Trump’s Firing of Fed Governor Lisa Cook Tests Central Bank Independence

Federal Reserve Governor Lisa Cook,

President Donald Trump on Monday took the extraordinary step of firing Federal Reserve Governor Lisa Cook, an unprecedented move that is already drawing comparisons to the most heated battles in the century-long history of the U.S. central bank. Legal experts, economists, and political leaders warn the decision could upend the Fed’s independence and destabilize global confidence in America’s financial system.

Trump justified the dismissal—effective immediately—by citing allegations that Cook misrepresented her primary residence to secure favorable mortgage terms. In a letter posted on Truth Social, the president argued that the accusations “undermine public confidence” in the central bank.

Cook, who became the first Black woman appointed to the Fed’s Board of Governors in 2022, rejected the allegations outright. “I will not resign,” she said in a statement. “I will continue to carry out my duties to help the American economy as I have been doing since 2022.” Her attorney, Abbe Lowell, said the firing was illegal and vowed to take “whatever actions are needed” to reverse it.

Allegations Rooted in Politics

The charges against Cook stem from Bill Pulte, head of the Federal Housing Finance Agency and a close Trump ally. Pulte accused Cook of improperly claiming both an Atlanta condominium and an Ann Arbor home as her primary residence on mortgage applications. Though the Justice Department has opened an inquiry, Cook has not been charged with any crime.

Pulte had been openly critical of the Fed’s monetary policy, often amplifying Trump’s frustrations over high interest rates. Legal scholars argue that the unproven allegations do not rise to the legal standard required to remove a Fed governor, which the Federal Reserve Act limits to “cause,” typically defined as neglect of duty or misconduct in office.

“This looks like an illegal firing,” said Lev Menand, a Columbia Law School professor and former Fed economist. “The president cannot simply oust a governor over untested personal allegations. Central bank independence was hanging by a thread before this—now it risks snapping.”

Trump’s Broader Strategy

The move fits a broader pattern. Trump has long criticized the Fed for failing to cut interest rates more aggressively, arguing it is stifling growth. He has publicly attacked Fed Chair Jerome H. Powell, whose term expires in 2026, and hinted at reshaping the central bank to align more closely with his economic agenda.

With the recent resignation of Governor Adriana Kugler, Trump now has two vacancies to fill. If he succeeds in removing Cook, he could soon secure a working majority on the seven-member board—potentially tipping policy toward rapid rate cuts despite fears from economists that such moves could reignite inflation.

Experts Warn of Dangerous Precedent

“This is the end of central bank independence as we know it, if the courts let it stand,” said Peter Conti-Brown, a Wharton professor specializing in monetary law. “The Fed was designed to be insulated from day-to-day politics. If presidents can fire governors at will, that insulation is gone.”

Democrats were swift to condemn the move. Senator Elizabeth Warren of Massachusetts called it “an authoritarian power grab that blatantly violates the Federal Reserve Act, and must be overturned in court.”

Historical Echoes: When Presidents Took on the Fed

Trump’s action may be unprecedented in scope, but he is hardly the first president to clash with the central bank.

• 1951 – Truman’s Showdown
  President Harry Truman tried to force the Fed to keep interest rates low to finance the Korean War. The conflict ended in the Treasury–Fed Accord, which established the Fed’s independence in setting monetary policy.
• 1970s – Nixon’s Pressure Campaign
  Richard Nixon leaned heavily on Fed Chair Arthur Burns to keep rates down before the 1972 election. Recordings later revealed Nixon’s private demands, which helped fuel runaway inflation.
• 1980s – Reagan vs. Volcker
  Ronald Reagan’s aides criticized Paul Volcker’s steep rate hikes, though the Fed chair held firm, winning respect for crushing inflation despite political pressure.
• 1990s – Clinton’s Restraint
  Bill Clinton broke with tradition by refusing to publicly comment on Fed decisions, reinforcing a culture of independence.
• 2017–2020 – Trump vs. Powell
  In his first term, Trump repeatedly attacked Chair Powell on Twitter, even floating the idea of demoting him. Legal experts at the time warned such a move would violate the Fed’s charter.
• 2025 – Trump Fires Cook
  Now, by forcibly removing a sitting governor, Trump has escalated presidential pressure on the Fed into uncharted legal territory.

Markets on Edge, Independence at Risk

Analysts warn that if Trump prevails, global markets could lose faith in the Fed’s neutrality. Investors rely on the central bank to make long-term decisions insulated from political whim. A perception that interest rate policy is dictated by the White House could lead to higher borrowing costs, capital flight, and inflationary pressures.

“The mere attempt is destabilizing,” said Sarah Binder, a Brookings Institution fellow. “Even if the courts block this firing, the signal to investors is clear: Fed independence is no longer guaranteed.”

The Road Ahead

Cook has made clear she intends to fight her dismissal in court, ensuring a protracted legal battle. In the meantime, Trump has already nominated economist Stephen Miran to fill one of the board’s vacancies. If he succeeds in filling both open seats with loyalists, he could reshape the Fed’s trajectory at a moment of economic uncertainty.

For now, Trump’s firing of Lisa Cook has not just raised questions about one governor’s fate—it has thrust the entire principle of central bank independence into the spotlight, potentially marking a turning point in the balance of power between the presidency and America’s most important financial institution.