When the news broke last Tuesday that President Donald Trump had ordered the firing of a member of the Federal Reserve’s Board of Governors, one could be forgiven for thinking it was Jerome Powell. Trump has spent years attacking the Fed chair and repeatedly threatened to can him.
But Powell’s job is safe, for now. Instead, the president fired Lisa Cook, one of the seven-person board’s other members, citing allegations that she had committed mortgage fraud.
Cook, however, refused to go and filed a lawsuit Thursday asking the courts to affirm her status as a Fed governor. Before Trump, no president had ever removed a sitting Fed board member in the 111-year history of the central bank, and the attempted firing is just the latest in a string of attacks that the administration has launched against the Fed’s independence.
Trump’s principal foot soldier in his fight against the Fed is the leader of an independent federal housing agency. William Pulte, the director of the Federal Housing and Finance Agency (FHFA) that oversees mortgage giants Fannie Mae and Freddie Mac, surfaced allegations last month that Cook had submitted fraudulent information on mortgage paperwork. On social media, Pulte posted screenshots of mortgage paperwork attributed to her that listed both an apartment in Atlanta and a home in Michigan as principal residences in documents filed two weeks apart in the summer of 2021, before President Joe Biden nominated her for the Fed board in 2022.
On Thursday, Pulte made additional allegations regarding a third property, saying Cook listed a Massachusetts property as a second home in mortgage paperwork but later presented the residence as an investment/rental property on federal financial disclosures. Pulte also compounded the earlier allegations regarding Atlanta and Michigan properties, claiming Cook falsely represented them in disclosures made while a Fed governor as residences and that FHFA “has reason to believe” the properties have been used as rentals. Pulte provided no evidence to support this claim aside from the Atlanta property being briefly listed on Zillow. Pulte sent criminal referral letters to the Justice Department based on the allegations.
Cook has yet to be charged with any crimes, but that hasn’t stopped Pulte from declaring her guilty of fraud and calling her “a professional liar.” The governor responded to the allegations in a statement saying, “I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts.”
Cook has not publicly contested the veracity of the documents Pulte cited; her lawyers called the fraud allegations “unsubstantiated.” But the documents’ accuracy alone would not automatically demonstrate criminal fraud, as Pulte and the president claim. Proving fraud would require showing that an individual intentionally made a false statement. “Anytime there’s a criminal case involving fraud, there needs to be an intent to defraud,” Robert Altchiler, a New York defense attorney who has worked on mortgage fraud cases, told The Dispatch.
Errors in filling out mortgage paperwork are not uncommon. “Some people do it perfectly, some people miss on certain things, but not intentionally, and then other people just lie,” Altchiler said.
Jonathan Kanter, a former assistant attorney general at the Justice Department during the Biden administration, said proving mortgage fraud in court can be difficult, adding that the allegations against Cook are “not something ordinarily the Department of Justice would investigate and use its scarce resources to address.” The Justice Department prosecuted fewer than two dozen mortgage fraud cases in fiscal year 2024.
Regardless of the merits of the allegations or Cook’s potential criminal liability, the circumstances surrounding her firing indicate that the administration is focused more on exerting executive control over the Fed than executing a crackdown on mortgage fraud.
Pulte, a wealthy political donor who first rose to social media prominence by engaging with the president online during his first term, seems to be using his position as FHFA director to go after Trump’s political enemies and boost his own profile by publishing a steady drip of allegations and documents on his personal social media account. While Pulte said the Cook investigation emerged from a tip his agency received, the FHFA did not respond to The Dispatch’s request for a comment confirming that.
Instead of waiting for the Justice Department to assess the claims, Pulte made a flood of media appearances to opine on Cook and the Fed. He did the same when he referred to the Justice Department allegations of mortgage fraud against Democratic Sen. Adam Schiff and New York Attorney General Leticia James—both individuals whom Trump said should be prosecuted while campaigning in 2024. Pulte has said his mortgage fraud scrutiny is applied regardless of political affiliation. But the agency has not commented on—much less referred to the Justice Department—allegations that Texas Attorney General Ken Paxton has allegedly listed three homes as his primary residence in mortgage paperwork. (Paxton is a Trump ally and is currently campaigning for a Senate seat.)
Pulte’s X account is filled with hundreds of posts attacking the Fed, calling for Fed Chair Powell to resign. He’s so focused on the Fed that he claims to have “sources” actively speaking with Powell and has speculated on whether the chair has hired a PR firm.
“The trajectory we are on may educate us all, [may] make more vivid the costs of destroying an institution that has taken decades to build up.”
David Wilcox, former director of the Fed’s division of research and statistics
The president has spent nearly seven years publicly attacking Powell over interest rates, saying he should resign, and musing on whether he should be fired. Trump reportedly showed a draft letter firing Powell to Republican lawmakers last month, and Pulte was reportedly the source of the letter. Recently, the president has mentioned talk of fraud as a potential justification to oust Powell, speculating fraud could be involved in the increased construction costs of the renovation of the Fed’s Washington, D.C., headquarters.
The president and his allies’ repeated scrutiny of the central bank has called into question the Fed’s independence and its insulation from politically driven monetary policy. Vice President J.D. Vance, in an interview Thursday, emphasized that the important issue is not the case against Cook, but whether the president can control interest rate decisions. “Let’s just say for the sake of argument that Lisa Cook had done absolutely nothing wrong, isn’t it a little preposterous that the president of the United States … doesn’t have the ability to make these determinations?” Vance said.
