The move comes after Cook’s lawyers had said that President Donald Trump has “no authority” to remove the governor from her post.
Federal Reserve Governor Lisa Cook has reportedly filed a lawsuit against President Donald Trump, challenging his attempt to fire her from the board.
According to a report by Bloomberg, citing court records, the lawsuit was filed in a Washington federal court on Thursday. The move comes after Cook’s lawyers had said that the President has “no authority” to remove the governor from her post.
The Fed also chimed in, stating, “Congress, through the Federal Reserve Act, directs that governors serve in long, fixed terms and may be removed by the president only ‘for cause’,” something that Federal Reserve Chair Jerome Powell has also ascertained when Trump has expressed his displeasure with the lack of interest rate cuts.
“Long tenures and removal protections for governors serve as a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people,” the central bank added.
The standoff between Cook and President Trump follows his assertion that there was “sufficient reason” to believe Cook had made false statements regarding her mortgage. He cited constitutional powers, which he said allowed him to remove her from office. Trump’s accusations were based on Federal Housing Finance Agency Director Bill Pulte’s allegations that Cook had lied on a 2021 loan application.
Cook is one of seven members on the Federal Reserve’s board of governors. She also sits on the 12-member committee responsible for setting interest rates. Her ouster would mean Trump could put someone more aligned with his position on monetary policy in Cook’s stead.
This case may strengthen the argument that the Federal Reserve is losing its independence, as cited by many market watchers, including notable economist Mohamed El-Erian.
U.S. equities were in the green after the market opened on Thursday. The SPDR S&P 500 ETF (SPY) gained 0.18% in morning trade, the SPDR Dow Jones Industrial Average ETF (DIA) edged 0.01% higher, and the tech-heavy Nasdaq-100 tracking Invesco QQQ Trust (QQQ) showed the biggest hike, up 0.5%. Retail sentiment around QQQ on Stocktwits improved to ‘neutral’ from ‘bearish’ territory over the past day.
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