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Federal Reserve Gov. Lisa Cook has filed a lawsuit against President Donald Trump, calling his attempt to fire her over mortgage fraud allegations an “unprecedented and illegal move.”
The lawsuit filed on Thursday in Washington, DC, federal court accuses Trump of violating the Federal Reserve Act, and Cook’s constitutional rights to due process, by attempting to fire her through a social media post.
Cook is seeking an immediate court injunction confirming her status as a member of the Fed’s Board of Governors, which would allow her to vote on interest rate policy at the next Federal Open Market Committee (FOMC) meeting in September.
In response to the suit, White House spokesman Kush Desai told Realtor.com® that Trump “exercised his lawful authority to remove a governor on the Federal Board of Governors” under a federal law that allows the president to remove a Fed governor “for cause.”
“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 Desai. “The removal of a governor for cause improves the Federal Reserve Board’s accountability and credibility for both the markets and American people.”
(X/@drlisacook)
Cook in her lawsuit argued that Trump lacked sufficient cause to fire her, because his decision was based on claims made on social media, rather than any formal criminal indictment or conviction.
Trump-appointed housing regulator Bill Pulte last week accused Cook of lying on a mortgage application by listing two separate properties as her primary residence. Pulte publicized the claim on social media on Aug. 20 and said that he had referred the matter to the Justice Department for a criminal investigation.
Days later, Trump posted a letter to Cook on his Truth Social site stating that he was removing Cook from her post “effective immediately” over the allegations raised by Pulte.
Cook’s lawsuit alleges that Trump never sent her the letter before posting it publicly, and that his Truth Social announcement was the first she heard of his move to fire her, giving her no chance to respond to Pulte’s allegations or defend herself.
“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,” the lawsuit states. “The operational independence of the Federal Reserve is vital to its ability to make sound economic decisions, free from the political pressures of an election cycle.”
A Fed spokesman previously told Realtor.com that the central bank would abide by any court decision in the matter.
Escalation of Trump’s pressure campaign against the FOMC
Trump’s attempt to fire Cook follows months of mounting pressure from his administration on Fed Chair Jerome Powell and the rest of the FOMC to lower the Fed’s benchmark rate, which would juice the economy and reduce government borrowing costs.
Trump has also accused Powell of “hurting the housing industry badly” by leaving the Fed policy rate steady, saying that “people can’t get a mortgage because of him.”
Mortgage rates have averaged above 6.5% since the beginning of the year, adding to affordability woes for homebuyers and keeping home sales suppressed near a 30-year low.
The Fed, wary of lingering inflation, has kept its key overnight interest rate steady at a range of 4.25% to 4.5% since December, angering Trump and his allies who have demanded rate cuts.
Cook was one of eight policymakers who backed Powell in holding rates steady at the last FOMC meeting in July, and replacing her would allow Trump to stack the committee with an additional voice in support of his preferred easy money policies.
Appointed by President Joe Biden in 2022 as the first Black woman on the Fed Board of Governors, Cook was scheduled to serve a full 14-year term ending in 2038.
Trump’s attempt to fire her adds pressure on the FOMC following months of the president heaping insults and threats on Powell, a Republican banker whom the president himself appointed as Fed chair during his first term in 2018.
Paradoxically, Trump’s unprecedented standoff with Cook comes even as the FOMC is expected to cut its benchmark rate, as the president desires, in a matter of weeks.
In a speech last week, Powell signaled his openness to a rate cut at the Sept. 17 meeting, saying that the “balance of risks” in the economy was shifting away from inflation and toward the threat of layoffs.
Mortgage rates have fallen in expectation of a Fed cut, with the average 30-year rate falling to a new 10-month low of 6.56% on Thursday, according to Freddie Mac.
However, the Fed does not control mortgage rates, which rise and fall based on investor expectations about future economic conditions and monetary policy.
“It is important to remember the Fed sets short-term rates, not long-term rates,” says Realtor.com senior economist Jake Krimmel. “So cuts to the Fed’s policy rate do not necessarily pass through into 30-year mortgage rates, which more closely track 10-year Treasury yields set by financial markets.”
Krimmel notes that price movement in the bond market following Trump’s move to fire Cook showed rising inflation expectations as long-term yields rose, a trend that will put upward pressure on mortgage rates.
“The financial markets are likely to see the erosion or outright elimination of Fed independence as an inflationary force, not a stabilizing one,” he says. “If this pattern holds, that could mean higher mortgage rates for borrowers in the future, not lower rates.”
Trump ally Pulte levels mortgage fraud charge at Cook
Last week, Pulte publicly accused Cook of lying on a mortgage application in 2021, alleging that she falsely claimed an Atlanta condo as her primary residence but went on to rent out the property.
“How can this woman be in charge of interest rates if she is allegedly lying to help her own interest rates?” Pulte wrote in a post on X.
Pulte also shared a copy of a letter he wrote to Attorney General Pam Bondi, recommending a criminal investigation of Cook on suspicion of falsifying bank documents and committing mortgage fraud.
The letter alleged that in summer 2021, Cook purchased a Michigan home and a condo in Atlanta within a few weeks of each other, and affirmed in mortgage documents for each property that it would be her primary residence for at least a year.
Pulte further alleged that the Atlanta condo was listed as available for rent just two months after Cook purchased it, negating her claim on the mortgage application that it would be her primary residence.
Mortgage rates for primary residences are typically lower than those for second homes or investment properties. Making false statements on a mortgage application, including about the borrower’s finances or the nature of the property that secures the loan, can be prosecuted as a federal crime.
However, Cook has not been criminally charged in the matter, much less convicted. The fraud alleged by Pulte dates to before Cook became a Fed governor in 2022.
This is a developing story.