Trump Drops Fed Governor Cook in Mortgage Scandal

By Staff, Agencies

US President Donald Trump on Monday said he was firing Federal Reserve Governor Lisa Cook over alleged improprieties in obtaining mortgage loans.

This unprecedented move could test the limits of presidential power over the independent monetary policy body if challenged in court.

Trump told Cook, the first African-American woman on the Fed board, he had “sufficient cause” to remove her over 2021 documents where she claimed two mortgage properties as primary residences.

Cook, appointed by Biden in 2022, has not yet explained the mortgage transactions after the US Federal Housing Finance Agency raised concerns and referred the case to Attorney General Pamela Bondi.

Neither Cook or the Fed had immediate response to Reuters.

Although Fed governors serve fixed terms beyond a president’s tenure—Cook’s runs until 2038—the Federal Reserve Act permits removal “for cause.”

That has never been tested by presidents who, particularly since the 1970s, largely have taken a hands-off approach to Fed matters as a way to ensure confidence in US monetary policy.

Legal experts say a court challenge could raise issues about executive power, the Fed’s unique status, and whether Cook’s actions justify removal.

Trump in the letter accused Cook of having "deceitful and criminal conduct in a financial matter" and said he did not have confidence in her "integrity".

Trump cited negligence in Cook’s financial dealings, questioning her fitness as a regulator, and claimed authority to fire her under Article 2 and the 1913 Federal Reserve Act.

Cook had been defiant about continuing onward at the Fed after the issue first became public last week with Trump calling for her to resign.

Cook said on August 20 she won’t be bullied into resigning over “questions raised in a tweet” and is gathering accurate information to address any legitimate concerns about her finances.

The outcome remains uncertain, as officials from other independent agencies who resisted Trump’s firings faced costly legal battles with unclear results.

Trump’s move sparked a steepening US Treasury yield curve: 2-year yields dropped on near-term Fed policy hopes, while 10-year yields rose on inflation concerns ahead of the Sept. 16-17 Fed meeting.

The reaction reflects expectations that the Fed policy rate may drop but at the expense of its commitment to thwart inflation.