U.S. President Donald Trump has announced the immediate removal of Federal Reserve Governor Lisa Cook from her position, sparking a potential constitutional crisis.
President Trump cited “sufficient reason” to believe Cook made false statements on mortgage agreements, specifically alleging she provided conflicting information on two mortgage documents regarding her primary residence in Michigan and Georgia
Trump’s letter to Cook, posted on his Truth Social platform late Monday, accused her of providing conflicting information on two mortgage documents one in Michigan and another in Georgia regarding her primary residence.
He argued that the contradiction undermines her credibility.
The allegations stemmed from a public letter sent by housing finance regulator Bill Pulte, a Trump ally, to Attorney General Pam Bondi, which referred to the matter as a “criminal referral” and called for an investigation.
Cook previously said she learned of the allegations from the media and explained that the issue arose from a mortgage application she filed four years ago, before joining the central bank.
“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” Cook said last week, adding that she is gathering information to address any “legitimate questions” about her financial history.
The situation raises significant legal questions, with experts noting that the White House may have to defend its decision in court.
If Cook or the Fed resists Trump’s order, it could trigger a standoff between the central bank and the presidency.
The Federal Reserve, which gained independence from the U.S. government in 1951, has not yet commented on Trump’s decision.
Trump has also repeatedly criticised Chair Jerome Powell, calling him a “numbskull” and a “stubborn moron” for resisting the president’s push for steep interest rate cuts.
Powell, however, recently signalled that a rate cut could be possible in September, suggesting that the impact of Trump’s tariffs on inflation may be temporary.
Markets reacted swiftly to the development, with the U.S. dollar weakening against major global currencies during Asian trading on Tuesday.
Investors are speculating that Trump’s potential replacement for Cook could shift the Fed’s stance on interest rates.
Julia Lee, head of client coverage for FTSE Russell, said: “The key question for markets is if Trump succeeds in replacing Cook, could he reshape the Fed’s composition and how would that impact the market’s perception on US investibility?”
Shoki Omori, chief strategist at Japanese bank Mizuho, also expressed concern over the mounting pressure on Powell, warning that future appointees “may just listen to whatever the White House wants,” which, he said, is “not looking good.”
