US President Donald Trump says he wants to remove Federal Reserve governor Lisa Cook, claiming he has constitutional powers to do so.
But Cook has said she has no intention of resigning, Trump has no power to fire her and that she will sue him if he attempts to remove her.
The spat has rattled financial markets and is likely to cause further uncertainty and instability as it brings into question the independence of the US central bank.
Who is Lisa Cook?
Professor Lisa DeNell Cook is the first black woman to be appointed as a governor of the Federal Reserve.
She is an economist who has previously taught at the University of Michigan, been on the faculty of Harvard University's Kennedy School of Government and held international economic advisory positions.
Former president Joe Biden appointed Cook to the board of governors of the Federal Reserve on May 23, 2022. She was reappointed to the board on September 8, 2023, and sworn in five days later for a term ending January 31, 2038.
What does the board of the Federal Reserve do?
The Federal Reserve is the central bank of the US, similar to the Reserve Bank of Australia.
The Fed conducts US monetary policy, including setting interest rates, and also supervises and regulates financial institutions.
The Federal Reserve Board of Governors, based in Washington DC, is an "accountable, transparent, nonpartisan federal agency" that reports to and is directly accountable to the US Congress.
It is run by seven members — or governors — serving staggered 14-year terms, nominated by the US president and confirmed in their positions by the Senate.
Why is Trump saying he fired her?
The US president is saying he has fired Cook after allegations of mortgage fraud, which were raised last week by the director of the Federal Housing Finance Agency, Bill Pulte, who alleged Cook had claimed two primary residences in 2021, one in Michigan and another in Atlanta.
Cook has denied the allegations.
What will it mean if Cook is replaced?
Donald Trump has been pressuring the Fed to cut interest rates for months and has repeatedly threatened to fire Fed Chair Jerome Powell.
The US president has previously called Powell a "major loser", when the chair refused to accede to Trump's demand to cut interest rates immediately.
Powell has been a public critic of Trump's tariff policies, saying they create uncertainty and are an impediment to rate cuts, and he also famously fact-checked the president, creating a viral moment in July.
With Trump on track to pick a replacement for Powell, whose term as Fed chief expires in May, removing Cook would give the president space to name a new governor who, presumably, would be more inclined to support his push for sweeping rate cuts.
Does Trump have the power to remove Professor Cook?
The Fed said in a statement that Cook and other board members served 14-year tenures and could not be removed easily from office, in order to ensure that monetary policy decisions were based on economic data and "the long-term interests of the American people".
While Trump on Monday said Cook's firing was "effective immediately", the Fed's statement indicated that it saw Cook's status as unchanged.
The central bank next meets to set interest rates on September 16–17, and based on the Fed's statement, it appears it would take a court ruling between now and then for her to be prevented from participating.
In May, when the US Supreme Court's majority ruled that the president could fire members of independent agencies without cause, they did name as an exception the Federal Reserve, saying that it would remain free from executive control and removal.
What next?
Cook's lawyer, Abbe Lowell, said Trump's "reflex to bully is flawed and his demands lack any proper process, basis or legal authority" and that he and his client would "take whatever actions are needed to prevent his attempted illegal action".
But Trump has already started mulling over possible replacements, saying he wants to appoint someone "I like".
ABC/wires
