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Can Trump fire Cook? Here’s the legal community’s answer

Can Trump fire Cook? Here’s the legal community’s answer

ForesightNewsForesightNews2025/08/27 03:22
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By:ForesightNews

Cook refused to resign and pledged to file a lawsuit, arguing that Trump lacks the legal authority to dismiss her.

Cook refuses to resign and pledges to sue, arguing that Trump lacks the legal authority to fire her.


Written by: Bao Yilong

Source: Wallstreetcn


U.S. President Trump’s attempt to dismiss Federal Reserve Governor Lisa Cook is sparking a major legal dispute over the White House’s authority to control the Federal Reserve.


On August 26, Wallstreetcn reported that Trump publicly announced on social media the immediate removal of Fed Governor Cook, accusing her of fraud in mortgage applications. Cook’s defense attorney, Abbe Lowell, has pledged to file a lawsuit. In a statement, Cook said:


President Trump claims there is ‘reason’ to fire me, but there is no such reason under the law, nor does he have the authority to do so. I will not resign. I will continue to fulfill my duties to help the U.S. economy, just as I have been doing since 2022.


Cook was appointed by President Biden in 2022, with her term originally set to run until 2038. Bill Pulte, Director of the Federal Housing Finance Agency, accused Cook of misconduct in applying for two home mortgages in 2021, which could constitute mortgage fraud.


But these allegations remain just that—allegations. Cook has not faced a formal investigation or criminal charges, let alone been convicted. The alleged misconduct occurred a year before Cook was appointed as a governor and is unrelated to her Fed duties. Legal experts believe that unsubstantiated allegations are unlikely to meet the standard of “for cause” dismissal.


According to Section 10 of the 1913 Federal Reserve Act, members of the Fed Board can only be removed “for cause,” but the law does not clearly define what constitutes “cause.” Generally, “cause” includes three situations: inefficiency, neglect of duty, and misconduct during tenure.


Now, the outcome of the dispute between Trump and Cook will largely depend on how the courts interpret the legal standard of “for cause.”


Legal Proceedings: Preliminary Injunction as the Key


If Cook files a lawsuit, she can immediately apply for a preliminary injunction to prevent her dismissal while the case proceeds.


Both sides will submit briefs outlining their arguments, and the Trump administration will have the opportunity to provide more details regarding the allegations against Cook.


The outcome of the injunction may depend on whether Cook can convince the judge that she and the Fed would suffer “irreparable harm” if the status quo is not maintained.


The decision on the preliminary injunction could be made quickly, which is crucial, as a ruling on whether the case actually constitutes “cause” for dismissal could take months or longer.


The case may not be delayed for too long. Both parties can appeal the injunction ruling to the federal appeals court. If Cook’s injunction request is denied and the appeal upholds the decision, her dismissal will remain effective. If the injunction is granted and upheld by the appeals court, Cook can continue to serve while the case proceeds.


The Supreme Court May Be the Final Arbiter


This dispute may ultimately be decided by the U.S. Supreme Court.


Any ruling on the preliminary injunction can be appealed to the federal appeals court and ultimately to the Supreme Court.


Given Trump’s 6-3 conservative majority on the Court, and the Court’s repeated approval this year of his policies facing legal challenges, this could put him in a favorable position in the lawsuit.


However, the Supreme Court gave an important hint in a ruling this May. At that time, the Court allowed Trump to remove officials from two other government agencies without giving a reason, but specifically noted that the decision did not mean the President had similar authority over the Federal Reserve, calling the Fed “a uniquely structured private entity.”


This statement has been interpreted to mean that Trump cannot dismiss Fed officials without cause, but leaves open the possibility of removing Cook “for cause.” According to reports, in U.S. legal practice, “cause” is generally interpreted to include three situations: inefficiency, neglect of duty, and misconduct during tenure.


However, there is still no unified consensus on these terms, which gained prominence in Congress more than a century ago. Judges will have to decide whether the mortgage fraud allegations against Cook constitute any of these grounds.


If the case ultimately reaches the Supreme Court, it will be a direct test of this legal gray area.


The Origin of the “Mortgage Fraud” Allegations


Bill Pulte, Director of the Federal Housing Finance Agency and a staunch Trump ally, accused Cook on social media of lying on loan applications for two properties.


As previously reported by Wallstreetcn, Cook listed both her Michigan and Georgia properties as primary residences to obtain more favorable loan terms. He noted that the applications for the two properties were submitted two weeks apart.


In his letter, Trump stated that it was “incredible” that Cook did not realize that two separate mortgage applications filed in the same year required her to list each property as her primary residence. Trump wrote:


At the very least, the conduct in question demonstrates serious negligence in financial transactions, raising doubts about your experience and credibility as a financial regulator.


According to media reports, the Trump administration has made similar allegations against other critics, such as California Senator Adam Schiff and New York Attorney General Letitia James, both of whom have denied the accusations.

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Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.

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