The Department of Justice (DOJ) has reportedly initiated an investigation into Federal Reserve Governor Lisa Cook, amid allegations of mortgage fraud. This development comes just a day after former President Trump publicly called for Cook, a Biden appointee, to resign from her position. The investigation marks a significant escalation in the ongoing tension between the Trump administration and the Federal Reserve, which has faced mounting criticism for its perceived sluggishness in cutting interest rates and its recent expenditure of $2.5 billion to renovate its headquarters.
According to a report from Bloomberg, Ed Martin, a senior official at the DOJ known for leading investigations into other high-profile political figures, has communicated with Federal Reserve Chairman Jerome Powell regarding Cook’s situation. Martin's correspondence reportedly emphasized the need for "further scrutiny" and recommended that Cook be suspended from her duties immediately. He expressed concern that "no one believes it’s appropriate for her to remain in her role while serious questions linger."
In light of these allegations, Cook has firmly stated her intention to remain in her position. Since first facing these claims from Federal Housing Finance Agency head Bill Pulte, who accused her of falsifying documents to obtain favorable loan terms, Cook has maintained her innocence. "I will not be intimidated into leaving my role based on baseless claims raised on social media," she declared through a spokesperson. Furthermore, Cook expressed her commitment to addressing any legitimate inquiries regarding her financial history.
Pulte, a prominent figure in private equity and a loyalist to Trump, conveyed his concerns in a letter to Attorney General Pam Bondi and Ed Martin on August 15. He suggested that Cook may have committed a criminal offense by allegedly "falsifying bank documents and property records" to secure advantageous loan terms, which could amount to mortgage fraud under criminal law. Specifically, Pulte claimed Cook declared a condo in Atlanta as her primary residence while also designating a home in Michigan as her primary residence, raising questions about the legality of her mortgage applications.
Reports from the Wall Street Journal indicate that Trump is contemplating efforts to remove Cook from her position due to the ongoing allegations. A resignation from Cook would create an opportunity for Trump to appoint another member to the Federal Reserve Board, thereby intensifying his influence over the central bank's decisions, particularly regarding interest rates. Trump has frequently criticized Powell for not acting swiftly enough in reducing rates and has suggested that he should resign.
The response from Democrats on the U.S. House of Representatives Committee on Financial Services has been swift and vehement. They condemned Trump’s actions as "blatant lies" aimed at displacing the first Black woman on the Federal Reserve Board with an unqualified ally. They argue that this move threatens the independence of the Federal Reserve and should not be allowed to proceed.
The Federal Reserve's central bankers are scheduled to convene again in Jackson Hole, Wyoming, on September 16 and 17 to make crucial decisions regarding the key nationwide borrowing rate. This meeting will be pivotal as the Federal Reserve continues to navigate the complexities of the current economic landscape amidst political pressures.
If Powell were to be removed from his position as a result of this controversy, several prominent candidates have emerged as potential successors. These include former Federal Reserve governor Kevin Warsh, current Fed Governor Christopher Waller, and Kevin Hassett, who is currently serving as Trump's National Economic Council director. The unfolding situation reflects the intricate interplay between politics and the Federal Reserve's operations, underscoring the ongoing challenges faced by the institution.
