Trump Seeks Historic Ouster of Fed Governor Over Mortgage Fraud Allegations

The U.S. Department of Justice has launched a criminal investigation into allegations of mortgage fraud against Lisa Cook, a governor of the Federal Reserve. The inquiry, which involves subpoenas and grand jury proceedings in Georgia and Michigan, follows criminal referrals from Bill Pulte, director of the Federal Housing Finance Agency. Pulte’s referrals claim that Cook misclassified two properties—located in Atlanta and Ann Arbor—as her primary residences shortly after purchasing them, a classification that could have entitled her to more favorable mortgage terms. Cook has denied the allegations, with her legal team asserting that the accusations are part of a politically motivated effort to undermine her position and the Federal Reserve’s independence [1][2][3][4].

The investigation has intensified amid ongoing legal and political tensions between the Trump administration and the Federal Reserve. On August 25, President Donald Trump issued an order to remove Cook from her position, citing the allegations against her as grounds for termination. This marked the first time in history that a Fed governor has been removed by a sitting president. Cook’s legal representatives have contested the move in court, arguing that Trump lacks the constitutional authority to remove her and that the allegations do not establish a basis for such action. They have also filed a motion to maintain her position while the legal challenge proceeds [1][3][4].

The Department of Justice’s investigation is being coordinated by Ed Martin, the director of the Justice Department’s Weaponization Working Group. In a letter to Federal Reserve Chair Jerome Powell, Martin urged the Fed chair to remove Cook before the investigation is finalized. However, under the Federal Reserve Act, Powell does not have the authority to remove a member of the Board of Governors, a power reserved exclusively for the president, subject to congressional approval [1][2][3]. Martin’s involvement has been scrutinized, with critics arguing that the investigation is part of a broader campaign by the Trump administration to exert influence over the Fed’s monetary policy decisions.

Cook, the first Black woman appointed to the Federal Reserve’s board of governors, has been a vocal advocate for economic equity and diversity within financial institutions. Her nomination was confirmed by the U.S. Senate in 2023, and her term is scheduled to last until 2038. The legal and political battle over her removal has raised concerns among financial analysts and policymakers about the potential politicization of the Federal Reserve. Historically, the Fed has operated as an independent entity to ensure that monetary policy decisions are made based on economic data rather than political pressure [2][3][4].

Analysts have noted that the broader implications of the case extend beyond Cook’s personal situation. The Federal Reserve’s independence has long been a cornerstone of its credibility and effectiveness. The administration’s attempts to influence the Fed’s composition and policy direction have sparked debates about the balance between executive power and institutional autonomy. While the Fed is expected to cut interest rates in September 2025, the political pressures surrounding the decision have added uncertainty to market expectations [3][4].

The Justice Department has not commented on the specifics of the investigation, maintaining a standard policy of not discussing ongoing inquiries. However, the case has already drawn significant media attention and is likely to influence the public perception of the Federal Reserve’s independence in the coming months. As the legal proceedings continue, the outcome of the case could set a precedent for future interactions between the executive branch and the central bank [1][2][3].

Source:

[1] DOJ probing mortgage fraud claims against Fed governor Lisa Cook – AP (https://www.pbs.org/newshour/politics/doj-probing-mortgage-fraud-claims-against-fed-governor-lisa-cook-ap-source-says)

[2] Justice Department launches criminal investigation into Lisa Cook (https://www.cnn.com/2025/09/04/business/justice-department-launches-investigation-lisa-cook)

[3] Justice Department ramps up Lisa Cook investigation (https://www.nbcnews.com/politics/justice-department/justice-department-lisa-cook-investigation-rcna229061)

[4] Justice Department opens criminal investigation into Federal Reserve Governor Lisa Cook (https://abcnews.go.com/US/justice-department-opens-criminal-investigation-federal-reserve-governor/story?id=125261793)