Fed governor Lisa Cook says she will sue Trump to keep job

US Federal Reserve governor Lisa Cook will sue President Donald Trump’s administration to try to prevent him from firing her, her lawyer has said.

“President Trump has no authority to remove Federal Reserve governor Lisa Cook,” said Abbe Lowell, a long-time Washington lawyer who has represented figures from both major political parties.

“His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action.”

Mr Trump’s unprecedented effort to fire Ms Cook is likely to end up at the Supreme Court and could more clearly define the limits of the president’s legal authority over the traditionally independent institution.

The Fed exercises expansive power over the US economy by adjusting a short-term interest rate that can influence broader borrowing costs for things like mortgages, auto loans and business loans.

The Federal Reserve weighed in on Tuesday for the first time on the firing, saying it would “abide by any court decision”.

But the Fed’s statement did not answer a key question about Ms Cook: Namely, whether she is continuing to serve at the Fed while the legal case plays out. Nor did it explicitly criticise Mr Trump’s attempt to sack her.

Mr Trump, a Republican, has repeatedly demanded that chairman Jerome Powell and the Fed’s rate-setting committee cut its rate to boost the economy and reduce interest payments on the government’s 37 trillion dollar debt pile.

If Mr Trump succeeds in removing Ms Cook from the Fed’s board of governors, it could erode the Fed’s political independence, which is considered critical to its ability to fight inflation because it enables the Fed to take unpopular steps like raising interest rates.

A less-independent Fed could leave Americans paying higher interest rates, because investors would demand a higher yield to own bonds to offset potentially greater inflation in the future, pushing up borrowing costs throughout the economy.

– Allegations against Ms Cook

Bill Pulte, a Trump appointee to the agency that regulates mortgage giants Fannie Mae and Freddie Mac, made the accusations last week.

Mr Pulte alleged that Ms Cook had claimed two primary residences — in Ann Arbor, Michigan, and in Atlanta — in 2021 to get better mortgage terms.

Mortgage rates are often higher on second homes or those bought to rent.

The most likely next step for Ms Cook is to seek an injunction against Mr Trump’s order that would allow her to continue her work as a governor.

Ms Cook said on Monday night that she would not step down.

“President Trump purported to fire me ‘for cause’ when no cause exists under the law, and he has no authority to do so,” she said in an emailed statement. “I will not resign.”