Fed’s Cook Contests ‘Baseless’ Mortgage Fraud Claims to DOJ

(Bloomberg) — Federal Reserve Governor Lisa Cook offered a detailed rebuttal to mortgage fraud allegations made by President Donald Trump and other US officials, arguing in a letter to Attorney General Pam Bondi that the claims “fail on even the most cursory look at the facts.”

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Cook’s attorney Abbe Lowell sent a letter on Monday to Bondi and Ed Martin, a senior Justice Department official tapped as a “special attorney” to investigate mortgage fraud, as she presses a legal fight to keep her job. The US Supreme Court is set to hear arguments on Jan. 21 on Cook’s challenge to Trump’s move to fire her.

Lowell wrote that criminal referrals by a senior administration official were “baseless.” Cook has not been charged to date.

“The full record makes clear that what he claims to be contradictions in loan applications were not contradictions at all but were cherry-picked, incomplete snippets of the full documents submitted at the time and in subsequent filings by Governor Cook consistent with her applications,” Lowell wrote.

The Justice Department released a statement regarding the Cook letter that it “does not comment on current or prospective litigation including matters that may be an investigation.”

Cook is among a number of mostly Democratic targets of the Trump administration referred to the Justice Department over allegations of mortgage fraud. Others include Senator Adam Schiff, the California Democrat, and New York Attorney General Letitia James.

James, who was indicted for alleged mortgage fraud last month, claimed in a legal filing Monday that Trump administration officials engaged in “outrageous government conduct” and have turned the Federal Housing Finance Agency into a “weapon” used against “President Trump’s enemies.” She asked the court to dismiss the case or permit her to have access to documents and communications by the officials to prove her allegations.

Trump said on Aug. 25 that he had fired Cook “for cause” after she refused his demand to resign over a claim by FHFA Director Bill Pulte that she lied on mortgage applications. Cook, in turn, filed a lawsuit against Trump, arguing his attempt to remove her from the Federal Reserve Board was unlawful and violated the central bank’s independence.

The Supreme Court last month refused to let Trump to immediately oust Cook, allowing her to remain in her position at least until the justices hear arguments in the case in January.

The ultimate outcome of the legal battle will help determine the extent to which the White House is able to exert control over the Fed as Trump pressures its leaders to significantly cut interest rates.

‘Inadvertent Notation’

In two separate referral letters to the Justice Department, Pulte accused Cook of wrongdoing in relation to properties in Michigan, Massachusetts and Georgia. In his first letter, Pulte alleged that Cook claimed in mortgage documents that the Ann Arbor, Michigan, property is her “primary residence” even though she does not live there year-round, and that she also claimed the Atlanta, Georgia home as her “primary residence” even though she used it for vacation.

Pulte’s second referral letter made a similar claim about Cook’s Cambridge, Massachusetts property, accusing her of claiming it as a primary residence while using it as a vacation or rental property.

According to Cook’s response on Monday, her claim about the Ann Arbor property was true. She said she bought the home in 2005 when she started a full-time job as an assistant professor at Michigan State University and used the property as her primary residence until 2011, when she briefly relocated to Washington to serve as a senior economist at the White House Council of Economic Advisers.

“Governor Cook returned to her Ann Arbor home in 2012 and continued teaching and doing research at MSU for an additional 10 years,” Lowell wrote. “In the spring of 2021, when Governor Cook refinanced the mortgage on her Michigan home (the loan with which Director Pulte now takes issue), that property was still her primary residence and she was still residing in Ann Arbor and employed by MSU.”

Lowell said Pulte’s claims about the Atlanta property are similarly off-base, and that there is no evidence that she intended to defraud the lender. She purchased the property so she could have a permanent place near her family. One line in the document listed it as her “primary residence,” which Lowell said was “at most an inadvertent notation.”

“Governor Cook was raised in Milledgeville, Georgia, where her family owned a home for decades,” her lawyer wrote in the letter. “After her family sold its jointly-owned family home in Milledgeville in 2021, Governor Cook wanted to have her own place to stay when she would come home to visit family.”

Cook’s letter said the Cambridge property was purchased in 2002, when she was a first-time home buyer. She lived there until she accepted a job at Michigan State University, and converted it into a second home mortgage in 2021 “as she had been living away from Cambridge and was renting out the home for most of the calendar year by this point.” Cook used a second-home rider when she refinanced the home, and her bank accepted it, according to the letter.

“When she originally obtained her mortgage on the Cambridge property, she accurately stated that it was her primary residence, having begun her career as an academic economist at Harvard University in 1997,” Lowell wrote.

Legal Fight

Cook was appointed by President Joe Biden in 2022 to a term that was set to expire in 2038.

According to Cook’s legal filings, Trump’s move is designed not to uphold accountability, but to seize political influence over monetary policy. Trump has blasted Fed Chair Jerome Powell for not moving as quickly as the president wanted to reduce interest rates.

Under the Federal Reserve Act, a governor can only be removed “for cause,” meaning proven misconduct or neglect while in office. Cook’s alleged misconduct, which took place a year before her appointment, had nothing to do with her duties as Fed governor and therefore doesn’t meet that standard, she argues.

The Justice Department contends that courts don’t have a role to play in second-guessing the president’s reasons for firing a governor “for cause.” The administration has largely succeeded in defending Trump’s controversial firings before the Supreme Court this year and has framed Cook’s case as part of a pattern of judicial interference, but the justices in the past have made clear that they see the Fed as a unique entity.

No justice noted a dissent when the court refused to let Trump fire Cook before hearing the case.

(Updates with new James legal filing.)

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