Fed Governor Cook will sue Trump to keep her job, lawyer says

NEW YORK/WASHINGTON (Reuters) - Federal Reserve Governor Lisa Cook will file a lawsuit to prevent President Donald Trump from firing her, a lawyer for the embattled central bank official said on Tuesday, kicking off what could be a protracted legal fight over the White House's effort to shape U.S. monetary policy.

"His attempt to fire her, based solely on a referral letter, lacks any factual or legal basis. We will be filing a lawsuit challenging this illegal action," Cook's lawyer, prominent Washington attorney Abbe Lowell, said in a statement.

The statement was issued a day after Trump said he would fire Cook, the first Black woman to serve on the Fed's governing body, for alleged "deceitful and potential criminal conduct" related to mortgages she took out in 2021. Cook has said Trump does not have the authority to fire her and has vowed to stay on the job.

Trump's showdown with the nominally independent central bank follows other largely successful efforts to bring other elements of the U.S. government under his direct control. Since returning to office in January, the president has overseen the departure of hundreds of thousands of civil servants, dismantled several agencies and withheld billions of dollars of spending authorized by Congress.

Trump pressured the Fed to lower interest rates during his first term in the White House and he has escalated that campaign in recent months. The president has demanded that rates be cut by several percentage points and threatened to fire Fed Chair Jerome Powell, although he recently backed away from that saber-rattling.

The attempt to influence U.S. monetary policy has knocked confidence in the dollar and U.S. sovereign debt and sparked fears of global financial turmoil. But market reaction to Trump's latest Fed gambit was tame on Tuesday.

Wall Street's main equities indexes were largely flat on the day, while the dollar dropped. Yields on 2-year, 5-year and 10-year Treasury notes fell, reflecting higher expectations of a near-term rate cut, and rose on longer-dated bonds, in a sign that the Fed's inflation-fighting credentials might weaken.

Trump said in a letter to Cook on Monday that he had "sufficient cause" to fire her because she had described separate properties in Michigan and Georgia as primary residences on mortgage applications before she joined the Fed in 2022.

In recent months Trump has fired several Black women who held senior government positions, including the head of the Library of Congress and the chair of the National Labor Relations Board.

The Trump administration has also targeted other political opponents with similar accusations of mortgage fraud, including New York Attorney General Letitia James, a Black woman who secured a half-billion-dollar civil fraud judgment against Trump last year. A New York appeals court threw out the penalty last week, while preserving the case.