Federal Reserve Governor Lisa Cook has launched a landmark lawsuit against President Donald Trump, setting the stage for a high-stakes legal battle over the independence of the nation’s central bank. The case, filed Thursday in Washington, D.C., federal district court, seeks to block Trump’s attempt to remove Cook from the powerful seven-member Fed board—a move that experts say could have far-reaching consequences for the global economy and the future of independent U.S. agencies.
Cook, who was appointed to the Federal Reserve in 2022 by former President Joe Biden and is the first Black woman to serve on the board, alleges that Trump violated the law by seeking her ouster without valid cause. Trump, in an August 25 letter, accused Cook of “deceitful and criminal conduct in a financial matter,” specifically citing allegations that she submitted fraudulent information on mortgage applications. Cook, for her part, has categorically denied any wrongdoing and insists that no legal grounds exist for her removal.
According to The Economic Times, the lawsuit filed by Cook challenges not only the president’s authority to remove a Fed governor, but also the very principle of central bank independence that underpins the U.S. financial system. The case could ultimately reach the Supreme Court, where it would test the limits of presidential power over agencies long considered independent from the White House.
“No causes exist under the law, and [Trump] has no authority,” Cook said in a statement, echoing the position laid out in her legal complaint. Her attorneys argue that Trump’s “demands lack any proper process, basis or legal authority.” The suit also names Fed Chair Jerome Powell and the entire Fed board as defendants, seeking to prevent them from complying with Trump’s order to remove her.
Trump’s move to oust Cook comes amid a broader campaign by his administration to assert greater control over independent agencies. Earlier this year, Trump fired Gwynne Wilcox, the first Black woman to serve on the National Labor Relations Board, and dismissed several other officials from agencies traditionally insulated from direct presidential influence. The president has also repeatedly criticized Fed Chair Powell for not lowering interest rates and for his handling of a multibillion-dollar renovation project, though he has so far refrained from removing Powell before his term ends in May 2026.
As reported by The Wall Street Journal, Trump’s allegations against Cook were first publicized by Bill Pulte, a Trump appointee who leads the Federal Housing Finance Agency. Pulte referred the matter to the Justice Department, but Cook has not been charged with any civil or criminal violation. Her 2024 financial disclosure lists three mortgages, with two designated as personal residences—a detail relevant because loans for primary residences often carry lower interest rates than those for investment properties.
In her lawsuit, Cook contends that Trump “concocted” a pretext for her firing in violation of the Federal Reserve Act, which states that board members can only be removed “for cause.” The act, however, does not define what constitutes cause. Traditionally, statutes governing other independent agencies reference neglect of duty, malfeasance, or inefficiency as grounds for removal. Cook’s legal team argues that “an unsubstantiated allegation” of mortgage fraud prior to her Senate confirmation does not meet this threshold.
“Even if the President had been more careful in obscuring his real justification for targeting Governor Cook, the President’s concocted basis for removal—the unsubstantiated and unproven allegation that Governor Cook ‘potentially’ erred in filling out a mortgage form prior to her Senate confirmation—does not amount to ‘cause’ within the meaning of the FRA and is unsupported by caselaw,” the lawsuit asserts, as cited by The Wall Street Journal.
Trump, for his part, has made clear that he is ready for a protracted legal fight. He told advisers he wants to move quickly to name a replacement for Cook, according to the Journal. The lawsuit also seeks a temporary restraining order to allow Cook to remain on the board while the case plays out in court. A hearing on the matter is set for Friday morning, August 29, before Judge Jia Cobb, herself a Biden appointee. The outcome of the case is expected to be appealed, quite possibly all the way to the Supreme Court, given the stakes involved.
The Federal Reserve, through a spokesperson, has said it will abide by any court decision. However, the uncertainty surrounding Cook’s status adds a layer of complexity as the Fed approaches its next policy meeting on September 16–17. The board is currently split between two Trump appointees from his first term and two Biden appointees, with the remaining seats filled by the presidents of the Fed’s regional reserve banks. Eight times a year, this group votes on interest rates, balancing the twin goals of curbing inflation and supporting job growth.
Cook’s legal battle comes at a time of heightened scrutiny for the Fed. The central bank has held interest rates steady above 4.25% throughout 2025, with expectations building for a possible rate cut next month. Inflation, driven in part by tariffs, remains above the Fed’s 2% target, though Powell recently suggested that tariff-driven price increases are unlikely to persist in the long term. Meanwhile, a recent Labor Department report sharply revised downward estimates of job growth this spring, prompting Trump to fire the commissioner of the Bureau of Labor Statistics just hours after the data was released.
The broader context is one of growing tension between the White House and independent agencies. Recent Supreme Court rulings have weakened job protections for officials at such agencies, though the Court has hinted that the Fed may enjoy greater safeguards due to its unique status as a “quasi-private entity.” Still, no president has ever attempted to remove a sitting Fed governor before, making Cook’s case a true legal first.
Some observers worry that if Trump succeeds, it could set a precedent that undermines the Fed’s ability to act independently, with ripple effects for financial markets worldwide. Others argue that the president must have some authority to remove officials accused of misconduct, lest agencies become unaccountable.
As the legal battle unfolds, the eyes of the financial world are fixed on Washington. Cook’s fight is not just about her own job, but about the future of the institution she serves—and, by extension, the stability of the U.S. economy itself. For now, all sides await Friday’s hearing and the next moves in a saga that could reshape the balance of power between the White House and the nation’s most important financial regulator.