On Aug. 25, President Donald Trump stated that he had fired Federal Reserve Governor Lisa Cook, claiming that she had committed mortgage fraud by listing two homes as her primary residence on a loan application. Cook responded that she was staying in her job because Trump didn’t have the authority to fire her, the loan application charge was false, and that her due process rights were violated. Three days later, she filed a lawsuit against Trump, stating that her firing was illegal. A federal appeals court ruled on Monday that Trump cannot remove her, at least for the time being.
It is worth noting that the Trump administration has also charged others with this same mortgage application fraud, including Senator Adam Schiff and New York Attorney General Letitia James. If you are familiar with the history of these two, you understand that Trump appears to seek revenge rather than justice.
A governor on the Federal Reserve typically serves a 14-year term. There are seven of them, and together, they comprise the Board of Governors for the Federal Reserve. The president of the United States nominates each governor, whom the U.S. Senate must confirm.
Among the seven members of the Board of Governors, one is appointed as chair of the Federal Reserve and one as a vice chair. Jerome Powell currently serves as chair, and he has been under significant pressure from Trump to lower interest rates.
The Board of Governors decides interest rates in the United States on things like mortgages and other bank loans. In determining interest rates, they consider inflation and employment trends. They also regulate banks in the United States. To perform their jobs effectively, they must be independent of politics and base their decisions solely on economic data. Thus, Trump’s efforts to influence the board’s decisions are considered both inappropriate and dangerous.
Why is it dangerous? Because the world looks to the Federal Reserve for independent and reliable data, free from political pressure, to inform its financial decisions. If the information is not valid, businesses will make bad financial decisions. As I always said in the research classes I taught, “Garbage in, garbage out.” Trump is attempting to influence the Federal Reserve into making decisions that enhance the appearance of his economic policies, despite their actual performance.
The Federal Reserve operates as a democracy. That is, each governor has a vote on raising or lowering interest rates and other board decisions. Trump already has two members of the board who vote according to his wishes. If he can get Cook fired, he could name a third member, and that would give him three votes out of seven. When Chairman Powell retires on May 15, 2026, Trump will name his replacement, giving him four out of seven votes, a majority of the board. So being able to fire Cook is important to him.
But there are more than the seven members of the Board of Governors who have a vote. There are also 12 Federal Reserve Bank presidents, and each of them also serves on the Federal Reserve. The New York Federal Bank president is a permanent voting member. The other 11 bank presidents rotate, with four voting at a time on a one-year basis. Thus, there are 12 total voting members on the Federal Reserve. When the other six members are not voting, they still serve as advisers and participate in board discussions.
Who is Lisa Cook? She is an economist, born in 1964 in Georgia, the daughter of a hospital chaplain and a nursing professor. She has a B.A. in physics and philosophy from Spelman College. In 1986, she was named a Harry S. Truman Scholar, Spelman’s first.
She went to Oxford University and earned a second B.A. in philosophy, politics, and economics before completing her Ph.D. in economics at the University of California, Berkeley, in 1997.
She taught at Harvard’s Kennedy School of Government and Harvard Business School, was a senior adviser at the U.S. Treasury Department’s Office of International Affairs, a National Fellow and Research Fellow at Stanford University, and a professor of economics and international relations at Michigan State, where she was tenured in 2013.
She served on the Federal Reserve Bank of Chicago’s Board of Directors before President Joe Biden nominated her to the Board of Governors in 2022 to fill a term that ended in 2024. She was confirmed by the Senate for a full 14-year term in 2024 and became the first Black woman ever to serve on the Federal Reserve Board of Governors.
She is supposed to stay on the board through 2038. A decision by the courts will determine if she can remain on the board and complete her term. On Sept. 9, Judge Jia Cobb issued a preliminary injunction that temporarily blocked Trump’s attempt to fire Cook, stating that the allegations made by the Trump administration occurred before she took office (2021) and, secondly, that Cook was denied due process before Trump tried to fire her.
Regarding the specific charge, Trump claims that Cook claimed both her primary home and a vacation home as her primary residence simultaneously to secure better loan rates. Bank records, however, uncovered and reported by Chris Prentice and Marisa Taylor of Reuters, undermine Trump’s assertion. Cook, according to the bank, referred to the second home on official documents as a “2nd home.”
Six hundred economists signed a letter in defense of Cook, emphasizing the importance of the Federal Reserve’s independence. It is worth noting that no president has ever fired a Federal Reserve Governor in the board’s 111-year history. Trump wants to be the first.
Meanwhile, Cook remains on the board and continues to participate and vote during Federal Reserve meetings. For now, the board’s independence has been preserved.
Tom Zirpoli is the Laurence J. Adams Distinguished Chair in Special Education Emeritus at McDaniel College. He writes from Westminster. His column appears on Wednesdays. Email him at tzirpoli@mcdaniel.edu.