WASHINGTON — In a move stirring both legal and political controversy, the Justice Department has launched an investigation into Federal Reserve Governor Lisa Cook over allegations of mortgage fraud, a development that comes amid President Donald Trump’s contentious effort to remove her from the central bank’s board. The inquiry, which emerged publicly in early September 2025, has put the independence of the Federal Reserve under renewed scrutiny and raised questions about the rare use of federal charges in such cases.
The investigation follows a criminal referral from Bill Pulte, director of the Federal Housing Finance Agency and a Trump appointee. Pulte alleged that Cook misrepresented her primary residence status on mortgage applications for two properties she purchased in 2021—one in Ann Arbor, Michigan, and another in Atlanta—before her appointment to the Fed. According to The Associated Press, Pulte claimed Cook identified both as primary residences, a designation that can lead to more favorable mortgage terms compared to loans for second homes or investment properties.
Justice Department investigators have already issued subpoenas as part of the probe, confirming the seriousness with which authorities are treating the allegations. The inquiry is being coordinated by Ed Martin, director of the DOJ’s Weaponization Working Group and a known Trump ally. Martin is also overseeing similar mortgage fraud investigations into other prominent Democrats: New York Attorney General Letitia James and U.S. Senator Adam Schiff of California—both of whom have publicly denied any wrongdoing.
The timing and focus of these investigations have drawn intense criticism from Cook’s legal team and outside observers. Abbe David Lowell, Cook’s attorney, issued a pointed statement: “Predictably and recognizing the flaws in challenging their illegal firing of Governor Cook, the administration is scrambling to invent new justifications for its overreach. This Justice Department—perhaps the most politicized in American history—will do whatever President Trump demands.”
Indeed, the context surrounding the probe is inextricably linked to President Trump’s ongoing battle with the Federal Reserve. On August 25, 2025, Trump moved to fire Cook, citing the criminal referral and allegations of mortgage fraud as justification. Cook, however, has argued that her dismissal is not only unlawful but part of a broader strategy by Trump to exert political control over an institution designed by Congress to be insulated from day-to-day political pressures.
According to court filings, Cook’s lawyers insist that the president can only remove a Fed governor “for cause,” a standard historically interpreted as requiring evidence of inefficiency, neglect of duty, or malfeasance while in office. They maintain that Cook was not only denied due process—a hearing and an opportunity to respond to the charges—but that the alleged conduct does not constitute fraud. “The questions over how Governor Cook described her properties from time to time, which we have started to address in the pending case and will continue to do so, are not fraud, but it takes nothing for this DOJ to undertake a new politicized investigation, and they appear to have just done it again,” Lowell added in a statement to the press.
The Justice Department, for its part, has urged a federal judge to allow for Cook’s immediate removal while the legal battle unfolds, dismissing her claims as “baseless.” DOJ attorneys argue that the president has the authority to remove a governor for cause and that such decisions are not subject to judicial review. The case, now before a federal court in Washington, could set a precedent for the nearly 112-year-old Federal Reserve, whose independence has long been considered vital for making tough economic decisions, including the setting of interest rates.
According to Reuters, the federal government rarely brings criminal charges for the type of mortgage misstatements alleged in Cook’s case. A review of more than 600 federal cases involving false statements to lending institutions since 2017 found that only 20 involved criminal charges for misstating a primary residence on a mortgage application. Of those, just one was a standalone charge; the rest were part of larger indictments involving more serious criminal conduct, such as drug trafficking or bank fraud. “Federal prosecutors would rarely, if ever, bring federal fraud charges against a single borrower who makes this type of misrepresentation,” said Matthew Edwards, a law professor at Baruch College’s Zicklin School of Business and an expert on mortgage fraud, in comments to Reuters.
The investigations into Cook, James, and Schiff were all initiated after referrals from Pulte, according to sources and documents reviewed by Reuters. The DOJ’s Ed Martin, who has publicly signaled his aggressive approach to these cases—most notably by posting a photo of himself outside Letitia James’ Brooklyn home—has become a focal point for critics who see the probes as politically motivated. When asked by CNBC whether he was investigating similar conduct by Ken Paxton, the Texas attorney general and Trump ally, Pulte declined to comment on any case that had not been made public.
For Cook, the stakes extend far beyond her personal reputation or job security. Economists and central bank watchers warn that political interference in the Federal Reserve could undermine its ability to make unpopular but necessary decisions, such as raising interest rates to combat inflation. Trump has repeatedly criticized Fed Chair Jerome Powell and the rest of the central bank’s rate-setting committee for not cutting interest rates quickly enough, fueling fears that a White House-controlled Fed would keep rates artificially low to serve political ends rather than economic fundamentals.
The legal and political drama is unfolding at a time when public trust in nonpartisan institutions is already under severe strain. The rare nature of the charges, the high-profile figures involved, and the broader implications for central bank independence have all combined to make this a closely watched case in Washington and beyond. Cook, James, and Schiff have all denied any wrongdoing, and their legal teams are preparing for what could be a protracted fight in the courts.
As the case proceeds, it is likely to become a defining moment for the Federal Reserve and a test of the boundaries between political power and institutional independence. The outcome could reshape not only the careers of those directly involved but also the future of monetary policy in the United States.
With the legal wrangling far from over and the stakes higher than ever, all eyes remain on the federal courts and the halls of the central bank—where the battle for independence, and perhaps the very soul of U.S. economic policy, is being fought in real time.
