US Justice Department eyes probe into Fed Governor Lisa Cook

Photo:AP

A new controversy has emerged in Washington as the US Justice Department has signaled possible plans to open an investigation into Federal Reserve Governor Lisa Cook. This move has created a storm of political debate, questions about her future, and rising tension between the White House and the central bank.

Justice Department Letter to Powell

Ed Martin, a senior Justice Department official known for handling other high-profile political probes, sent a strong letter to Federal Reserve Chair Jerome Powell on Thursday. In this letter, he claimed that Cook’s actions “require further examination” and urged Powell to take immediate steps to remove her from the Fed board.

Martin’s words were unusually direct:

“At this time, I encourage you to remove Ms. Cook from your Board. Do it today before it is too late!”

He argued that allowing Cook to stay on the board while under suspicion would hurt the central bank’s credibility.

Can Powell Fire Her?

Although Martin asked Powell to act, the law does not give Powell such power. Governors of the Federal Reserve are presidential appointees confirmed by the Senate, and they cannot be removed by the Fed chair. Only the President of the United States has the authority to remove a governor, and even then, only if there is proven wrongdoing.

Trump’s Pressure on Cook

According to a White House insider, President Donald Trump has privately discussed the idea of firing Cook. However, at this stage, Trump is not actively moving toward that option. Instead, he wants Cook either to resign voluntarily or be dismissed through Powell.

Trump has been openly critical of both Powell and Cook in recent weeks. He has repeatedly attacked the central bank for not cutting interest rates quickly and for spending heavily on renovating its headquarters. He even mocked Powell by calling him “Too Late” for failing to act on rate cuts earlier this year.

Cook’s resignation would give Trump another opening to reshape the Fed board and increase his influence over monetary policy decisions.

Cook Responds Firmly

Despite the growing political storm, Lisa Cook has made her stance clear. On Wednesday, she issued a written statement saying:

“I have no intention of being bullied to step down from my position because of some questions raised in a tweet. I will take any questions about my financial history seriously and will provide accurate information.”

Cook, who became the first Black woman to serve as a Federal Reserve governor when she was appointed in 2022, stressed that she plans to continue her work. Her term runs until 2038, making her one of the longest-serving members of the board if she stays.

Allegations Against Cook

The situation intensified after Bill Pulte, Director of the Federal Housing Finance Agency, sent a referral letter on August 15 to Attorney General Pam Bondi and Ed Martin. In his letter, he accused Cook of possibly committing mortgage fraud by “falsifying bank documents and property records” to secure better loan terms.

So far, these are only allegations, and no official charges have been filed. The Justice Department has said it must keep investigations confidential until it has enough evidence.

Shifting Balance at the Fed

If Cook does step down, Trump would gain another chance to fill the Fed board with his preferred candidates. The seven-member board is already changing. Earlier this month, Adriana Kugler, another appointee of President Joe Biden, announced she would leave her position before the end of her term.

With two Trump appointees already serving — Christopher Waller and Michelle Bowman — a Cook departure would tip the balance even further toward Trump’s side.

History of Political Battles

Lisa Cook’s journey to the Fed has never been free of controversy. During her Senate confirmation in 2022, Republican lawmakers heavily criticized her qualifications and raised doubts about her academic and professional record. The vote was so tight that then-Vice President Kamala Harris had to break a 50-50 tie in the Senate to secure her confirmation.

Despite the rough path, Cook has played an active role in shaping monetary policy. As a permanent member of the Federal Open Market Committee (FOMC), she has had a voice in key decisions, including whether to raise or cut interest rates.

Recently, Cook has voiced concerns about inflation and trade tariffs. In early August, she warned that the latest jobs report was “concerning” and might signal a weakening US economy. The central bank is now expected to cut interest rates at its next meeting in September, a move that could shape the direction of the US economy in the months ahead.

What’s Next?

For now, Lisa Cook says she will not resign. The Justice Department has not officially launched a public investigation, but the referral letter and political pressure have placed her under a heavy spotlight.

If an official probe begins, it could drag on for months, creating uncertainty inside the Federal Reserve at a critical time when the central bank is trying to manage inflation, economic growth, and political pressure from the White House.

Cook’s case also highlights the deepening clash between President Trump and the Federal Reserve. Trump wants lower interest rates to boost the economy, while Fed leaders want to carefully balance growth and inflation.

The outcome of this situation will not only decide Cook’s future but may also shift the power balance inside America’s most important financial institution.