President Donald Trump has ordered the dismissal of Federal Reserve governor Lisa Cook, an unprecedented move in the central bank’s 111-year history that is expected to spark legal and political challenges.
An Unprecedented Decision
Cook, the first Black woman to serve on the Fed’s Board of Governors, was accused by Trump of misrepresenting her residency on mortgage applications. In a letter, he pointed to documents in which Cook allegedly declared homes in both Michigan and Georgia as her primary residence within weeks of each other.
“It is inconceivable that you were not aware of your first commitment when making the second,” Trump wrote.
The president’s decision follows a public campaign led by housing finance regulator Bill Pulte, a Trump ally, who sent a letter to Attorney General Pam Bondi describing the matter as a “criminal referral” and urging an investigation. It is unclear whether the Justice Department has opened a case.
Cook Responds: Cook has strongly rejected the allegations, telling the BBC she first learned of them from the media and that the issue stemmed from a mortgage application filed four years before she joined the Fed.
“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” she said.
She added that she is gathering records to “answer any legitimate questions and provide the facts.”
Legal Questions Loom
The White House move is highly unusual. Fed governors are typically appointed for 14-year terms and enjoy significant independence from the executive branch. Experts say Trump’s decision is likely to face a legal test, as the administration will need to prove it had lawful grounds to remove her.
If Cook or the Fed resists, the dispute could trigger a rare standoff between the central bank and the White House. The Fed has operated independently from the government since 1951.
Pressure on the Fed
The firing comes as Trump intensifies pressure on the Federal Reserve to cut interest rates. He has repeatedly lashed out at Fed chair Jerome Powell, calling him a “numbskull” and a “stubborn moron” for resisting rapid rate reductions.
Last week, Powell signaled that a rate cut could come in September, noting that the inflationary impact of Trump’s tariffs may prove temporary. His remarks at the annual Jackson Hole conference reassured markets that looser policy could be on the horizon.
Market Reaction
The U.S. dollar slipped in Asian trading on Tuesday, with investors betting that Cook’s removal and her potential replacement would tilt the Fed toward faster interest rate cuts.
Trump’s order to dismiss Lisa Cook marks an extraordinary challenge to the Fed’s independence. Whether it survives legal scrutiny could reshape not just the central bank’s leadership but also its ability to operate free from direct political interference.
