Trump Removes Fed Governor Lisa Cook Over Mortgage Allegations Sp sparks Legal and Market Turmoil

President Donald Trump removed Federal Reserve Governor Lisa Cook on August 25, 2025, citing allegations of false statements on mortgage documents. The removal has triggered widespread debate over the independence of the Federal Reserve and raised concerns about the stability of U.S. monetary institutions [1]. Trump asserted that the move was justified under the Federal Reserve Act of 1913 and Article 2 of the U.S. Constitution, but Cook and her legal team have contested the action, arguing that the president lacks the authority to remove her without clear legal grounds [1].

Cook, the first African-American woman to serve on the Fed’s governing body, reportedly declared multiple primary residences in Michigan and Georgia in 2021, prior to her confirmation. Trump’s letter accused her of deceit and emphasized the need for public trust in those who shape financial policy. However, critics note that the mortgage details were publicly available and vetted during her Senate confirmation process, casting doubt on the legitimacy of the charges [2].

The removal marks an escalation in Trump’s long-standing pressure on the Federal Reserve, including criticism of Fed Chair Jerome Powell for not lowering interest rates more aggressively. Analysts warn that this move could set a precedent for increased executive influence over monetary policy, challenging the historically independent role of the Fed [1]. Legal scholars have expressed concern over the implications for executive power and the Fed’s institutional autonomy [2].

Financial markets reacted swiftly to the news. The U.S. Dollar Index dropped to approximately 98.10, while European and Asian stock markets declined as investors grappled with the uncertainty [3]. Nigel Green of deVere Group noted that the move has shaken confidence in the Fed, a cornerstone of global financial stability [3]. Tim Duy of SGH Macro Advisors suggested that the administration appears to be pursuing a broader strategy to reshape the central bank, potentially affecting future policy decisions on inflation and interest rates [1].

The removal also creates an open seat on the Fed’s seven-member board, allowing Trump to appoint a successor. This shift could alter the ideological balance of the board and influence the Fed’s policy direction, with potential consequences for inflation, employment, and financial stability [1]. Analysts point out that such actions reflect a broader pattern of Trump asserting control over federal institutions, which may reshape the balance of power in economic policymaking [4].

Cook’s legal team is contesting the removal, emphasizing that no due process was followed and that the president overstepped his authority. The legal battle could have far-reaching implications for the interpretation of executive power and the Fed’s independence. As the Fed prepares for its next policy meeting in mid-September, the uncertainty surrounding this event continues to weigh on market sentiment [1].

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[1] Federal Reserve Governor Lisa Cook says Trump 'has no ... (https://www.france24.com/en/americas/20250826-federal-reserve-governor-lisa-cook-says-trump-has-no-authority-to-fire-her)

[2] Dollar Stability Questioned as Trump Ousts Fed Official (https://cointelegraph.com/news/trump-fires-fed-governor-lisa-cook-dollar-bitcoin-market-uncertainty)

[3] US Dollar Recovery Attempt Falters After Trump Moves to ... (https://www.investing.com/analysis/us-dollar-recovery-attempt-falters-after-trump-moves-to-oust-fed-governor-cook-200665901)

[4] Analysts' reaction to Trump firing Fed's Cook (https://www.reuters.com/business/view-analysts-reaction-trump-firing-feds-cook-2025-08-26/)