Trump's Fed firing push tests central bank independence after 5-4 ruling

The White House notified Federal Reserve Governor Lisa Cook that President Trump is "considering" removing her from the Board of Governors, demanding a response to unproven mortgage fraud allegations within three weeks, according to sources familiar with the letter.

"These allegations are as baseless now as they were a year ago when President Trump tried to remove Governor Cook and interfere with the independence of the Federal Reserve," Abbe Lowell, Cook's attorney, said in a statement.

The move follows a 5-4 Supreme Court ruling in June that upheld limits on the president's power to remove Fed board members. Chief Justice John Roberts wrote that Cook was entitled to notice and an opportunity to respond before removal "for cause," but the court declined to rule on the underlying allegations. The letter, signed by Deputy Chief of Staff Dan Scavino, alleges conduct punishable by up to 30 years in prison, though Scavino argued the allegations constitute "gross negligence" even if they do not amount to a crime.

The renewed effort threatens to reignite a legal fight that has already produced rulings from a federal district judge and the D.C. Circuit refusing to allow Cook's firing. With the Supreme Court explicitly leaving the door open for Trump to attempt removal after due process, the coming weeks will test whether the Fed's structural independence can withstand sustained executive pressure — with potential consequences for Treasury yields, the dollar, and equity valuations if markets perceive political interference in monetary policy.

The allegations against Cook stem from two criminal referrals made by Bill Pulte, the director of the Federal Housing Finance Agency and chairman of Fannie Mae and Freddie Mac. Pulte has filed multiple referrals against Trump critics, including New York Attorney General Letitia James and Sen. Adam Schiff. The Department of Justice launched an investigation last year based on Pulte's claims that Cook falsified bank documents to obtain favorable loan terms.

Trump first sought to remove Cook last August as part of a broader campaign to pressure the central bank into lowering interest rates. Ed Martin, the U.S. Pardon Attorney and director of the DOJ's "Weaponization Working Group," wrote to Federal Reserve Chairman Jerome Powell urging Cook's removal. "At this time, I encourage you to remove Ms. Cook from your Board. Do it today before it is too late!" Martin wrote.

Cook, who was confirmed by the Senate in a 50-50 vote with then-Vice President Kamala Harris breaking the tie, has denied wrongdoing and has never been charged with a crime. "This was never about mortgage documents signed years before I became a Federal Reserve governor," she said after the Supreme Court ruling. "It was an attempt to remove me on a manufactured pretext because I refused to bow to political pressure and continued to set interest rates based only on what would best serve the American people."

The Three-Week Clock

In the June ruling, Roberts wrote that "any change in that scheme must come from Congress, not the courts," rejecting the government's argument that the president could remove a Fed board member at will. But the court also declined to rule on the underlying allegations, noting that "the ultimate question of whether the President can remove Cook for cause will depend in part on the underlying facts."

U.S. District Judge Jia Cobb, who previously blocked the firing, wrote that "Cook is one of seven members of a Board that is, by design, not intended to be susceptible to policy pressure, let alone tasked with implementing the President's agenda."

The three-week response window gives Cook's legal team until roughly late August to respond. If Trump proceeds with removal after that, the case would return to the courts, which would need to weigh whether the allegations meet the legal standard for "for-cause" removal of a Fed governor.

The stakes extend beyond Cook herself. The Federal Reserve's independence is a cornerstone of U.S. monetary policy credibility, and markets have historically priced in a premium for the central bank's insulation from political pressure. A successful removal could set a precedent that undermines that insulation, with implications for Treasury yields, the dollar, and equity valuations.

This article is for informational purposes only and does not constitute investment advice.