Fed Governor Lisa Cook sues Trump and sets up a historic fight over the central bank

Federal Reserve Governor Lisa Cook sued President Donald Trump on Thursday morning over his attempt to oust her from the central bank, setting up an enormous legal battle around the central bank's independence.

Cook filed the lawsuit in the U.S. District Court for the District of Columbia. The 24-page lawsuit lists Trump and Federal Reserve Chair Jerome Powell as the defendants. The latter is listed solely due to the ability he has to carry out Trump's action.

The lawsuit states that it is challenging Trump's "unprecedented and illegal attempt" to oust Cook from the seven-member Board of Governors, part of the broader panel that votes on interest rates. Lawyers for Cook are asking the federal court to confirm her status as a Fed governor so she can continue in her official capacities.

A spokesperson for the Federal Reserve declined to comment.

The White House said it had exercised "lawful authority" in removing Cook. "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," said White House spokesman Kush Desai in a statement. "The removal of a governor for cause improves the Federal Reserve Board’s accountability and credibility for both the markets and American people.”

Cook's lawsuit sets in motion a legal battle that's likely to land on the steps of the Supreme Court within weeks. Trump had steadily ratcheted up his attacks on the central bank in his quest to secure lower interest rates, and eventually moved to fire Cook.

He has recently signaled that he wants to have appointees on the central bank that share his views on the economy and monetary policy. "Once we have a majority, housing is going to swing, and it’s going to be great,” he said at the White House on Tuesday. “People are paying too high an interest rate. That’s the only problem with housing.”

Cook has faced allegations that she lied on a pair of mortgage applications in 2021, a year before her Senate confirmation to the Fed. Cook was initially appointed by then-President Biden.

The mortgage allegations formed the bulk of a criminal referral that Federal Housing Finance Agency Director Bill Pulte sent to the Justice Department early last week. Within days, Trump urged her resignation and then fired her.

Cook has not been charged or convicted of wrongdoing. Her filing was scarce in providing more details about the mortgage allegations against her.

It said she possibly "mislabeled a home’s purpose on a mortgage application well before her Board appointment without any allegation of its intentionality or materiality and would not be the type of ‘offense’ that would constitute ‘cause," according to Cook's lawyers. The lawsuit also said Cook wasn't provided an opportunity to respond to the claims that Pulte initially posted on social media before sending it to the Justice Department for investigation.

A spokesperson for the Fed said earlier this week that it will "abide by any court decision."