Embattled Fed Governor Lisa Cook's lawyer says she'll sue Trump to keep her job

Federal Reserve Gov. Lisa Cook will sue President Donald Trump's administration to try to prevent him from firing her, her lawyer said Tuesday.

The announcement makes it more likely that a high-stakes legal battle will ensue that will probably end up at the Supreme Court, and could redefine the limits of the president's legal authority over the central bank. Increasingly at issue is the Fed's independence from day-to-day politics, which most economists consider a key factor in keeping long-term inflation and interest rates low.

"President Trump has no authority to remove Federal Reserve Governor Lisa Cook," said Abbe Lowell, Cook's lawyer and a longtime Washington figure who has represented prominent people from both major political parties. "His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action."

Trump, meanwhile, underscored in remarks at the White House that his goal is to seize more power over the Fed to get it to lower interest rates. He has previously said he would only appoint people to the Fed's board who will support lower borrowing costs.

"We'll have a majority very shortly, so that'll be good," Trump said, referring to the Fed's governing board. "Once we have a majority, housing will swing," he added, blaming slow housing sales on high mortgage rates.

Trump has criticized Fed Chair Jerome Powell for months because the Fed has left its key short-term interest rate unchanged at about 4.3% - relatively high compared with its level during the COVID-19 pandemic, when it was nearly zero.

But now Trump has turned his attention to the broader Federal Reserve system. The committee that sets interest rates has 12 voting members, with seven coming from the board and the other five drawn from the presidents of the 12 regional Fed banks.

The Fed exercises expansive power over the U.S. economy by adjusting a short-term interest rate that can influence broader borrowing costs for things like mortgages, auto loans and business loans.

Also Tuesday, the Fed itself weighed in for the first time on the firing, saying it would "abide by any court decision."

The Fed also defended its longtime independence from politics: "Congress, through the Federal Reserve Act, directs that governors serve in long, fixed terms and may be removed by the president only 'for cause,'" the central bank said. "Long tenures and removal protections for governors serve as a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people."

A spokesperson said the Fed has deferred any decision on Cook's working status and added that there is no official business before the board this week.

But the Fed's statement did not explicitly criticize Trump's decision to fire her.

If Trump succeeds in removing Cook from the Fed's board of governors, it would likely erode the Fed's political independence, which enables it to take unpopular steps like raising interest rates. A less-independent Fed could leave Americans paying higher rates, because investors would demand a higher yield to own bonds to offset potentially greater inflation in the future, pushing up borrowing costs throughout the economy.

Who's on the board? Trump appointed two members of the board, Christopher Waller and Michelle Bowman, in his first term and has named Steven Miran, a top White House economist, to replace Gov. Adriana Kugler, who stepped down unexpectedly Aug. 1. If Miran's nomination is approved by the Senate and Trump is able to replace Cook, he would have a 4-3 majority on the Fed's board.

For now, Miran would just be on the board until Kugler's term was set to end in January. Trump said Tuesday at a Cabinet meeting that he could instead nominate Miran to complete Cook's term, , which lasts until 2038, if he succeeds in firing her.

Legal experts say the Republican president's claim that he can fire Cook, who was appointed by Democratic President Joe Biden in 2022, is on shaky ground. But it's an unprecedented move that hasn't played out in the courts before, and the Supreme Court this year has been much more willing to let the president remove agency officials than in the past.

"It's an illegal firing, but the president's going to argue, 'The Constitution lets me do it,'" said Lev Menand, a law professor at Columbia University and author of a book about the Fed. "And that argument's worked in a few other cases so far this year."

Menand said the Supreme Court construes the Constitution's meaning, and "it can make new constitutional law in this case."

Trump on Tuesday acknowledged there would likely be a court fight.

"You always have legal fights," he said. "She seems to have had an infraction, and you can't have an infraction," he added of Cook.

Allegations against Cook Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, alleged last week that Cook had claimed two primary residences -- in Ann Arbor, Michigan, and in Atlanta -- in 2021 to get better mortgage terms. Mortgage rates are often higher on second homes or those bought to rent.

Trump said in a letter posted on his Truth Social platform late Monday that he was removing Cook effective immediately because of allegations she committed mortgage fraud.

Cook says she won't resign Cook said Monday night that she would not step down. "President Trump purported to fire me 'for cause' when no cause exists under the law, and he has no authority to do so," she said in an emailed statement. "I will not resign."

The courts have allowed the Trump administration to remove commissioners at the National Labor Relations Board, the Merit System Protection Board and other independent agencies. Yet Cook's case is different.

Those dismissals were based on the idea that the president needs no reason to remove agency heads because they exercise executive power on his behalf, the Supreme Court wrote in an unsigned order in May.

In that same order, the court suggested that Trump did not have the same freedom at the Fed, which the court called a "uniquely structured, quasi-private entity."

Removing governors 'for cause' The law that governs the central bank, the Federal Reserve Act, includes a provision allowing for the removal of Fed governors "for cause."

"For cause" is typically interpreted to mean malfeasance or dereliction of duty by an official while in office, not something done before that person is appointed, Menand said.

To establish a "for cause" firing also requires a finding of fact, said Scott Alvarez, the Fed's former general counsel and now adjunct professor at Georgetown Law.

"We know there's allegations by Bill Pulte, but Lisa has not been able to respond yet," Alvarez said. "So we don't know if they're true. Allegations are not cause.''

Lowell said Monday night that Trump's "reflex to bully is flawed and his demands lack any proper process, basis or legal authority," adding, "We will take whatever actions are needed to prevent his attempted illegal action."

Cook is the first Black woman to serve as a governor. She was a Marshall Scholar and received degrees from Oxford University and Spelman College, and she has taught at Michigan State University and Harvard University's Kennedy School of Government.