Federal Reserve Governor Lisa Cook finds herself at the center of a political and legal firestorm after President Donald Trump moved to terminate her appointment on September 5, 2025, citing allegations of mortgage fraud. The unfolding saga, which now includes a criminal investigation by the Department of Justice (DOJ), spotlights the intersection of financial regulation, presidential power, and partisan maneuvering at the highest levels of government.
According to The Wall Street Journal and ProPublica, the DOJ's inquiry into Cook stems from a referral by Bill Pulte, the head of the Federal Housing Finance Agency and a major Trump donor. Pulte, who has reportedly contributed over $1 million to Trump’s political operations, accused Cook in August 2025 of a series of mortgage-related misrepresentations dating back to 2021—before she joined the Fed. Pulte alleges that Cook obtained a mortgage on a home in Michigan, claiming it as her principal residence, then secured a second mortgage in Georgia, also designating that property as her primary residence, only to place it up for rent soon after. Additionally, Pulte claims Cook acquired a third mortgage in Massachusetts, identifying the property as a second home, but later listing it as an investment or rental property in her tax filings. These designations matter because principal and primary residences typically qualify for lower interest rates and more favorable tax treatment than investment properties.
Cook’s legal team, led by attorney Abbe Lowell, has pushed back on the allegations, suggesting that any inconsistencies in Cook’s mortgage paperwork could be attributed to unintentional clerical errors. In a recent court appearance, Lowell argued that “even if some of Cook’s cited statements present ‘facial contradictions,’ she has properly designated each of the properties in other official disclosures.” Lowell further emphasized that the mortgage transactions in question predated Cook’s tenure as a Federal Reserve governor by about a year, raising questions about their relevance to her current role.
Despite these defenses, the legal stakes for Cook are mounting. The DOJ’s criminal investigation, first reported on September 4-5, 2025, raises the specter of federal charges that could not only end her career at the Fed but potentially result in criminal penalties. The burden of proof for criminal charges is, of course, much higher than in employment disputes, but the very existence of the investigation amplifies the political drama surrounding her removal. As ProPublica notes, at least three of President Trump’s own Cabinet members have listed multiple homes as primary residences on their mortgage applications—a detail that adds a layer of irony and underscores the partisan nature of the current controversy.
The legal battle over Cook’s firing is playing out in federal court, where District Court Judge Jia Cobb—a Biden appointee—presides over Cook’s wrongful termination lawsuit. In court, Cobb appeared unmoved by arguments that Trump’s actions were merely a pretext to install a loyalist at the Fed who would lower interest rates. “I’m uncomfortable with the pretext argument,” Cobb stated, signaling a reluctance to weigh the president’s motives over the statutory requirements governing Fed appointments.
The Federal Reserve Act, which created the central bank in 1913, stipulates that the president may remove members of the Board of Governors “for cause.” This legal standard gives the president significant, though not unlimited, discretion. As Judge Cobb explained, “Deferential doesn’t mean that there’s no probing of it. You just assume good faith, you defer.” In practice, this means the courts are likely to uphold the president’s determination of cause unless there is a glaring error or clear evidence of bad faith.
President Trump has made no secret of his desire to reshape the Fed. Just hours after moving to terminate Cook, he boasted, “We’ll have a majority very shortly. So that’ll be great … We have to get the rates down a little bit.” The implication is clear: Trump wants to install loyalists who will support his call for lower interest rates, a move that could have significant implications for the nation’s economy. Critics argue that this effort undermines the Fed’s independence, while supporters contend that the president is simply exercising his lawful authority to set economic policy.
The Supreme Court has weighed in on the broader question of presidential power over independent agencies. In a recent ruling, the Court affirmed that the Federal Reserve is “a uniquely structured, quasi-private entity that follows in the distinct historical tradition of the First and Second Banks of the United States.” The justices made clear that while the president’s power to remove leaders of certain executive-branch agencies may be broad, the Fed’s structure and for-cause removal protections are distinct. “Do what you will with the National Labor Relations Board and the Merit Systems Protection Board, but leave the Fed alone,” the Court stated, signaling its intent to preserve the central bank’s unique status.
Still, the courts may prefer to avoid a constitutional showdown over the president’s authority to remove Fed governors. If the judiciary finds that Trump had sufficient cause to fire Cook—based on the mortgage fraud allegations, regardless of whether they are ultimately proven in criminal court—it could sidestep thornier questions about the separation of powers and the Fed’s independence. As legal analysts have pointed out, “If Trump had sufficient cause for the firing, then the case ends without a constitutional reckoning over the relationship between the president and the Fed.”
Cook’s defenders maintain that the allegations against her are politically motivated and that the administration is using regulatory and prosecutorial power to target high-profile Democrats while ignoring similar conduct by Republicans. “The Trump administration is inventing justifications to fire her as part of pressure against the Federal Reserve,” Cook’s lawyer said, according to ProPublica. The comparison to the IRS targeting scandal during the Obama administration is not lost on observers, though, as New York Magazine points out, there is no evidence directly tying President Obama to that effort.
For now, Lisa Cook faces a daunting dual challenge: fighting to reclaim her seat on the Federal Reserve Board and defending herself against a criminal investigation that could have far-reaching personal and professional consequences. The outcome may hinge less on the ultimate truth of the mortgage fraud allegations and more on the courts’ willingness to scrutinize—or defer to—the president’s finding of cause. As the legal and political drama unfolds, the case stands as a vivid reminder that in Washington, not everything ill intended and ill conceived is necessarily illegal, and the boundaries of presidential power remain as contested as ever.
How this episode will reshape the Fed, the law, and the careers of those involved remains to be seen. But for now, the eyes of the financial and political world are fixed on Lisa Cook—and the precedent her case may set for the future of American economic governance.