White House says Cook should take leave from Fed during legal fight

White House officials on Wednesday urged Federal Reserve Board member Lisa Cook to vacate her position instead of waiting for a court decision on President Trump’s attempt to fire her.

Kevin Hassett, the director of the White House National Economic Council, said Ms. Cook hasn’t explained why she listed separate properties as her primary residences in 2021, so she should take leave during the legal fight over presidential authority.

“The fact that she is not doing that suggests that she is partisan and is trying to make a partisan stance, which is contrary to the independence of the Fed,” Mr. Hassett told reporters at the White House.

He said Mr. Trump “absolutely” has the authority to fire a Fed governor as Ms. Cook plans to file a lawsuit against the president.

“I think the accusations are serious, and I look forward to seeing the outcome,” Mr. Hassett said.

Mr. Trump moved to fire Ms. Cook late Monday, saying he could no longer trust her with monetary policy amid claims she cited separate properties in 2021 as her primary residences.

Ms. Cook is the first Black woman to sit on the Fed’s Board of Governors. President Biden nominated her to the board in 2022.

Her removal and replacement, alongside confirmation of a pending governor nominee, would give the White House a Trump-appointed majority on the Fed Board as the White House seeks lower interest rates from central bankers.

Mr. Trump pointed to laws that say a president can fire a Fed governor “for cause,” though what that means is up to interpretation. 

“Lisa Cook has indicated through her personal attorney that she will promptly challenge this action in court and seek a judicial decision that would confirm her ability to continue to fulfill her responsibilities as a Senate-confirmed member of the Board of Governors of the Federal Reserve System,” the Fed said in a statement. “As always, the Federal Reserve will abide by any court decision.”

The president is firing Ms. Cook over claims that she signed 2021 documents listing a Michigan property as her intended primary residence and, shortly later, listed a Georgia property as her primary residence.

Trump officials said the maneuver would have let her get favorable loan terms. The Georgia property was later listed for rent.

The Trump administration says the situation appears to be open-and-shut, so Ms. Cook should explain herself fully. 

“If a Fed official committed mortgage fraud, this should be examined and they shouldn’t be serving as one of the nation’s leading financial regulators,” Treasury Secretary Scott Bessent told Fox Business’ “Mornings With Maria.” “What we haven’t heard from Ms. Cook is, we haven’t heard her say, ‘I didn’t do it.’ She just keeps saying the president can’t remove her.”

Mr. Hassett on Wednesday said the Justice Department is investigating the matter.

The fight could have wide ramifications. Some economists and investors will get skittish if they think the Fed loses its independence and follows political dictates instead of the economic data.

“Congress, through the Federal Reserve Act, directs that governors serve in long, fixed terms and may be removed by the president only ‘for cause,’” the Fed said. “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 added, “The Federal Reserve will continue to carry out its duties as established by law.”

Congressional Democrats have warned of economic ramifications from a loss in Fed independence. 

Wall Street hasn’t reacted strongly to the situation, however. Stocks were little changed and traded in positive territory on Wednesday as investors awaited earnings from Nvidia, a major chipmaker.

One of Ms. Cook’s colleagues vouched for her credentials in an interview with CNBC’s “Squawk Box.”

“Personally, I have worked with Lisa Cook as she’s been a member of the Board of Governors, and she’s always brought integrity and commitment to the central bank’s mission,” said New York Federal Reserve President John Williams. “I think Federal Reserve central bank independence is very important.”

Mr. Bessent, meanwhile, repeated his call for a sweeping review of how the Fed operates.

He said he encouraged Fed Chairman Jerome H. Powell to do that before someone else does.

“The Fed is an unaccountable institution,” Mr. Bessent said, “and its relationship with the American people depends on a high level of trust, and incidents like [Ms. Cook’s] puncture that trust.”