United States President Donald Trump has ordered the removal of Federal Reserve governor Lisa Cook amid unproven claims of mortgage fraud, an unprecedented move that immediately raised fears for the central bank’s independence.
In a letter posted on social media on Monday night, Trump said Cook, one of the seven members of the Fed’s Board of Governors, was being sacked “effective immediately” in accordance with his powers under the US Constitution and the 1913 Federal Reserve Act.
Citing claims aired last week by the US federal mortgage regulator, Trump said there was “sufficient reason to believe you may have made false statements on one or more mortgage agreements”.
“The Federal Reserve has tremendous responsibility for setting interest rates and regulating reserve and member banks,” Trump said in the letter, which was shared on his platform, Truth Social.
“The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.
“At a minimum, the conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator,” Trump said.
Trump had on Friday threatened to fire Cook, a former Michigan State University professor who was appointed by former President Joe Biden, if she did not resign.
In a statement responding to Trump’s letter, Cook said she would not resign.
“President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” Cook said, adding that she would continue to carry out her duties “to help the American economy as I have been doing since 2022”.
A spokesperson for the Federal Reserve declined to comment.
Trump’s extraordinary move is set to accentuate concerns about the independence of the US central bank, which has been under intense pressure from the president to lower interest rates.
The ability of the Fed to set interest rates, which affect the cost of borrowing for consumers and businesses, without being subject to political interference is widely considered a key plank of confidence in the US economy.
Trump has repeatedly assailed Fed chair Jerome Powell, whose term expires in May, and the board for not moving faster to lower borrowing costs, arguing that their fears that his tariffs could lead to runaway inflation are overblown.
If Trump is successful in removing Cook, the board will be left with two vacancies, following the resignation of Governor Adriana Kugle earlier this month.
That would give Trump the opportunity to fill the board with a majority of his appointees.
Futures for the benchmark S&P 500 stock market index, which are traded outside of regular market hours, dipped about 0.2 percent following Trump’s announcement.
Gold, a traditional safe-haven asset during periods of stock market volatility, strengthened slightly.
Investors are now facing the reality that “the latitude of the Fed to conduct monetary policy in relentless pursuit of price stability and maximum employment may not be as great as they thought yesterday,” David Wilcox, a senior fellow at the Peterson Institute for International Economics who served on the staff of the Federal Reserve Board, told Al Jazeera.
“The damage done to confidence in the US system will not be easily or quickly repaired,” Wilcox said.
Mark Spindel, the founder of Potomac River Capital and a historian of the Fed, cast Trump’s move as being in line with his “aggressive attempts” to take control of the US central bank.
“With a majority of the board, there’s wide latitude to reorganise the system, including possibly switching district bank presidents, who vote on the Federal Open Market Committee,” Spindel told Al Jazeera, referring to the central bank’s committee for setting monetary policy, which includes four of eleven regional reserve bank heads in addition to the seven governors.
Trump’s ordering of Cook’s removal sets the stage for a potentially protracted legal challenge.
Under the Federal Reserve Act and US Supreme Court precedent, the president must demonstrate “cause”, widely interpreted to mean malfeasance, to fire any of the central bank’s seven governors.
“In all likelihood – because of the stakes involved and the absence of relevant case law in this area – it will be challenged in court,” Wilcox said.
“Unfortunately, that process will probably be lengthy, perhaps running for many months.”
In a letter addressed to US Attorney General Pam Bondi and Department of Justice official Ed Martin earlier this month, Federal Housing Finance Agency director Bill Pulte, a staunch Trump ally, alleged that Cook had listed two properties – in Ann Arbor, Michigan, and Atlanta, Georgia – as her primary home addresses.
In the letter, which was shared on social media, Pulte said Cook appeared to have “falsified bank documents and property records to acquire more favourable loan terms, potentially committing mortgage fraud under the criminal statute”.
Mortgage loans for primary residences typically have lower interest rates as they are considered lower risk than those for investment properties.
Cook, the first African American woman to serve on the board, has not been charged with any wrongdoing or convicted of a crime.
In response to Pulte’s letter, Cook said last week that she would gather information about her financial history “to answer any legitimate questions and provide the facts”, but that she had “no intention of being bullied to step down”.
