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WASHINGTON (CN) — Lisa Cook, the Federal Reserve Board of Governors member who President Donald Trump moved to fire on Monday, challenged her removal in a lawsuit filed Thursday as an “unprecedented and illegal” attack on the central bank’s independence.
Cook filed the 24-page suit in the U.S. District Court for the District of Columbia, setting up a significant legal battle over what has long been deemed a red line in terms of the president’s ability to terminate political appointees.
“This case challenges President Trump’s unprecedented and illegal attempt to remove Governor Cook from her position which, if allowed to occur, would be the first of its kind in the board’s history,” Cook wrote. “It would subvert the Federal Reserve Act, (‘FRA’), 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.”
Cook argues that the Federal Reserve Act makes clear that the only causes for removal are inefficiency, neglect of duty, malfeasance in office or comparable misconduct. She says immediately firing her violated her due process rights.
In an Aug. 25 Truth Social post, Trump published a letter addressed to Cook that said her termination was “effective immediately.”
Trump cited accusations by Federal Housing Finance Agency Director William Pulte, a Trump appointee, who has said Cook engaged in mortgage fraud. In an Aug. 15 criminal referral to Attorney General Pam Bondi and DOJ Special Attorney Ed Martin, Pulte said Cook had wrongfully claimed two different houses as her main residence in 2021 to obtain better loan terms.
Pulte has made similar claims against California Senator Adam Schiff, a longtime Trump adversary, and New York Attorney General Letitia James, who brought the civil fraud case in New York against Trump.
Cook has denied any wrongdoing, noting that the conduct occurred before her Senate confirmation hearings in 2022 and did not sink her nomination.
She requests U.S. District Judge Jia Cobb, a Joe Biden appointee, declare that Trump’s attempted firing was unlawful, that Federal Reserve governors can only be removed for cause, that an unsubstantiated accusation of mortgage fraud is not cause for removal, and that Trump’s attempted firing violated her due process rights.
Additionally, she seeks an injunction against Fed Chair Jerome Powell and the Board of Governors blocking them from carrying out Trump’s attempted firing.
The Federal Reserve said Tuesday it would abide by the court’s ultimate decision.
The mortgage fraud charges mark a change in strategy for the president, who has successfully removed several similarly situated agency heads without an explicit reason, or “cause,” since taking office in January.
His efforts to terminate Merit Systems Protection Board Cathy Harris and National Labor Relations Board Member Gwynne Wilcox were most recently upheld by the Supreme Court, who ruled 6-3 on May 22 to freeze a lower court order to reinstate them.
“Because the Constitution vests the executive power in the president, he may remove without cause executive officers who exercise that power on his behalf, subject to narrow exceptions recognized by our precedents,” the majority wrote.
The ruling leaves the case at the D.C. Circuit, which has yet to rule on the merits of the case.
At oral arguments before the D.C. Circuit in May, Justice Department attorney Harry Graver conceded that the central bank should not fall under the president’s direct control as it sets monetary policy, which is not a traditional executive power, and has a “historical status” that warrants an exception.
The Supreme Court acknowledged the Federal Reserve’s “special historical status” in the 2020 case *Seila Law v. Consumer Financial Protection Bureau, * noting that while the bureau’s director could be removed as a “lesser executive officer,” the Federal Reserve and its members were unique.
Cook noted that the Supreme Court majority in *Wilcox v. Trump * explicitly cited that distinction in its decision.
“The Federal Reserve is a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States,” the majority wrote.
Trump has explicitly stated that if Cook can be removed, he could replace her; he would then hold a majority of the appointees on the central bank’s Board of Governors.
“It is clear from the circumstances surrounding Governor Cook’s purported removal from the Federal Reserve Board that the mortgage allegations against her are pretextual, in order to effectuate her prompt removal and vacate a seat for President Trump to fill and forward his agenda to undermine the independence of the Federal Reserve,” Cook says in her suit.
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