The court battle over the future of the Federal Reserve begins today
At 10 a.m. ET, a federal court in Washington, D.C., will hold a hearing over Lisa Cook’s removal from the Federal Reserve. But the court battle will shape much more than the future of Cook’s tenure at the central bank.
At stake is the independence of the Federal Reserve, the world’s most important central bank.
As noted by JPMorgan chief U.S. economist Michael Feroli, Cook’s firing from the Fed, if successful, “would create the second vacancy on the board in less than a month and would allow the president to move that body in a direction more to his liking.”
“If the president were successful, the outcome would be momentous,” Feroli added.
Gaining a majority on the Fed’s board does not automatically give Trump’s nominees power to raise, lower or keep interest rates unchanged, but his nominees could, as soon as February, decline to renew or confirm a fresh four-year term for regional Fed bank presidents who get a vote on interest rates.
Those presidents are key to the 12-member Federal Open Market Committee, which comprises the Fed chair, six Fed governors and five regional Fed presidents. Those presidents come from Federal Reserve banks from New York and San Francisco to Chicago and Atlanta.
Declining to confirm certain regional presidents until they are to the liking of Trump’s nominees could dramatically change the way the Fed’s rate-setting committee works.
Already, two of Trump’s nominees serve on the Fed’s board. Michelle Bowman and Christopher Waller abstained from a vote in 2023 to approve Chicago Fed President Austan Goolsbee, a former top economic adviser to President Barack Obama, to the rate-setting FOMC, according to records obtained by Bloomberg News through an open records request.
Friday’s court argument will center around allegations made by Trump’s Federal Housing Finance Authority Director Bill Pulte. He has claimed that Cook committed mortgage fraud before she became a Fed governor.
For Cook, her lawyers are seeking an immediate and “emergency temporary restraining order” that would confirm her ability to continue in her role while the merits of her case are heard.
Cook’s broader lawsuit against the administration seeks a “declaration that President Trump’s August 25, 2025 purported firing … is unlawful and void and that Governor Cook remains an active member of the Board of Governors of the Federal Reserve.” She also seeks a declaration from the court that “that an unsubstantiated allegation of mortgage fraud prior to a Governor’s confirmation is not cause for removal.”
Under the legislation that created the Federal Reserve, the only reason a governor can be removed from their role is “for cause,” which is generally seen as some kind of wrongdoing. Trump’s termination letter to Cook said that the administration believes she “may have made false statements on one or more mortgage applications.”
Cook’s lawyers have emphasized the use of “may” in Trump’s letter, saying the claims from Pulte are unsubstantiated.