Lisa Cook, governor of the US Federal Reserve, speaks at the Peterson Institute For International Economics in Washington, DC, US, on Thursday, Oct. 6, 2022.
Ting Shen | Bloomberg | Getty Images
“This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would the first of its kind in the Board’s history,” Cook’s attorney, Abbe Lowell, wrote in the lawsuit.
“It would subvert the Federal Reserve Act … which explicitly requires a showing of ’cause’ for a Governor’s removal, which an unsubstantiated allegation about private mortgage applications submitted by Governor Cook prior to her Senate confirmation is not,” Lowell wrote.
The case was assigned to Judge Jia Cobb, who was appointed to the federal bench in late 2021 by former President Joe Biden.
Cook is asking Cobb to declare Trump’s firing order “unlawful and void” and affirm that she remains a board member.
She also wants the judge to rule that the claims about her mortgages do not constitute “cause,” which the lawsuit defines as “inefficiency, neglect of duty, malfeasance in office, or comparable misconduct.”
Powell and the Fed Board are being sued only to the extent that they are able to “effectuate President Trump’s purported termination of Governor Cook,” the suit said.
The complaint notes that Cook, who was appointed in 2022 by Biden and confirmed by the Senate, is “the first Black woman to sit on the Federal Reserve’s Board in its 111-year history.” Her term is currently set to end in 2038.
White House spokesman Kush Desai said in a statement responding to Cook’s suit that Trump “exercised his lawful authority to remove a governor on the Federal Board of Governors for cause.”
“The President determined there was cause to remove a governor who was credibly accused of lying in financial documents from a highly sensitive position overseeing financial institutions,” Desai said in the statement to CNBC.
“The removal of a governor for cause improves the Federal Reserve Board’s accountability and credibility for both the markets and American people.”
But Cook’s lawsuit asserts that the mortgage allegations are a pretext being used by Trump to vacate the board seat and “forward his agenda to undermine the independence of the Federal Reserve.”
In a separate court filing asking Cobb to temporarily block Trump’s attempted firing while the case plays out, Lowell said Trump’s allegations about her mortgages are not true.
And even if she had committed the “infraction” at issue, Trump would still not have cause to remove her in part because the alleged conduct took place before she joined the Fed Board, the lawyer wrote.
“After evaluating the evidence, whether an offense amounts to ’cause’ for removal should depend on a combination of when it occurred, whether it occurred in the performance of the officeholder’s official duties, and how serious of an offense it is,” Lowell wrote in the request for a temporary restraining order.
“The President would not have ’cause’ to remove a Federal Reserve Governor even if he possessed smoking gun evidence that she jaywalked in college.”
“And here, he would not have ’cause’ to remove Governor Cook even if she had erred in filling out a form for a private mortgage before she assumed office,” Lowell wrote.
The Fed declined to comment on the lawsuit.
Trump’s effort to fire Cook came after months of him complaining that she, Powell and other board members were not cutting interest rates, as he wanted.
The allegations against Cook first surfaced from Bill Pulte, director of the Federal Housing Finance Agency and an aggressive backer of Trump’s criticisms of Powell.
Pulte sent a criminal referral to the Department of Justice, which said it will investigate the mortgage claims against Cook. Pulte, the DOJ and the White House have all demanded that Cook quickly leave her post in light of the allegations.
Within hours of Trump’s termination letter to her being made public on Truth Social, Cook vowed to “continue to carry out my duties to help the American economy as I have been doing since 2022.”
The key question for her lawsuit is whether a judge, and ultimately the Supreme Court, will agree that Trump had cause to fire her.
The Federal Reserve Act says that a president can remove a member of the Fed’s Board of Governors only “for cause.”
Cook has not been charged, much less convicted, of any crime, including mortgage fraud.
If Trump is successful in removing Cook, it would put him on track to have appointed a majority of the Fed Board of Governors’ seven members.
“We’ll have a majority very shortly,” Trump said at the White House during a Cabinet meeting on Tuesday. “So that’ll be great.”
This is breaking news. Check back for updates.
— CNBC’s Dan Mangan contributed to this report.
