump has ordered the removal of Federal Reserve governor Lisa Cook over allegations of mortgage fraud in his latest attack on the US central bank.
In a letter published on Mr Trump’s Truth Social platform, the US president said he had “sufficient cause” to remove Ms Cook with immediate effect.
Mr Trump accused Ms Cook of “deceitful and criminal conduct in a financial matter” and said he no longer had confidence in her “integrity”.
“At a minimum, the conduct at issue exhibits the sort of negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator,” he said.
The dollar fell sharply following the unprecedented step, which could test the boundaries of presidential power over the independent US central bank, which sets interest rates.
However, the US currency recovered its losses overnight after Ms Cook, who voted to keep interest rates on hold at the Fed’s last meeting, vowed that she would not resign.
She said: “President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so.”
Ms Cook, the first black woman to serve as a member of the Federal Reserve’s governing board, said the president had no authority to remove her. Her term at the Fed runs to 2038.
Mr Trump called on her to resign last week over claims she had applied for “primary residence” mortgages on two separate properties within two weeks of each other in 2021 before she became Fed governor.
Ms Cook has yet to provide a detailed account of the transactions since questions about them were raised last week by US Federal Housing Finance Agency director William Pulte, who referred the matter to attorney general Pamela Bondi for investigation.
Abbe Lowell, Ms Cook’s lawyer, said they planned to take “whatever actions are needed to prevent” Trump’s “illegal action”. The defence attorney has represented several high profile defendants, including the US president’s daughter Ivanka Trump and her husband Jared Kushner.
Mr Trump’s bid to remove Ms Cook, who was appointed to the Fed’s board in 2022 by Joe Biden, is the latest in a series of run-ins between the US president and the central bank since he returned to office in January.
Mr Trump has repeatedly urged the Fed to cut interest rates and heavily criticised its chairman Jerome Powell, who he has called a “numbskull” and “a major loser”.
Earlier this year he indicated he was considering sacking “Mr Too Late” Powell, but he backtracked after bond vigilantes sent US borrowing costs surging amid concerns over the Fed’s independence.
Longer-term US Treasury bond yields – a benchmark for the cost of servicing its national debt – jumped higher after Mr Trump said he was sacking Ms Cook.
Test for bank’s independence
Jim Reid, a Deutsche Bank analyst, said: “This could turn into the most market-relevant test so far of Trump’s ability to fire officials of independent government agencies.
“Were Cook’s dismissal to hold, it would open up another seat for Trump to fill on the seven-person Federal Reserve Board.”
Though the terms of Fed governors are structured to outlast a given president’s tenure, the Federal Reserve Act does allow for the removal of a sitting governor “for cause” — a provision that has never been tested by a president.
Since the 1970s, presidents have typically taken a hands-off approach to the central bank in order to preserve its independence and public trust.
Mr Trump claimed he had the authority to remove Ms Cook under Article 2 of the US Constitution and the Federal Reserve Act of 1913.
Ms Cook had expressed defiance after the issue first became public last week, with Mr Trump calling for her resignation.
“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” Ms Cook said on August 20.
“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.”
Ms Cook took out the mortgages in question in 2021, when she was an academic. A 2024 financial disclosure form lists three mortgages held by Ms Cook, with two marked as personal residences.
Loans for primary residences often carry lower rates than those for investment properties, which are seen as riskier by banks.
Given its unprecedented nature, it is unclear how the matter might proceed. Members of other independent US agencies who have challenged Mr Trump’s efforts to remove them have been forced to launch legal action at their own expense – a potentially costly process with no guaranteed outcome.
The Fed next meets on September 16.
Academic research has consistently found that central banks insulated from political influence tend to deliver better economic outcomes — a principle now facing a direct challenge at the world’s most influential monetary institution.