Federal Reserve Governor Lisa Cook has begun a standoff with Donald Trump, refusing to leave her post after Trump announced he had fired her Monday evening.
Cook’s sacking was the first in the 111-year history of the Federal Reserve, as Trump all but guaranteed a replacement that would back the president’s calls to slash interest rates.
However, Cook released a statement Monday night that suggested she wasn’t going anywhere.
‘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. ‘I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022.’
Her lawyer Abbe Lowell also issued statement that slammed Trump and vowed to take action against the ‘illegal’ move.
‘President Trump has once again taken to social media to “fire by tweet” and once again his reflex to bully is flawed and his demands lack any proper process, basis or legal authority,’ Lowell said.
‘We will take whatever actions are needed to prevent his attempted illegal action.’
The president move is a sharp escalation in his battle to exert greater control over what has long been considered an institution independent from day-to-day politics.
Trump has been pushing Federal Reserve chair Jerome Powell to cut the central bank’s short-term interest rate. Firing Cook will clear the path for Trump to appoint a MAGA acolyte who can help him assert control over the institution.
Donald Trump fired Federal Reserve Governor Lisa Cook (pictured) late Monday, all but guaranteeing a replacement that would back the president’s calls to slash interest rates
The move is a sharp escalation in his battle to exert greater control over what has long been considered an institution independent from day-to-day politics
He said in a letter posted on his Truth Social platform that he is firing Cook because of allegations that she committed mortgage fraud.
‘In light of your deceitful and potentially criminal conduct in a financial matter… I do not have such confidence in your integrity,’ Trump wrote.
So far, Powell has argued that rates should stay high because inflation hasn’t come down to the 2 percent target. As consumer prices remain high, he’s kept Fed interest at 4.5 percent since December 2024.
President Trump has openly disagreed with the decision, calling for as much as a three percent cut.
Lower rates make it cheaper for businesses to borrow money but crucially it also cuts borrowing costs for ordinary Americans, who then have more to spend on goods and services. A higher rate can cool consumer pricing.
Trump’s decision to fire Cook is an escalation. For months, the President has been trying to cut against the Fed’s independence.
Normally, the Fed has protected itself against political pressure as tries to maintain low inflation and high job growth across the US.
But the Fed is in a tricky spot, given recent economic analysis.
The president has repeatedly attacked the Fed´s chair, Jerome Powell (pictured left), for not cutting its short-term interest rate, giving him the nickname ‘Too Late’ and even threatened to fire him
July’s jobs report was bleak, leading Trump to argue that rates need to come down. Meanwhile, the month’s core inflation rate continued to climb.
Independent economists are mixed about the correct pathway.
Forcing Cook off the Fed´s governing board provides Trump an opportunity to appoint a loyalist.
Trump has said he would only appoint officials who would support cutting rates.
Recently, the President has been stepping up his attempts to get lowered rates by repeatedly blasting it’s leader, Jerome Powell.
Lowered rates from the Fed could free up money for American consumers and businesses. That in turn boosts spending, stock prices, and 401(k) accounts.
The president has also repeatedly flirted with ousting Powell as he seeks to lower rates by political force.
Last week, Scott Bessent, the White House’s Treasury Secretary, said he would start interviewing Powell’s replacements in September, nine months before the chair’s term expires.
Earlier this month, Trump named Council of Economic Advisers Chairman Stephen Miran to serve out the rest of the term that opened from Governor Adriana Kugler’s unexpected exit.
Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, made the accusations official last week.
Pulte alleges that Cook had claimed two primary residences — in Ann Arbor, Michigan and Atlanta — in 2021 to get better mortgage terms.
The regulator also posted a part of his letter to US Attorney General Pam Bondi, saying his agency had obtained Cook’s mortgage documents, and citing the two loans from June and July 2021.
‘She needs to quit because what she did is grounds for firing,’ he wrote in a separate post.
The announcement came days after Cook said she wouldn’t leave her post despite Trump previously calling for her to resign. The Fed’s board has seven members, meaning Trump’s move could have deep economic and political ramifications.
Mortgage rates are often higher on second homes or those purchased to rent.
Trump said in announcing the move that he had the constitutional authority to remove Cook, but doing so will raise questions about control of the Fed as an independent entity.
The firing is likely to touch off a legal battle and Cook could be allowed to remain in her seat while the case plays out.
Cook would have to fight the legal battle herself, as the injured party, rather than the Fed.
