(Bloomberg) — Donald Trump moved to oust Federal Reserve Governor Lisa Cook, a dramatic escalation in the president’s battle for more control over the US central bank that unnerved investors.
In a letter posted on Truth Social late on Monday, Trump said he had “sufficient cause” to fire Cook, the first Black woman to serve on the Fed Board in Washington, based on the allegations she made false statements on one or more mortgage loans.
The move, which prompted losses for long-dated US Treasuries in Tuesday trading, could give Trump another chance to name someone to the Fed board as he repeatedly pressures officials to lower interest rates.
Cook was defiant and refused to quit. Forcing out the official appointed by President Joe Biden in 2022 would give Trump an opportunity to secure a four-person majority on the Fed’s seven-member Board of Governors.
“At the moment, he is all about the Fed,” Tina Fordham, founder of Fordham Global Foresight, told Bloomberg Television. “He is committed, it seems, to really testing the limits of executive authority in the United States.”
In his letter to Cook, the president suggested that she has lost the faith in her integrity required for someone in her position.
“The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve,” Trump wrote in the letter sent to Cook on Monday. “In light of your deceitful and possibly criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.”
Cook’s term was not set to expire until 2038. The central bank declined to comment. Her lawyer, Abbe Lowell, pledged to take “whatever actions are needed to prevent” the president’s “illegal action.”
“President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” Cook herself said in a statement released by her attorney. “I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022.”
In challenging the removal order, Cook could immediately seek an injunction reinstating her while litigation moves forward. No charges have been filed against her, though a Justice Department official last week signaled possible plans to investigate her.
“This is a kill shot at Fed independence,” said Aaron Klein, a senior fellow at the Brookings Institution. “Trump is saying the Fed is going to do what he wants it to do, by hook or by crook.”
A gauge of the dollar declined as much as 0.3% and gold rose as much as 0.6% after Trump moved to fire Cook, though the greenback cut its losses and gold trimmed gains after she pledged to stay on.
The yield on 30-year bonds rose, reflecting the market’s expectation that price pressures could sharpen if Trump were to succeed in replacing Cook with a policymaker more inclined to lower borrowing costs.
“Even if you don’t believe anything is going to come of this — that there won’t be any changes at the Fed — in the near term what it implies is, the risk premium for holding long-term Treasuries needs to go even higher,” Kathy Jones, chief fixed income strategist at Charles Schwab & Co, told Bloomberg TV.
“The political heat on the FOMC has reached a new high. The difference between this assault on Fed independence, versus previous threats to fire Fed Chair Jerome Powell is that Trump has taken action. What’s more, the removal of Cook could open a narrow path toward a facelift for the FOMC that could see it stacked with policymakers with a dovish bias.”
—Anna Wong, chief US economist at Bloomberg Economics.
While a president has never removed a Fed governor from office, one can do so for cause. Laws that describe “for cause” generally define the term as encompassing three possibilities: inefficiency; neglect of duty; and malfeasance, meaning wrongdoing, in office.
Trump had earlier called for Cook’s resignation after Federal Housing Finance Agency Director Bill Pulte alleged she lied on loan applications for two properties — one in Michigan and one in Georgia — claiming she would use each property as her primary residence to secure more favorable loan terms.
Trump said it was “inconceivable” that Cook was not aware of requirements in two separate mortgage applications taken out in the same year requiring her to maintain each property as her primary residence.
“At minimum, the conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your experience and trustworthiness as a financial regulator,” Trump wrote.
The Fed’s perceived independence from government whims is a bedrock assumption of US markets, and any change to that perception could weigh on US credit ratings.
S&P Global Ratings, in a note earlier this month affirming the US at AA+, warned that its sovereign credit rating could “come under pressure if political developments weigh on the strength of American institutions and the effectiveness of long-term policymaking or independence of the Federal Reserve.”
‘Power Grab’
The announcement was also met with pushback from Democrats. Senator Elizabeth Warren questioned the legality of the move in an emailed statement.
“The illegal attempt to fire Lisa Cook is the latest example of a desperate president searching for a scapegoat to cover for his own failure to lower costs for Americans,” Warren said. “It’s an authoritarian power grab that blatantly violates the Federal Reserve Act, and must be overturned in court.”
Trump and the White House have been relentless in their attacks on the Fed this year, arguing high interest rates have added to the government’s financing costs and damaged the housing market.
Yet the decision to oust Cook sets the stage for a potential legal battle that would constitute uncharted territory for the Fed. In a ruling earlier this year, the Supreme Court signaled it would shield the central bank from the type of at-will removals of board members Trump has undertaken at other independent federal agencies.
Peter Conti-Brown, a professor and Fed historian at the Wharton School of the University of Pennsylvania, said this case could become a test of the court’s intentions.
“The legal landscape from here is that Governor Cook can resist this and can litigate it, and then we would get clarity on what the Supreme Court means when they say that Lisa Cook has for-cause protection and what the contours of that protection are,” Conti-Brown said.
“In other contexts, for-cause protection has applied to the public office, which suggests that the cause in question is about neglect of duty, inefficiency in office, mal-appropriation while in office. If the court reads for-cause protection to be relevant to what occurred during the public office, then of course this is irrelevant.”
DOJ Probe
Trump’s announcement comes after the US Department of Justice indicated it planned to investigate Cook, following a criminal referral from Pulte alleging that she may have committed mortgage fraud. That investigation marked the latest in a series of moves by the Trump administration both to increase legal scrutiny of Democratic figures and put pressure on the central bank.
Cook said Aug. 20, after Pulte initially called on US Attorney General Pam Bondi to investigate, that she had “no intention of being bullied to step down from my position because of some questions raised in a tweet.” She added that she did “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.”
Pulte, in a statement posted to social media, thanked Trump for removing Cook. “If you commit mortgage fraud in America, we will come after you, no matter who you are,” he wrote.
During her initial confirmation process, Cook faced intense scrutiny from Republican lawmakers and conservative media outlets who accused her of misrepresenting parts of her resume and tried to use that to sink her nomination. She strongly denied the allegations and was confirmed on a party-line vote in the Senate, with then-Vice President Kamala Harris stepping in to break the 50-50 tie.
Cook has expressed worry over inflation and tariffs this year, but also said in early August that the July jobs report was “concerning” and could indicate a potential turning point for the US economy.
Fed officials have held their benchmark rate steady so far in 2025 in defiance of Trump amid concerns that tariffs and other policies will fuel inflation, though on Friday Fed Chair Jerome Powell signaled policymakers may cut rates when they meet in September due to rising risks to the labor market.
–With assistance from Meghashyam Mali, Justin Sink, Amara Omeokwe, Catarina Saraiva, Malcolm Scott, Joumanna Bercetche and Dani Burger.
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