The Supreme Court on Wednesday seemed inclined to keep Federal Reserve governor Lisa Cook in her job, casting doubt on President Donald Trump’s bid to wrest control of the nation’s central bank.
The justices heard arguments over Trump’s effort to fire Cook based on allegations she committed mortgage fraud, which she denies. No president has fired a sitting governor in the 112-year history of the Fed, which was structured to be independent of day-to-day politics. The case presented the court with one of the more extraordinary efforts by Trump to expand presidential power. Though the court has frequently sided with him on emergency petitions, Cook’s case could prove to be an exception.
Allowing Cook’s firing to go forward “would weaken, if not shatter, the independence of the Federal Reserve,” said Justice Brett Kavanaugh, one of three Trump appointees on the nation’s highest court.
At least five other justices on the nine-member court also sounded skeptical about the effort to remove her from office.
Both Cook and Federal Reserve chairman Jerome Powell sat through nearly two hours of arguments in the packed courtroom.
“For as long as I serve at the Federal Reserve, I will uphold the principle of political independence in service to the American people,” Cook said in a statement issued after the arguments.
Interest rates
The true motivation for trying to fire Cook, Trump’s critics say, is the Republican president’s desire to exert control over U.S. Interest rate policy. If Trump succeeds in removing Cook, the first Black woman Federal Reserve governor, he could replace her with his own appointee and gain a majority on the Fed’s board. The case is being closely watched by Wall Street investors and could have broad impacts on the financial markets and U.S. Economy.
Trump has been dismissive of worries that cutting rates too quickly could trigger higher inflation. He wants dramatic reductions so the government can borrow more cheaply and Americans can pay lower borrowing costs for new homes, cars or other large purchases, as worries about high costs have soured some voters on his economic management.
During a speech earlier Wednesday in Davos, Switzerland, Trump reiterated his call for the Fed to sharply lower rates, arguing that the United States should pay “the lowest interest rate of any country in the world.”
The board cut a key interest rate three times in a row in the last four months of 2025, but that’s more slowly than Trump wants. The Fed also suggested it may leave rates unchanged in coming months over inflation worries.
The issue before the court is whether Cook can stay on the job while her challenge to the firing plays out in court. Judges on lower courts have allowed her to remain in her post as one of seven central bank governors. The justices could simply deny the emergency appeal Trump is seeking and allow the case to continue playing out in lower courts.
Chief Justice John Roberts, who also seemed skeptical of Trump’s actions, suggested it may be pointless to return the case to lower courts rather than issue a more enduring ruling.
A decision is expected by early summer.
Taking on the Fed
With Cook’s case under review at the high court, Trump dramatically escalated his confrontation with the Fed. The Justice Department has opened a criminal investigation of Powell and has served the central bank with subpoenas.
Powell himself took the rare step of responding to Trump, calling the threat of criminal charges “pretexts” that mask the real reason, Trump’s frustration over interest rates. The Justice Department has said the dispute is ostensibly about Powell’s testimony to Congress in June over the cost of a massive renovation of Fed buildings.
In Trump’s first year of his second term, the justices generally, but not always, went along with Trump’s pleas for emergency action to counteract lower-court rulings against him, including allowing the firings of the heads of other governmental agencies at the president’s discretion, with no claim that they did anything wrong.
But the court has sent signals that it is approaching the independence of the nation’s central bank more cautiously, calling the Fed “a uniquely structured, quasi-private entity.”
In Cook’s case, Trump is not asserting that he can fire Fed governors at will, Solicitor General D. John Sauer said. Cook is one of several people, along with Democratic New York Attorney General Letitia James and Democratic Sen. Adam Schiff of California, who have been accused of mortgage fraud by federal housing official Bill Pulte. They have denied the allegations against them.
Cook’s properties
The case against Cook stems from allegations she claimed two properties, in Michigan and Georgia, as “primary residences” in June and July 2021, before she joined the Fed board. Such claims can lead to a lower mortgage rate and smaller down payment than if one of them was declared as a rental property or second home.
Those applications, Sauer said, are evidence of “gross negligence at best” and give Trump reason to fire her. In any event, he argued, courts shouldn’t be reviewing his decision and Cook has no right to a hearing.
Giving Cook a chance to sit down with Trump and respond to the allegations her, Justice Amy Coney Barrett said, “just wouldn’t be that big a deal, it seems.”
Cook has denied any wrongdoing and has not been charged with a crime. “There is no fraud, no intent to deceive, nothing whatsoever criminal or remotely a basis to allege mortgage fraud,” a Cook lawyer, Abbe Lowell, wrote to Attorney General Pam Bondi in November.
Cook specified that her Atlanta condo would be a “vacation home,” according to a loan estimate she obtained in May 2021. In a form seeking a security clearance, she described it as a “2nd home.” Lowell wrote that the case against her largely rests on “one stray reference” in a 2021 mortgage document that was “plainly innocuous in light of the several other truthful and more specific disclosures” about the homes she has purchased.
Roberts and Justice Sonia Sotomayor, both owners of multiple residential properties, expressed some sympathy for Cook.
“I suppose we can debate that, how significant it is in a stack of papers you have to fill out when you’re buying real estate,” Roberts said, responding to Sauer’s assertion that Cook had made a “quite a big mistake” in her mortgage application.
Sotomayor said there was something familiar to her in Cook’s need to move to Washington after her appointment to the Fed and rent out her Michigan home.
“I had to move from New York when I got my job in Washington, and, frankly, I renovated my apartment the year before, thinking I would be in New York for the rest of my life,” Sotomayor recalled, alluding to her Supreme Court appointment. “Things change.”
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Associated Press writers Fatima Hussein, Christopher Rugaber and Lindsay Whitehurst contributed to this report.
