NEW YORK/WASHINGTON: United States President Donald Trump announced the immediate dismissal of Federal Reserve Governor Lisa Cook over allegations of improprieties in mortgage loan applications.
Trump cited “sufficient cause to remove you from your position” in a letter addressing Cook, the first African-American woman on the Federal Reserve’s governing board.
The allegations centre on Cook indicating both Michigan and Georgia properties as primary residences on separate 2021 mortgage documents.
Cook responded through her lawyer Abbe Lowell, stating “no cause exists under the law, and he has no authority” to remove her from the position appointed by former President Joe Biden in 2022.
Lowell declared they would “take whatever actions are needed to prevent this attempted legal action” against what he called demands lacking “proper process, basis or legal authority.”
Questions about Cook’s mortgages emerged last week from Federal Housing Finance Agency director William Pulte, who referred the matter to Attorney General Pamela Bondi for investigation.
Federal Reserve governors typically serve terms extending beyond presidential administrations, with Cook’s appointment lasting until 2038 unless legally removed.
The Federal Reserve Act permits removal of a sitting governor “for cause,“ though this provision has never been tested through presidential action since the 1970s.
Legal scholars note potential challenges involving executive power, the Fed’s unique structure, and whether Cook’s actions constitute valid grounds for dismissal.
University of Pennsylvania Fed historian Peter Conti-Brown observed that mortgage transactions occurred before her appointment and were publicly vetted during Senate confirmation.
Trump’s letter accused Cook of “deceitful and criminal conduct in a financial matter” that undermined confidence in her “integrity” and competence as a financial regulator.
Financial markets reacted with a steepening Treasury yield curve, reflecting expectations that Fed policy rates may drop while inflation risks increase.
SGH Macro Advisors’ Tim Duy noted this signals the administration’s determination to “remake the Federal Reserve” and serves as a warning to other Biden appointees.
The dismissal attempt coincides with broader Trump administration efforts against diversity, equity and inclusion programs in the US government.
Cook obtained the mortgages in 2021 while working as an academic, with primary residence loans typically carrying lower rates than investment property mortgages.
Trump has repeatedly criticised Fed Chair Jerome Powell over interest rates, though halted previous threats to remove him with Powell’s term ending in nine months.
Cook’s potential departure would enable Trump to select his fourth appointment to the Fed’s seven-member board, reshaping monetary policy leadership. – Reuters