Trump moves to dismiss Fed Governor Lisa Cook in bold power play

Hold onto your wallets, folks — President Donald Trump just dropped a bombshell by announcing he’s canning Federal Reserve Governor Lisa Cook over allegations of mortgage fraud, as the Associated Press reports.

Trump’s Monday night decision, shared via a letter on Truth Social, marks an unprecedented challenge to the Fed’s storied independence, setting the stage for a legal showdown that could ripple through financial markets and inflation control efforts.

The drama kicked off when Bill Pulte, a Trump appointee overseeing Fannie Mae and Freddie Mac, accused Cook last week of claiming two primary residences in 2021 — one in Ann Arbor, Michigan, and another in Atlanta — to snag favorable mortgage terms.

Allegations of fraud spark controversy

Now, securing better rates by misrepresenting a second home or rental property as a primary residence isn’t just a clever loophole — it’s the kind of move that raises eyebrows, especially for someone shaping national monetary policy.

Trump didn’t mince words, stating, “I do not have such confidence in your integrity,” in his scathing letter to Cook, arguing her alleged deceit undermines public trust in the Fed.

But let’s pump the brakes — allegations aren’t convictions, and Cook, the first Black woman to serve as a Fed governor since her 2022 appointment by Joe Biden, isn’t backing down without a fight.

Cook fights back

Cook fired back, declaring, “I will not resign,” and insisting Trump lacks the legal authority to oust her without proper cause under the law.

Her attorney, Abbe Lowell, doubled down with a sharp jab, calling Trump’s action “procedurally invalid” and promising to take every step to block what he sees as an overreach of power.

Legal experts like Lev Menand are scratching their heads too, noting, “We’re in uncharted waters,” as no president has ever tried to directly fire a Fed governor in this manner.

Legal, market implications loom

The law does allow a president to remove a Fed governor “for cause” — think serious wrongdoing or neglect of duty — but not for mere policy disagreements, and certainly not without a proper hearing, which hasn’t happened here.

Financial markets took a hit with the news, as stock futures dipped slightly late Monday and the dollar softened against major currencies, hinting at investor jitters over this power play.

If Trump pulls this off, replacing Cook could tip the Fed’s board to a 4-3 majority of his appointees, especially after naming Stephen Miran to fill another recent vacancy left by Governor Adriana Kugler.

Threat to Fed’s independence under microscope

Trump’s broader agenda seems clear — he’s been vocal about wanting Fed officials who’ll push for lower borrowing costs, and he’s repeatedly criticized chair Jerome Powell for not slashing rates fast enough.

While Powell hinted last week at potential rate cuts despite inflation concerns, his term runs until May 2026, and even replacing him might not guarantee Trump the policy shift he craves with the Fed’s 12-member voting committee in play.

Here’s the kicker: if the Fed’s political insulation crumbles under moves like this, bond investors might lose faith in its ability to tame inflation, driving up rates on everything from mortgages to car loans — hardly the “lower costs” Trump champions, as Sen. Elizabeth Warren suggested, arguing that the move is little more than an “authoritarian power grab.”