On August 25, 2025, the financial world received news of the firing of Lisa DeNell Cook, a prominent economist and the first Black woman to serve on the US Federal Reserve Board of Governors.
Cook has now become the centre of a major political and legal controversy following President Donald Trump’s announcement of her removal from office.
She is widely recognised for her expertise in macroeconomics, economic history, and research on racial and gender disparities in economic outcomes. Cook has also earned a reputation as a leading voice on how inequality shapes economic growth and financial markets.
Before joining the Federal Reserve in May 2022, she was a professor of economics and international relations at Michigan State University and served as a senior economic advisor during the Obama administration.
The controversy
Trump’s announcement claims that Cook engaged in mortgage fraud, alleging she improperly listed two properties as her primary residence in 2021 to qualify for more favorable loan terms. However, Cook has strongly denied any wrongdoing and stressed that the alleged incidents occurred prior to her Federal Reserve appointment.
What the law says
The Federal Reserve Act of 1913, signed into law by President Woodrow Wilson on December 23, 1913, established the Federal Reserve System, which serves as the central banking system of the United States of America.
The act aimed to stabilise the US economy, prevent financial panics and bank runs, and provide a more flexible currency supply by creating a decentralised system of 12 regional Federal Reserve banks overseen by a central Board of Governors.
However, some legal experts note that the Federal Reserve Act of 1913 does not grant the president the authority to remove board governors at will. Governors are typically appointed for 14-year terms to safeguard the Fed’s independence from political influence.
In response to her firing, Lisa Cook has filed a lawsuit in the US District Court for the District of Columbia to block her removal, citing statutory protections for her role.
“Cause for the president means she won’t go along with the interest rate drop,” Cook’s lawyer Abbe Lowell said during a court hearing on Friday August 29, 2025.
After returning to office in 2025, Donald Trump resumed criticism of the Fed for not cutting rates during his first term. He has occasionally attacked Fed Chair Jerome Powell over rate policies and alleged mismanagement of a multibillion-dollar project, though he has stopped threatening Powell’s removal before his term ends in May next year.
The Fed cut interest rates three times in 2024 but has held them steady since December 2024, citing concerns that Trump’s trade policies could spur inflation.
Lisa Cook, as part of her mandate, voted with Powell and the majority in all these decisions. The US central bank is expected to cut rates by some 0.25% at its September 16-17 meeting, though Trump has constantly called for a steeper reduction.
Why it matters
Lisa Cook’s position on the Federal Reserve is far from ceremonial as the Board of Governors plays a key role in shaping US monetary policy, including interest rates, inflation control, and overall financial stability across the US and the world.
Therefore, any attempt to remove a sitting governor could undermine market confidence and raise concerns about political interference in an institution meant to remain insulated from partisan pressures.
Economists have also warned that interfering with the Fed’s independence could have ripple effects across global financial markets.
For instance, investor confidence depends heavily on the perception that monetary policy decisions are driven by economic considerations rather than political ones.
What happens next?
The court case is expected to be closely watched, with potential ramifications for the balance of power between the executive branch and independent federal agencies in the US.
Some analysts believe that the outcome could also set a significant precedent regarding the authority of a US president over independent institutions tasked with critical economic governance.
Meanwhile, in recent public statements, Lisa Cook reaffirmed her commitment to the Federal Reserve’s mission. She emphasised that her focus remains on stabilising the US economy, promoting equitable growth, and maintaining financial confidence.
With additional files from Reuters and MarketWatch
MA
