Trump’s Bid to Oust Cook Hinges on ‘Cause’

President Donald Trump’s bid to expand his control of the Federal Reserve is about to trigger a historic lawsuit over a short bit of legalese: “for cause.” At issue is Trump’s unprecedented attempt to oust Fed Governor Lisa Cook over a thus far unproven claim that she lied on mortgage documents for a pair of homes back in 2021. Cook says she’ll sue to protect her position. The case is likely to hinge on whether Trump has “cause” to fire Cook. The law underpinning Fed operations says the president can only remove Fed officials “for cause,” but it unhelpfully doesn’t define the term. Columbia Law School Professor Kathryn Judge joins Bloomberg Businessweek Daily to discuss, adding she believes the legal battle could reach the Supreme Court.

President Donald Trump said he was prepared for a legal fight with Federal Reserve Governor Lisa Cook after he moved to oust her from her post following allegations that she falsified mortgage documents.

The Fed, weighing in for the first time this week, said it would abide by any court decision in Cook’s legal challenge of her dismissal by Trump. A Fed spokesperson added the central bank has deferred any decision on Cook’s current working status, and noted there is no official business before the Fed board this week.

“Lisa Cook has indicated through her personal attorney that she will promptly challenge this action in court and seek a judicial decision that would confirm her ability to continue to fulfill her responsibilities as a Senate-confirmed member of the Board of Governors of the Federal Reserve System,” the Fed said in a statement.

Trump, speaking at a Cabinet meeting on Tuesday, said he was also prepared to abide by any court decision, but indicated he was not concerned about Cook’s challenge.

“Oh sure, always,” Trump said. “She seems to have had an infraction, and she can’t have an infraction — especially that infraction, because she’s in charge of, if you think about it, mortgages.”

Earlier Tuesday, Cook’s lawyer vowed to file a lawsuit over the president’s maneuver to oust her for cause from the Fed Board of Governors. Trump reiterated his concern over allegations Cook claimed on two different mortgage applications that a home would be her primary residence and said he already had some “very good people” under consideration to fill her spot.

“We’ll have a majority, very shortly so that’ll be great once we have a majority, and housing is going to swing and it’s going to be great,” Trump said.

He floated the possibility he could shift Council of Economic Advisers Chairman Stephen Miran — whom he nominated to fill a vacant board seat with a term expiring in January — to the seat held by Cook, with a term running until 2038.

“We’ll see what happens. Look, we just put a very good man in one position, we switch him to the longer term and pick somebody else. But we’re very happy with the person we have in there,” the president told reporters.

Trump’s remarks were the latest signal he had no intention to back down from a fight that has sparked backlash over concerns it could threaten the independence of the central bank — a bedrock assumption of US markets that underpins the nation’s credit ratings.

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