Lisa Cook’s Lawsuit Against Trump: A Battle Over Federal Reserve Independence

In a dramatic escalation of tensions between President Donald Trump and the Federal Reserve, Governor Lisa Cook has filed a lawsuit challenging Trump’s attempt to remove her from her position on the Federal Reserve’s Board of Governors. The unprecedented move, announced on August 25, 2025, stems from Trump’s claim of “sufficient cause” based on unproven allegations of mortgage fraud leveled by Federal Housing Finance Agency Director Bill Pulte. Cook’s legal action, filed in federal court in Washington, D.C., on August 28, 2025, asserts that Trump’s attempt to fire her is “unprecedented and illegal,” arguing it violates the Federal Reserve Act and threatens the central bank’s independence.

The Federal Reserve, established by the Federal Reserve Act of 1913, operates as a quasi-private entity tasked with setting monetary policy, regulating banks, and managing the nation’s money supply. Critics argue the Act is unconstitutional, as it delegates the power to mint currency—originally a congressional prerogative under Article I, Section 8 of the Constitution—to a third-party institution.

This shift, they claim, undermines the government’s sovereignty over its currency, allowing private banks to influence economic policy. The Fed’s use of fractional reserve banking, where commercial banks create money by lending out a multiple of their reserves, is said to fuel inflation, often described as an “invisible tax” that disproportionately burdens the middle class by eroding purchasing power. Despite these criticisms, the Fed’s structure has been upheld by courts and remains a cornerstone of U.S. economic policy.