Ms. Lisa Cook, Federal Reserve Governor, is fighting to keep her position and she blames a clerical error, not fraud, for the mortgage form issue that President Donald Trump is leveraging to try to fire her.

This is the main point of a lawsuit that Lisa filed this week in federal court, directly challenging the President's legal authority to fire her from the Federal Reserve Board.

The case did not spend much time discussing whether she filled out the mortgage application incorrectly. Instead, the lawsuit only presented that even if she made a mistake, that still does not give Trump a legal right to fire her.

One of the documents filed in Lisa's lawsuit stated that the issue could stem from a clerical error. Her legal team argues that this is not enough to be considered a "reason," the only reason that allows for the firing of a member of the Federal Reserve Board under the Federal Reserve Act.

This term does not have a clear legal definition and may need to be interpreted by the Supreme Court. Lisa stated that the entire mortgage fraud allegation is just a farce to cover up what is really happening: a move by Trump to fill the Federal Reserve Board with people who will support his call for interest rate cuts.

Lisa's lawyer said that Trump has no legal basis.

The lawsuit calls the mortgage fraud allegations 'cause' and states that they are based on conduct allegedly occurring before Lisa was confirmed by the Senate. It argues that no federal agency has ever investigated or proven anything about those allegations.

“The allegations of misconduct before Governor Cook was confirmed by the Senate have never been investigated, let alone proven,” her legal team wrote. “These allegations are not grounds for dismissal under the Federal Reserve Act.”

The lawsuit states that even if there was a mistake, it was not serious enough to meet the legal threshold required to fire a Federal Reserve governor. Trump and Bill Pulte, who runs the Federal Housing Finance Agency, have accused Lisa of providing false information about where she lived when applying for a government-insured mortgage.

But her lawyer, Abbe Lowell, responded in the lawsuit, saying that even if the President tried to hide the real reason for firing her, the reason he came up with is still not sufficient to be considered valid under the law.

“Even if the President had been more careful in hiding the real reason for targeting Governor Cook,” Abbe wrote, “the reason the President came up with for firing, the unproven allegation that Governor Cook 'may' have made a mistake when filling out the mortgage information before being confirmed by the Senate, is not enough to be considered 'cause' under the meaning of the Federal Reserve Act and is not supported by legal precedent.”

The filing also points out that both Trump and Bill do not assert that Lisa personally benefited from the alleged clerical error, or that it was intentional misconduct. Her lawyer added, “Even if Governor Cook violated the regulations that the President alleges, which she did not, the President still has no 'cause' to fire her.”

Critics question the silence while the markets remain calm.

Bill responded in a statement to Scott Wapner of CNBC, saying, “In her filing, Ms. Cook does not deny that this is her mortgage document, so one must wonder why she, or [Fed Chair] Jerome Powell, would want this to be part of the Federal Reserve, which in theory should have top integrity and be crucial to the safety and soundness of the mortgage market in the U.S.” His statement questions why Lisa did not directly challenge the documents or offer an explanation.

While all of this is happening, the markets have largely ignored it. But that could change. Krishna Guha, head of global policy research at Evercore ISI, warns that the legal case is distracting from what he calls the 'Trumpification' of the Fed. “We do not have special knowledge of the legal events,” Krishna said in a note this week, “but believe that if it is determined that Cook made a mistake regarding mortgage information, even if accidentally, she will have to leave.”

If Trump gets his way and Stephen Miran is confirmed by the Senate to fill a vacant seat, he would hold a 4-3 majority on the Fed Board. This could rise to 5-2 if Jerome decides not to complete his term as governor after his current term as Chair ends in May 2026.

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