Trump's Attempt to Dismiss Cook Board Member Expected to Escalate into Legal Battle

In Response to Trump's Dismissal Letter, Cook "Refuses to Resign" and Hires Attorney

No Precedent for U.S. President Dismissing a Federal Reserve Board Member—Legal Battle Expected

Lisa Cook, a Federal Reserve Board member whom President Trump announced he would dismiss, has rejected the dismissal stating there is no legal basis for it. This is expected to result in legal proceedings.

On the evening of the 25th local time, President Trump released a dismissal letter for Lisa Cook of the Federal Reserve Board on his social media. In the letter, Trump cited the claims of Federal Housing Finance Agency Director Bill Pulte, alleging Cook made false statements when applying for a mortgage.

On the 26th (local time), CNBC pointed out that this was an unprecedented and dramatic move by a president attacking the Fed’s independence because the U.S. central bank is not lowering interest rates.

After Trump's public letter, Cook issued a statement asserting, "President Trump is attempting to fire me for reasons that do not exist under current law," and stated, "He does not have the authority to dismiss me." Cook further declared, "I will not resign," and "I will continue to fulfill my duties."

Cook has retained renowned attorney Abbe Lowell, and legal disputes regarding her dismissal are expected to follow.

In 2022, former President Joe Biden appointed Cook as the first Black woman to serve as a Federal Reserve Board member.

Attorney Lowell issued a statement saying, "President Trump, by launching yet another attack on social media, is increasing the harassment, and his demands have no due process, justification, or legal authority." He added, "We will take all necessary measures to prevent his unlawful actions."

According to Bloomberg, Cook can immediately seek an injunction for reinstatement while a lawsuit proceeds against the dismissal order. Although no charges have been filed against Cook yet, a Department of Justice official last week suggested the possibility of an investigation into Cook.

If Cook challenges the dismissal in federal court and appeals the judge’s decision, the Supreme Court would ultimately rule on whether her removal was lawful.

The Federal Reserve Act, enacted by the U.S. Congress in 1913, restricts the president’s unilateral power to fire a Fed board member. The law states that the president may remove a board member "for cause."

The statute does not provide details about such cause, but historically it is interpreted to mean explicit illegal actions or dereliction of duty.

There is almost no precedent for a U.S. president dismissing a Fed board member, making it difficult even for experts to predict how the legal battle will unfold. The political ramifications are also expected to be extremely complex.

Aaron Klein, a senior fellow at the Brookings Institution, noted, "This is a fatal blow to Fed independence: President Trump is saying he will do whatever he wants."

President Trump cited mortgage fraud allegations as grounds for dismissal.

He pointed out that Cook signed documents making two separate properties—one in Michigan, another in Georgia—her primary residence within two weeks. While not explicit fraud, he argued, "at a minimum, this shows gross negligence in financial dealings, calling into question your competence and credibility as a financial regulator."

Massachusetts Democratic Senator Elizabeth Warren issued a statement Monday night, saying, "This illegal attempt to fire Lisa Cook is the latest example of President Trump desperately seeking a scapegoat for his own failure to lower costs for Americans."

Senator Warren, a member of the Senate Committee on Banking, Housing, and Urban Affairs, argued, "This is an authoritarian seizure of power that flagrantly violates the Federal Reserve Act and must be overturned in court."

Edward Mills, managing director at financial advisory firm Raymond James, said that President Trump dismissing Cook amounts to "the White House seeking to exert direct influence over monetary policy decisions." He added, "Markets are likely to view this attack on Fed independence negatively, increasing uncertainty about future policy direction."

Prior to trying to fire Cook, President Trump had spent months threatening and complaining about the Fed and Chair Jerome Powell for not lowering interest rates as he requested.

According to a senior White House official, on July 15, President Trump asked Republican lawmakers whether Powell should be dismissed, and they agreed. Trump then said he would proceed, but the next day publicly denied intending to fire Powell, though he left the possibility open.

Of the seven Fed board members, two—Christopher Waller and Michelle Bowman—were appointed by President Trump. Trump named Powell as Fed Chair in 2017.

As of this day, the Federal Reserve Board currently has six members, including Cook. After Adriana Kugler resigned earlier this month, one seat remains vacant. President Trump nominated Council of Economic Advisers Chair Steven Miran to fill Kugler's seat.

If Miran is confirmed by the Senate, Trump dismisses Cook, and succeeds in confirming a replacement aligned with his views, Trump's appointees would constitute a 4–3 majority on the seven-member Fed board.

The board, together with five regional presidents who take turns, forms the Federal Open Market Committee (FOMC), which sets the central bank’s benchmark interest rate. However, the board alone controls several other interest rates, including interest paid on reserves banks hold at the Federal Reserve.

Byung-ah Kim, Contributing Reporter kja@hankyung.com