1:20The Supreme Court is observed during oral arguments on January 13, 2026, in Washington. Julia Demaree Nikhinson/AP
As President Donald Trump embarks on an unprecedented effort to exert influence over the Federal Reserve, the U.S. Supreme Court is deliberating on Wednesday regarding the extent of a significant limitation on his authority to dismiss a Fed member for any reason.
The pivotal case features Trump versus Fed governor Lisa Cook, a Democratic appointee, whom the president attempted to dismiss for cause in August, claiming that members of his administration raised unproven allegations of mortgage fraud prior to her taking office. She refutes these allegations.
Central to the disagreement is the definition of “cause,” which is not specified in the Federal Reserve Act, and whether the president is required to provide Cook with formal notification and the chance to defend herself in a hearing before removal. She has not been accused of any crime.
"The Court needs to clarify what constitutes a dismissible offense for members of the Federal Reserve Board," stated Lev Menand, an expert in economics law at Columbia Law School and a former Treasury Department official. "However, it cannot be merely whatever the president claims it to be."
Lisa Cook, member of the Board of Governors of the US Federal Reserve, attends the Federal Reserve Board’s Community Bank Conference at the Federal Reserve Board headquarters in Washington, October 9, 2025. Andrew Caballero-Reynolds/AFP via Getty Images
Trump asserts there is "sufficient evidence" that Cook unlawfully filed a mortgage application for a second residence as a "primary" residence to obtain more advantageous loan terms, at the very least creating an impression of impropriety. The Justice Department has initiated a criminal investigation.
"At a minimum, the actions in question demonstrate a level of gross negligence in financial dealings that raises doubts about your competence and reliability as a financial regulator," the president stated in his letter terminating Cook.
Cook, who declined to resign, maintains through her legal representatives that what she terms "groundless" allegations — based on "one isolated reference" in a 2021 mortgage document — serve as a pretext for a politically motivated attempt to influence the Fed’s policy board.
"There is no fraud, no intent to mislead, and absolutely no basis for alleging mortgage fraud," Cook’s attorney Abbe Lowell contended in a November letter to the DOJ.
Legal historians indicate that this case represents one of the most significant challenges to presidential authority in over a century. At stake is the autonomy of the nation’s central bank, which was designed to make decisions impacting the global economy and U.S. consumers with a focus on the nation’s long-term interests rather than immediate political agendas.
"This case is about much more than Cook," Menand remarked. "It concerns whether President Trump will be able to take control of the Federal Reserve Board in the upcoming months, and the administration has been rather transparent about that intention."
Workers are seen at the Federal Reserve renovation site on Jan. 14, 2026, in Washington, D.C. The Federal Reserve Board is undertaking a significant renovation of its two historic buildings, the Marriner S. Eccles Building and the FRB-East Building, nearly a century after their construction. Alex Wong/Getty Images
Former top officials of the Fed and numerous leading economists have cautioned that if the president succeeds in dismissing Cook in this manner, it would diminish public trust in the Fed, weaken the efficacy of its policies, and disturb financial markets.
Trump has made it clear that he desires the Fed to expedite the reduction of interest rates and has harshly criticized Fed Chairman Jerome Powell, a Trump appointee, for not taking the lead. Earlier this month, the Justice Department launched a criminal investigation into Powell regarding his management of renovations at the Federal Reserve headquarters, which he labeled as blatant political
Sourse: abcnews.go.com