• Lisa Cook to sue President Trump over attempted removal from the Federal Reserve
• Trump alleges Cook misrepresented mortgages, citing constitutional authority to fire her
• Fed stresses governors can only be removed “for cause” under law
• Bond sell-off signals investor concern over Fed independence and stability
• Cook refuses to resign, saying she will continue duties
• She was appointed in 2022 by Joe Biden, first Black woman governor
• Trump says he has candidates ready to replace her
• Case could test presidential powers over central bank governance
• Allegations stem from disputed 2019 mortgage documents in Michigan and Georgia
• Legal fight raises stakes for US markets and global borrowing costs

Federal Reserve Governor Lisa Cook will challenge her removal by President Donald Trump in court, setting up a constitutional clash over the independence of the central bank.

Cook’s lawyer, Abbe David Lowell, said the president “has no authority” to remove her from office. Trump insists she misrepresented her mortgage arrangements and has argued that his constitutional powers give him the right to act.

The dispute has already rattled financial markets. Long-term US government bonds were sold off on Tuesday as investors weighed the implications for the Fed’s independence. 

Rising doubts about the central bank’s credibility could push up borrowing costs for Washington and ripple across the global financial system.

Cook, the first African American woman to serve as a Federal Reserve governor, sits on the powerful 12-member committee that sets US interest rates. She was appointed in 2022 by then-President Joe Biden.

“This attempt to fire her, based solely on a referral letter, lacks any factual or legal basis,” Lowell said. “We will be filing a lawsuit challenging this illegal action.”

The Federal Reserve itself also stepped in, noting that governors serve long, fixed terms and can only be removed “for cause” under the Federal Reserve Act. 

“Long tenures and removal protections for governors serve as a vital safeguard, ensuring that monetary policy decisions are based on data, economic analysis, and the long-term interests of the American people,” the central bank said.

Cook has refused to resign. “I will not resign. I will continue to carry out my duties to help the American economy as I have been doing since 2022,” she said in a statement.

Trump told reporters he already had “good people” in mind to replace her. “We need people that are 100% above board and it doesn’t seem like she was,” he said. Replacing Cook with someone more aligned to his economic priorities could pave the way for lower interest rates - a policy Trump has publicly pressed for.

At the Fed’s most recent meeting in July, Cook joined Chair Jerome Powell and the majority of the committee in voting to hold interest rates steady.

The allegations against Cook stem from claims she signed mortgage documents for properties in Michigan and Georgia within weeks of each other, both listing the homes as her primary residence. 

The charge was first raised by Trump ally Bill Pulte, head of a housing finance regulator, who called the matter a “criminal referral” and urged an investigation. It is unclear whether prosecutors have opened a case.

Cook has dismissed the accusations as politically motivated. She told the BBC last week that she learned of them from media reports and that the issue related to a loan application made four years ago, before she joined the central bank. 

“I have no intention of being bullied to step down from my position because of some questions raised in a tweet,” she said.

The standoff pits the White House directly against the central bank at a time when markets are already nervous about the direction of interest rates and broader US economic policy. 

Experts say the White House will have to demonstrate in court that it had legitimate grounds to remove her - a test that could redefine the limits of presidential power over the Fed.