US: Court upholds Lisa Cook as Fed governor amid legal dispute with Trump

A federal court in Washington ruled Tuesday that Federal Reserve Governor Lisa Cook can remain in her job as she fights President Donald Trump 's efforts to fire her.

Judge Jia M. Cobb ruled that Fed Chairman Jerome Powell and the Fed's Board of Directors "are preliminarily enjoined from effecting in any manner the removal of Plaintiff (Cook) from her position as a member of the Board of Directors based on the reasons stated in the President (Trump)'s letter of August 25, 2025, including treating her as if she had been removed and denying or obstructing her access to any of the benefits or resources of her office, pending the resolution of this litigation."

On August 25, Trump published a letter of resignation from Cook on the Truth Social network, alleging - without evidence - that the director committed mortgage fraud in the acquisition of two properties in 2021, before joining the Fed.

Cook's lawyers argued that her dismissal was unlawful, as presidents can only fire Fed directors "for cause," which typically means inefficiency, dereliction of duty, or malfeasance in office. They also asserted that she was entitled to a hearing and the opportunity to respond to the allegations before being fired, but received neither. In her lawsuit, she denied the allegations but did not provide further details.

The decision is a blow to the Trump administration's efforts to exert more control over the traditionally independent Fed, which sets short-term interest rates to achieve its congressionally mandated goals of stable prices and maximum employment. Congress has also sought to isolate the Fed from day-to-day politics.

Cook is accused of claiming both properties were "principal residences," which could have resulted in lower down payments and mortgage rates than if either property had been designated as a second home or investment property.

The case could become a turning point for the 112-year-old Fed. Economists prefer independent central banks because they can take unpopular measures, such as raising interest rates to combat inflation, more easily than elected officials.

Many economists fear that if the Fed remains under White House control, it will keep its benchmark interest rate lower than fundamentally justified to satisfy Trump's demands for cheaper loans. This could accelerate inflation and also raise long-term interest rates, such as those on mortgages and auto loans. Investors may demand higher yields on bonds to offset higher inflation in the future, raising borrowing costs for the U.S. government and the broader economy.

If Trump succeeds in replacing Cook, he could secure a 4-3 majority on the Fed's board. Trump appointed two board members during his first term and nominated a top White House economic adviser, Stephen Miran, to replace Adriana Kugler, another Fed governor who resigned unexpectedly on August 1. Trump has stated that he will only appoint Fed officials who support lower rates.

No president has ever tried to fire a Fed governor before.

The Supreme Court has signaled that the president cannot fire Fed officials over political differences, but can do so "for cause," which typically means misconduct or dereliction of duty. Cook has not been charged with any crime.

Trump has repeatedly attacked Fed Chairman Jerome Powell and the other members of the Fed's interest-rate-setting committee for not cutting the short-term interest rate more quickly. It currently stands at 4.3%, after Fed policymakers cut it by a full percentage point late last year. Trump has said he thinks it should be 1.3%, a level that no Fed official and few economists support.

Powell recently signaled that the central bank was inclined to cut its rate at its next meeting, on September 16 and 17. Still, the Fed is likely to cut its benchmark rate more slowly than Trump wants, perhaps to around 3.25%—a higher level than Trump would prefer.

Cook is the first Black woman to hold the office of governor. She was a Marshall Scholar and graduated from Oxford University and Spelman College. Before joining the council, she taught at Michigan State University and Harvard University's Kennedy School of Government. / With information from AP

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