Federal Reserve Governor Lisa Cook’s lawsuit against Donald Trump challenges his ability to remove her from office, but only briefly addresses the central accusations that she committed mortgage fraud.
One part of the documents filed in the suit suggests that the issue at hand regarding documents Cook submitted for home loans may have been caused by a “clerical error” on her part and asserts that even if a mistake was made it does not rise to an offense that would justify removing her from office.
The complaint mostly focuses on rules outlined in the Federal Reserve Act that state Fed officials can only be removed for “cause,” a legally nebulous condition that may have to be determined by the Supreme Court.
Cook maintains that the fraud allegations do not meet the standard and instead are subterfuge for Trump’s efforts to stack the Fed Board of Governors in his favor so that he can get the interest rate cuts he has been demanding.
“It is clear from the circumstances surrounding Governor Cook’s purported removal from the Federal Reserve Board that the mortgage allegations against her are pretextual,” the suit states. “This allegation about conduct that predates Governor Cook’s Senate confirmation has never been investigated, much less proven. This allegation is not grounds for removal under the” act.
The document calls the fraud allegation “unsubstantiated and unproven” but does not go into detail about why that is the case.
Whether Cook did in fact lie on the applications will be the focus of establishing the legal standard for cause to remove her.
Trump and other officials, most notably Bill Pulte, the director of the Federal Housing Finance Agency, have alleged that Cook provided false information about her primary residence when obtaining federally backed mortgages.
The complaint said that even if Cook did make a mistake on the applications, it still wouldn’t rise to cause.
“Even if the President had been more careful in obscuring his real justification for targeting Governor Cook, the President’s concocted basis for removal — the unsubstantiated and unproven allegation that Governor Cook ‘potentially’ erred in filling out a mortgage form prior to her Senate confirmation — does not amount to ’cause’ within the meaning of the FRA and is unsupported by caselaw,” stated the complaint from Cook’s attorney, Abbe Lowell.
Moreover, the suit says that “the President and Director Pulte have not even alleged explicitly that Ms. Cook benefited from any clerical error, or that such an error was intentional. Even if Governor Cook had committed the infractions that the President alleges— which she did not—the President would lack ’cause’ to remove her” under the law.
In a statement to CNBC, Pulte noted that Cook did not attempt to refute the claims against her.
“In her filing, Ms. Cook does not deny that these are her mortgage documents, so one has to wonder why she, or [Fed Chair] Jerome Powell, would want this to be a part of the Federal Reserve, which is supposed to have preeminent integrity and which is critical to the safety and soundness of the U.S. Mortgage Market,” Pulte said in a statement to CNBC’s Scott Wapner.
However, avoiding the specifics in this type of case is far from unusual as doing so would give credence to the allegation, said Robert Hockett, a professor of law and public finance at Cornell Law School.
“You don’t want to play his game, or legitimize his game by playing it,” Hockett said. “‘I’m not surprised at all that the lawsuit wouldn’t include paragraph after paragraph providing the details of her mortgage applications. Because, that would, in effect, be conceding that there’s something legitimate about what Trump is doing.”
Markets have been relatively unbothered by the battle between Cook and Trump, though that could change as the case escalates.
Krishna Guha, head of global policy and central bank strategy at Evercore ISI, said markets are too focused on the conflict between the two and not enough on the bigger picture of what he calls the “Trumpification” of the Fed.
“We have no privileged knowledge of the legal facts, but believe if it were established Cook committed even accidental mortgage misrepresentation, she would have to go,” Guha said in a note earlier this week.
If Trump is successful in removing Cook, it would give him a 4-3 edge on the board in terms of appointees should Stephen Miran get through Senate confirmation to fill an empty seat. That could be extended to 5-2 if Powell chooses not to fill out his term as governor after his run as head of the central bank expires in May 2026.
https://www.cnbc.com/2025/08/28/lisa-cooks-lawsuit-against-trump-skirts-mortgage-fraud-allegation.html
