US President Donald Trump announced that he is firing Lisa Cook from the US Federal Reserve Board on his Truth Social platform. He invoked a clause in the Federal Reserve Act, but his move is unprecedented in the history of the US central bank - never before has an American president tried to fire a member of the Fed. Days ago, Trump warned that he would fire Cook if she did not resign herself, the German public media wrote.
What is Trump accusing Lisa Cook of?
Trump accuses Cook of providing false information in order to obtain favorable real estate loans. According to his appointee, Bill Pulte, the head of the Federal Housing Finance Agency (FHFA), Cook listed two homes as her primary residences, thereby securing more favorable mortgage terms. Trump accuses Cook of "fraudulent and potentially criminal conduct", as well as of insufficient competence and reliability.
Is there a legal basis for Trump's actions?
The US president has only limited authority to fire central bank officials. The Federal Reserve Act provides for a 14-year term for central bank governors - unless there is "good reason" ("for cause") for their dismissal. The Supreme Court has yet to clearly define what this "good cause" might be.
According to experts such as Peter Conti-Brown of the University of Pennsylvania, such a dismissal must be related to misconduct in the performance of official duties, not private matters. The legal situation is therefore unclear, but many things do not speak in Trump's favor.
How did the Fed chair react?
Lisa Cook has made it clear that she intends to fight for her position and sue Trump. According to the Federal Reserve, her term actually runs until January 31, 2038. The economist insists that she is legally in office and accuses Trump of exceeding his authority.
“The president claims there are reasons to fire me, but legally there is none, and he does not have the authority to do so,” ARD quoted Cook's law firm as saying. “We will take all necessary steps to thwart this attempted illegal action,” said Cook's lawyer, Abby David Lowell, quoted by ARD.
What could happen next?
Cook's removal could be challenged and go all the way to the Supreme Court, and until then she could remain in her position, ARD explained. If Cook continues to effectively oppose it, it is not clear how she could be removed from office. The Federal Reserve has its own security forces.
Background of the scandal
The US president has repeatedly criticized Fed Chairman Jerome Powell for his reluctance to cut the key interest rate. The Fed's interest rate policy is not to the taste of Trump, who has declared himself a "low interest rate man".
Since Trump took office in January 2025, the Fed has refrained from lowering interest rates - not despite Trump, but precisely because of him. According to economists, the tariffs he introduced have the potential to increase consumer prices in the US. This behavior of central bankers fuels the anger of the US president.
Therefore, experts suggest that Trump will further increase the pressure on the Fed to reduce interest rates. Trump is also likely to continue to fight Powell. His term ends in May 2026, ARD recalls.
Why does Trump want lower interest rates?
Lower interest rates make borrowing cheaper for companies and consumers: for companies, it is an opportunity to invest more, and private households could more easily finance mortgages or spend on consumption, such as buying cars. This helps the growth of the American economy - a merit that Trump would like to take for tactical reasons - in view of the upcoming midterm elections next year.
Lower interest rates also usually lead to an increase in stock prices, as they make them more attractive compared to bonds, and Trump is a president who likes to look at stock markets as a barometer of attitudes towards his policies. Last but not least, lower interest rates make it easier to refinance the US government debt, which gives Trump more room to maneuver regarding fiscal policy, the ARD points out.
Is Trump damaging the image of the US Federal Reserve?
Yes, experts are categorical. Trump's attempt to "politicize" the US central bank is an attack on the Fed's independence. Since President Richard Nixon's devastating influence on the central bank's interest rate decisions in the 1970s, it has been considered virtually untouchable. The Fed's independence is the basis of the dollar's status as the world's reserve currency and the appeal of US government bonds as a "safe haven".
What risk is Trump taking?
With his repeated attacks on the Fed, Trump risks making investors in financial markets lose confidence in the reliability and independence of the central bank. This has the potential to lead to collapses in global stock markets and deprive the US of the ability to refinance its gigantic national debt, which currently amounts to more than $37 trillion, through capital markets. So the very stability of the global financial system is at stake, writes the German public broadcaster ARD.
Author: Angela Göpfert ARD