The U.S. Supreme Court has thrown a significant wrench into President Donald Trump’s historic bid to reshape the Federal Reserve, ruling on October 1, 2025, that Governor Lisa Cook must remain in her post while the legal battle over her dismissal plays out. This decision, delivered in a brief, unsigned order, sets the stage for oral arguments in January 2026, leaving the central bank’s independence hanging in the balance and financial markets watching closely.
Trump’s attempt to fire Cook—announced in late August—marks the first time a sitting president has tried to remove a Federal Reserve governor since the institution’s founding in 1913. The move has ignited a fierce legal and political showdown, highlighting the delicate relationship between the White House and the central bank, whose interest rate decisions ripple through every corner of the U.S. economy.
At the heart of the controversy are allegations of mortgage fraud. Trump accused Cook of designating both a Michigan home and a Georgia property as her “primary residence” on mortgage applications before she began her 14-year term in 2023. Cook, the first Black woman to serve as a Fed governor and an appointee of President Joe Biden, has vigorously denied any wrongdoing. According to Reuters, documents provided by Cook’s legal team indicate the Georgia property was properly classified as a vacation home, not a primary residence.
Cook’s response was swift: she filed a federal lawsuit challenging her removal, arguing that Trump lacked the “for cause” justification required under the Federal Reserve Act. Her lawyers have maintained that the president’s real motivation was policy disagreement, not ethical concerns. As her legal team put it in a Supreme Court filing, “The President purported to remove Governor Cook only after repeatedly criticizing her and her colleagues for failing to make monetary-policy choices that would prioritize short-term growth over long-term stability.”
The courts have so far sided with Cook. On September 9, U.S. District Judge Jia Cobb issued a preliminary injunction blocking her removal, finding she was “substantially likely” to succeed in her challenge. Judge Cobb ruled that the “for cause” provision in the Federal Reserve Act does not contemplate removing a governor for conduct that occurred before they took office. She also found that Cook’s constitutional due process rights had been violated, as she was not given adequate notice or an opportunity to respond to the allegations before being fired. The U.S. Court of Appeals for the District of Columbia Circuit upheld this decision on September 15 in a 2-1 ruling, rejecting the Trump administration’s emergency appeal.
Trump’s legal team, however, insists the president acted within his authority. White House Press Secretary Karoline Leavitt told reporters, “We look forward to that case being fully played out at the Supreme Court.” The Department of Justice, in a filing, argued that the Federal Reserve Act’s “for cause” provision is broad and that as long as the president provides any justification other than a policy disagreement, courts have no authority to review it. Solicitor General John Sauer wrote, “That the Federal Reserve Board plays a uniquely important role in the American economy only heightens the government’s and the public’s interest in ensuring that an ethically compromised member does not continue wielding its vast powers.”
Yet Cook’s lawyers warn that removing her would send “shock waves in the financial markets that could not easily be undone.” They stress the importance of the Fed’s independence, a tradition established by Congress in 1913 and reinforced by the 1935 Banking Act, which granted seven presidentially-appointed governors staggered 14-year terms and specified they could be removed only “for cause.” During congressional hearings at the time, Treasury Secretary Henry Morgenthau Jr. argued that Fed governors should be “just as independent as you can make it…[like] the Supreme Court…independent of the President,” and removable only through impeachment.
Central bank independence, while not explicitly protected by the Constitution, has long been considered crucial to maintaining economic stability. As The Wall Street Journal notes, the doctrine only took formal root in the early 1990s but relies on legal protections devised decades earlier. If presidents could easily remove governors, critics argue, it would undermine the Fed’s ability to make tough, sometimes unpopular decisions for the long-term health of the economy.
Despite the gravity of Trump’s actions, the response from Congress and the financial markets has been surprisingly muted. Several Republican senators on the Senate Banking Committee, which oversees the Fed, have downplayed concerns. Louisiana Senator John Kennedy, for example, dismissed fears about Fed independence, saying, “He exists loudly.” Meanwhile, the Senate moved quickly to confirm Stephen Miran, a Trump adviser, to a separate Fed board seat, even allowing him to keep his White House job as chairman of the Council of Economic Advisers during his Fed term—a highly unusual arrangement.
Lael Brainard, a former Fed governor and senior economic adviser to Biden, remarked, “We simply haven’t seen pushback either from the markets or from the majority in Congress. The only place we’ve seen pushback is at the courts.”
The Supreme Court’s decision to let Cook remain at least until January 2026 comes as the justices prepare to hear a related case about presidential removal powers over the Federal Trade Commission in December. In a previous order from May 2025, the Court signaled that the Fed might enjoy special legal protections, calling it “a uniquely structured, quasi-private entity” with historical safeguards against executive interference. This could make the outcome of Cook’s case pivotal not just for her, but for the future of the central bank’s autonomy.
Phil Gramm, former chairman of the Senate Banking Committee, explained to The Wall Street Journal that the Fed’s unique constitutional standing—Congress’s explicit power to coin money and regulate its value—distinguishes it from other regulatory bodies. “That would be a strong argument against the president having the power” to easily dismiss Fed officials, Gramm said.
For now, the Supreme Court’s intervention has removed an immediate uncertainty from the Fed’s leadership. Without Cook, the seven-member board would be evenly split between Trump and Biden appointees, potentially paralyzing key decisions, including the renewal of terms for the presidents of the 12 regional Federal Reserve banks. As the legal contest grinds on, the drama underscores just how fragile the mechanisms protecting the central bank’s independence can be in the face of determined executive action.
The battle over Lisa Cook’s future is far from over, but for now, the Supreme Court’s decision ensures that the independence of the Federal Reserve—and the stability it brings to the American economy—remains intact, at least until next year’s high-stakes arguments.