Trump has made clear that his aim is to secure a “majority” of Fed Board members to go along with his desire to slash the federal funds rate, and Pulte also has pushed for lower rates, arguing the Fed is holding back the housing market. “We’ll have a majority very shortly,” Trump said Tuesday after firing Cook. He’s called for the Fed to cut the rate by a whopping 3 percent, or 300 basis points. The central bank is considering a cut this month—typically done in increments of a quarter of a percent— but has kept the rate at a target range of between 4.25 and 4.5 percent since December.
But Cook’s lawsuit argues the president’s attempt to fire her is illegal and simply a pretext for pressuring the Fed. Congress, through the Federal Reserve Act (FRA), afforded Fed Board governors with 14-year terms to insulate them from political pressure, and Cook’s term won’t expire until 2038. The law also stipulates that the president can only remove a governor “for cause.” The FRA does not define what constitutes “cause,” but other statutes on removal protections have defined it as involving “inefficiency, neglect of duty, or malfeasance in office.”
Cook’s attorneys argue that the firing doesn’t meet the cause requirement. First, the fraud allegations concern conduct that occurred before she took office. Second, the president did not provide Cook with proper notice and a hearing on her removal. Finally, the allegations themselves are “unsubstantiated,” yet the president fired her before any investigation had found a factual record proving fraud.
“President Trump’s conception of ‘cause’ has no limiting principle; it would allow him to remove any Federal Reserve Board member with whom he disagrees about policy based on chalked up allegations,” her attorneys wrote in a legal filing.
In response, the government argued in a brief that the law vests the president with the discretion to determine what constitutes a cause for firing, and that the courts must defer to the president’s determination. The first hearing on the suit was held in federal court in Washington, D.C., on Friday, but the judge made no ruling and gave Cook and her attorneys until Tuesday to respond to the government’s brief.
Some legal scholars believe the president may in fact have the legal authority to fire Cook. “The firing of Lisa Cook ‘for cause’ may be pretextual but is not obviously illegal,” said Harvard Law School professor Jack Goldsmith. In a podcast, he and Aditya Bamzai, a University of Virginia Law School professor who has researched for-cause provisions and the Fed, cited the Supreme Court’s 2021 decision in Collins v. Yellen, in which the court suggested that statutes with undefined for-cause protections seem to “give the President more removal authority than other removal provisions” that stipulate the specific causes. But the court also indicated that for-cause provisions do not enable the president to fire individuals at will.
“We haven’t had a lot of cases interpreting what ‘for cause’ means, and this is a highly unusual case and a highly unusual context,” Goldsmith emphasized. The Supreme Court also recently signaled support for the Fed’s unique legal independence in a May procedural order regarding Trump v. Wilcox, a case dealing with the president’s firing of members of the National Labor Relations Board and the Merit Systems Protection Board.
If Trump succeeds in firing Cook, he could soon install two loyalists. The president has already nominated Stephen Miran, the current chair of the Council of Economic Advisers (CEA), to fill a vacancy that emerged when Fed Governor Adriana Kugler announced her resignation earlier this month, six months before her term would have expired; Miran could be confirmed by the Senate as soon as this week. Two new members combined with the two current governors appointed by Trump in his first term, Michelle Bowman and Christopher Lawler, would give the board a majority of Trump-nominated governors.
But that doesn’t mean the board would suddenly be in lock-step with the president. “[Bowman] and [Lawler] have demonstrated themselves to be thoughtful, reflective folks who care about the independence of the central bank,” Chris Hughes, the founder of the Economic Security Project and the author of a recent book on economic policymaking and the Fed, told The Dispatch. The pair support cutting rates and both voted against the Fed’s July decision to hold rates steady, but have not advocated for the dramatic slashing the president wants.
What’s more, the Fed’s Federal Open Market Committee (FOMC) is the body that sets rates. The 12-member committee includes the seven Fed governors, the president of the New York Fed, and a rotating selection of four presidents from the other 11 regional reserve banks.
Still, economists and former officials worry Cook’s firing, if upheld by the courts, could be the beginning of the end for the bank’s independence. If what constitutes a valid cause for removal is wholly the province of the president, then Trump could conceivably come up with reasons to fill the entire board with his allies, and consequently, secure a majority on the FOMC.
“This is bigger than just going after one governor,” said former Cleveland Fed President Loretta Mester. “If the president ends up being successful … removing someone just based on an allegation, a rumor, an innuendo, without any kind of facts on the table, then we have lost Fed independence because anybody would be subject to that kind of arbitrariness.”
The economic track record of central banks that fall under direct political control is bleak. “If the central bank becomes responsive to the executive, whether it’s a Democrat or Republican, in the long term, it will unquestionably mean longer-term, higher inflation,” said Hughes, citing countries like Turkey where political interference in monetary policy has led to skyrocketing prices.
“The trajectory we are on may educate us all, [may] make more vivid the costs of destroying an institution that has taken decades to build up,” David Wilcox, a former director of the Fed’s division of research and statistics, told The Dispatch. “I fear that the administration is more focused on bringing an institution under its control than it is focused on maximizing the economic well-being of the American public.”
