Lisa Cook Sues Trump as Fed Drama Intensifies Ahead of Crucial September FOMC

Federal Reserve Governor Lisa Cook has sued U.S. President Donald Trump over his attempt to remove her from her position on the Fed Board over the mortgage fraud investigation. This comes ahead of the crucial September FOMC meeting, where the Fed is likely to cut rates, a development that is bullish for the crypto market.

Lisa Cook Drags Trump To Court Over Her Removal

A court filing shows that the Fed Governor has sued the president, seeking immediate declaratory and injunctive relief to confirm her status as a member of the Fed Board. She also joined the Fed Governors and Jerome Powell as parties to the suit, as she looks to challenge the president’s authority to fire her.

As CoinGape reported, Lisa Cook’s lawyer, Abbe Lowell, had earlier stated that they would file a lawsuit challenging her removal by the president. Lowell claimed that the president’s action was illegal, as there was no factual or legal basis for it, despite the mortgage fraud allegation against the Fed Governor.

The Federal Reserve Act (FRA) stipulates that the president can only remove a Fed Governor for “cause,” and this is the basis of Lisa Cook’s argument as she seeks an injunction to block Trump’s removal order.

The Fed Governor’s lawyer argues that an “unsubstantiated allegation” about private mortgage applications, which the Fed Governor submitted before taking office, is not sufficient cause for the president to remove her. Furthermore, Cook and lawyers further argued that Trump’s actions violate her Fifth Amendment due process rights and her statutory right to notice and a hearing under the FRA.

Judge Jia Cobb has scheduled an initial hearing of the case for this Friday. This case is historic as it could make or mar the Fed’s independence, especially considering that this is the first time a U.S. president has attempted to fire a Fed Governor.

Trump Looks To Force A Rate Cut

It is worth noting that Trump’s move to fire Lisa Cook is seen as another attempt to pressure the Fed into a rate cut at the September FOMC meeting. Her removal would free up another seat on the Fed Board, which would allow the president to nominate someone who would vote in favor of a rate cut.

At a cabinet meeting held earlier this week, the president again reiterated his call for lower interest rates. He also mentioned that they would soon have a majority on the Fed board.

The move to remove Lisa Cook might not be necessary, considering that Fed Chair Jerome Powell already signaled plans to cut rates at the September FOMC meeting. There is also an 83.2% chance of a 25 basis points (bps) rate cut, according to CME FedWatch data.

However, Trump isn’t leaving it to chance, as the president’s nominee to replace Adriana Kugler, Stephen Miran, is also reportedly on course for a Senate confirmation to the Fed Board before the September meeting.

Moreover, a September rate cut is just one of many rate cuts that Trump would like the Fed to make. The president has famously called for a 300 bps rate on several occasions, something he describes as rocket fuel for the “booming” U.S. economy. Rate cuts are bullish for the crypto market as they would boost risk-on sentiment and could inject more liquidity into crypto assets.