In a move that has sent shockwaves through Washington and financial markets alike, President Donald Trump announced late Monday that he was firing Federal Reserve Governor Lisa Cook, citing allegations of mortgage fraud. The decision, delivered via a letter posted to Trump’s Truth Social account on August 25, 2025, marks the first time in U.S. history that a sitting president has attempted to remove a Federal Reserve governor—an act that many experts consider an unprecedented challenge to the central bank’s vaunted independence.
Trump’s letter to Cook accused her of "deceitful and potentially criminal conduct in a financial matter," referencing claims made just last week by Bill Pulte, head of the Federal Housing Finance Agency and a Trump appointee. Pulte alleged that in 2021, Cook declared two different properties—one in Ann Arbor, Michigan, and another in Atlanta, Georgia—as her primary residence, thereby securing more favorable mortgage terms. "For example, as detailed in the Criminal Referral, you signed one document attesting that a property in Michigan would be your primary residence for the next year. Two weeks later, you signed another document for a property in Georgia stating that it would be your primary residence for the next year," Trump wrote in the termination letter, as reported by CNBC.
The president invoked Article II of the Constitution and the Federal Reserve Act of 1913 as the legal basis for the firing. In his letter, Trump argued, "The executive power of the United States is vested to me as President and, as President, I have a solemn duty that the laws of the United States are faithfully enacted. I have determined that faithfully enacting the law requires your immediate removal from office." The letter was also shared by the White House rapid response team on X (formerly Twitter), according to Axios.
Cook, for her part, has not been charged with any wrongdoing and has denied the allegations. In a statement issued last week, she said, "I have no intention of being bullied to step down from my position because of some questions raised in a tweet," adding that she was "gathering the accurate information to answer any legitimate questions and provide the facts." She reiterated her commitment to transparency, stating, "I do intend to take any questions about my financial history seriously as a member of the Federal Reserve." According to AP, Cook also emphasized that she learned about the criminal referral from the media and that the mortgage applications in question predated her tenure at the Fed.
The stakes of Trump’s decision are enormous—not just for Cook, but for the future of the Federal Reserve itself. The Federal Reserve Act allows the president to remove a governor "for cause," but legal scholars and former officials told AP and Axios that the bar for such removal is high, typically requiring clear evidence of malfeasance or dereliction of duty. The specifics of Cook’s mortgage applications, which date back years before her appointment, may not meet this threshold. As a result, the firing is expected to trigger a protracted legal battle that could ultimately reach the Supreme Court.
Senate Democrats and other critics quickly condemned the move. Senator Elizabeth Warren, in a statement Monday night, called Trump’s action "the latest example of a desperate President searching for a scapegoat to cover for his own failure to lower costs for Americans." She added, "It's an authoritarian power grab that blatantly violates the Federal Reserve Act, and must be overturned in court." Other advocates and former Fed officials warned that undermining the Fed’s independence could have serious consequences for the U.S. economy, particularly at a time when inflation remains a concern. Rohit Chopra, former director of the Consumer Financial Protection Bureau, stated, "The President’s effort to fire a sitting Federal Reserve Governor is part of a concerted effort to transform the financial regulators from independent watchdogs into obedient lapdogs that do as they’re told. This could have real consequences for Americans feeling the squeeze from higher prices."
The immediate market reaction to the news was telling. Financial markets responded nervously: longer-term U.S. Treasury yields climbed, gold prices spiked, the dollar slipped, and stock futures fell, as reported by Axios and CNBC. The ICE U.S. Dollar index dropped by 0.3% overnight, and gold futures rose by the same margin. These moves reflect investor anxiety that the Fed’s independence—and thus its ability to fight inflation without political interference—may be at risk.
Cook, who was nominated by former President Joe Biden in 2022, is the first Black woman to serve as a Federal Reserve governor. Her 14-year term was not set to expire until 2038, making her removal all the more consequential. As AP and CNBC note, Fed governors are meant to serve staggered terms to shield the institution from political pressure. Until now, presidents of both parties have largely respected this tradition, even as they have sometimes pressured the Fed behind closed doors.
The timing of Cook’s firing is also notable. Earlier this month, another Fed governor, Adriana Kugler, resigned unexpectedly. Trump has nominated Stephen Miran, chair of the Council of Economic Advisors, to fill Kugler’s seat until January 2026. If Trump successfully removes Cook and gets his nominee confirmed, he could secure a 4-to-3 majority of Trump appointees on the seven-member board, potentially reshaping the direction of the Fed for years to come. The board plays a crucial role in setting interest rates and overseeing financial regulation, and together with five regional presidents, makes up the Federal Open Market Committee.
This latest episode is part of a broader campaign by Trump to assert greater control over the central bank. He has repeatedly attacked Fed Chair Jerome Powell for not cutting interest rates aggressively enough and has even threatened to fire him. Powell’s term as chair expires in May 2026, at which point Trump could nominate a replacement more aligned with his views. However, as AP points out, even replacing the chair may not guarantee a shift in Fed policy, since twelve members of the interest-rate setting committee have a vote on rate decisions.
Legal experts remain divided on what happens next. The Federal Reserve Act’s "for cause" provision has never been tested in this way, and it’s unclear whether Cook can remain in her seat while a legal challenge unfolds. If she does choose to fight, she may have to do so as an individual, rather than with the support of the Fed as an institution. The uncertainty has left financial markets on edge and policymakers scrambling to assess the implications.
As the dust settles, one thing is clear: Trump’s move to fire Lisa Cook has set up a historic confrontation over the independence of America’s central bank. The outcome will not only determine Cook’s fate but could also reshape the balance of power between the White House and the Federal Reserve for generations to come.
