The Lisa Cook Situation and Its Larger Implications
This is not the first brawl we have witnessed between the Trump administration and a worker of the Federal Reserve. Another recent incident has been the continued tension between President Trump and Jerome Powell, chair of the Federal Reserve. The president being very vocal about his discontent with the ruling of the central bank concerning the interest rates, and has vouched for his replacement. Recently, member of the board of directors, Lisa Cook was under headlines while still in the first few years of her 14 year-term at the position (Sherman, 2025). Nominated in January 2022 by the Biden administration, she has been a victim of multiple threats by the current presidential office, calling for her dismissal.
Concerning Governor Cook, the Trump administration is seeking to fire her, and is suggesting replacing her with republican loyalist Stephan Miran in 2026. Moreover, it is first crucial to understand the ruling, as no F.E.D. governor has ever been removed by a president, and the law has never been put to trial in the courts. While the Supreme Court has granted the presidential office the power to execute such removals, these can only happen under “cause”. The term’s ambiguity makes it easier for the White House to justify its proposal. Presently, the administration is accusing her of fraud, stemming from her mortgage signings in 2021, before she was appointed. She allegedly registered two homes as her main residence to receive better loan deals. The administration claimed that by casting doubt on the integrity of its members, Governor Cook's alleged conduct would undermine the American people’s faith in the organization.
Presently, the Supreme Court has allowed her to maintain her position and will hear the case’s arguments in January 2026, allowing her to participate in the October and December Fed meetings (Halpert, 2025). Lisa Cook and her attorneys, however, contend that the Trump administration has potentially ulterior motives behind this accusation and is not purely seeking to ensure the integrity of the Board’s governors. Lisa Cook and her lawyers claim this is a push for the Trump administration to exercise control over the F.E.D. acting as an independent entity, to further be able to influence its decision. If the defense arguments of Lisa Cook's legal team are true, and the Trump organization is trying by any means necessary to influence the Fed's operations, it could potentially have serious consequences.
Firstly, by setting a precedent that a president can remove a sitting governor, essentially making other governors’ tenure more vulnerable, it would question the independence of the Federal Reserve (Rugaber, 2025). The Federal Reserve was initially designed to operate as almost an entirely separate entity from the current government office. This structure was intended to isolate it from any political pressure. This enables it to make decisions that prioritize the long-term economic health of the country, including decisions that may be unpopular with the population. Where central banks not acting independently has resulted in economic instability. For example, in the 1970s, the American central bank, under the governance of Arthur Burns, succumbed to President Nixon’s pressure to lower interest rates. The country was later met with excessively high inflation for the entire decade, reaching 14% (Kramer, 2025). A successful removal would set a binding legal norm “ for cause” termination, increasing the presidential’office power to remove and reshape the Board’s voters towards his preferred rate track, by potentially swapping out non-aligned members for loyalists and extending the party’s reach.
Secondly, the general public may worry that this tendency will continue, and from having a poor record, government-influenced banks are negatively perceived by investors. A loss of confidence in the F.E.D. could endanger the leadership role of the U.S. dollar in global finance. The American economy, from its sheer size and its record of political stability, makes the U.S. dollar the most demanded currency in the world. In a world where investors deem the American central bank to be at the whim of its government, and therefore less predictable, the dollar's credibility would erode. The American government would then lose its privilege of issuing its hallmark asset, the U.S. bond (Michael McMahon, 2025)(Gilson, 2023). If the Fed seems politicized, investors may start investing in alternatives such as the euro. As the issuance of bonds for the American government, as most other governments, is one of the principal means to which it finances itself, a loss of confidence from investors would make it difficult to obtain funding. Investors may become more concerned about their repayment and ask for higher interest rates, making it more expensive for the government to finance itself.
In sum, the Lisa Cook legal case is particularly important as it could set a new legal precedent depending on its verdict in January. Whether the institution’s decisions will become affected by the current presidential office or if investors start to believe that they are, the case is larger than simply one governor seat.
References
Gilson, Dave. “Why the Erosion of Trust Could Shake America’s Economic Stability.” Stanford Graduate School of Business, 20 Mar. 2023, www.gsb.stanford.edu/insights/why-erosion-trust-could-shake-americas-economic-stability.
Halpert, Madeline. “Supreme Court Rules Lisa Cook Can Stay in Federal Reserve Role for Now.” BBC News, BBC, 1 Oct. 2025, www.bbc.com/news/articles/ckg6pzz5700o.
Kramer, Leslie. “How the Great Inflation of the 1970s Happened.” Investopedia, Investopedia, Mar. 2025, www.investopedia.com/articles/economics/09/1970s-great-inflation.asp.
Michael McMahon, Michael. “What Can Happen When Economic Policy-Makers Lose Credibility?” Economics Observatory, 10 Feb. 2025, www.economicsobservatory.com/what-can-happen-when-economic-policy-makers-lose-credibility.
Rugaber, Christopher. “What Trump’s Move to Fire Fed Governor Means for Central Bank’s Independence.” The Guardian, Guardian News and Media, 26 Aug. 2025, www.theguardian.com/business/2025/aug/25/trump-federal-reserve-lisa-cook-explained.
Sherman, Mark. “Supreme Court Lets Lisa Cook Remain as a Federal Reserve Governor for Now in Unsigned Order.” PBS, Public Broadcasting Service, 1 Oct. 2025, www.pbs.org/newshour/politics/supreme-court-lets-lisa-cook-remain-as-a-federal-reserve-governor-for-now-in-unsigned-order.