Cook Signals ‘Clerical Error’ May Be Behind Mortgage Dispute (2)

Federal Reserve Governor Lisa Cook’s lawyers suggested that an unintentional “clerical error” may have been behind the mortgage dispute over which President Donald Trump wants her fired.

Cook sued Thursday to block Trump’s “illegal attempt,” saying he’s using a phony pretext that doesn’t amount to sufficient “cause” to remove her from the US central bank. In court papers, her lawyers laid out for the first time a potential defense to allegations that she fraudulently listed homes in Michigan and Georgia as a “primary residence” when she obtained mortgages in 2021.

Read More: Lisa Cook Suit Says Her Firing by Trump Puts US Economy at Risk

Trump’s director of the Federal Housing Finance Agency, Bill Pulte, claimed she made that declaration to secure more favorable loan terms, and has referred the matter to prosecutors.

Cook’s lawyers offered an explanation to blunt the fraudulent intent that Trump and Pulte have ascribed to her over the past week. They suggested that if there were errors, she didn’t mean to deceive anyone, and no one was harmed, a standard known as materiality.

The potential that Cook “mislabeled a home’s purpose on a mortgage application well before her Board appointment without any allegation of its intentionality or materiality would not be the type of ‘offense’ that would constitute ‘cause’” for her removal, Cook’s lawyers wrote in a court filing seeking a temporary restraining order.

Trump and Pulte “have not even alleged explicitly that Ms. Cook benefited from any clerical error, or that such an error was intentional,” wrote Cook’s lawyers, led by Abbe Lowell.

Pulte has attacked Cook in a series of social-media posts over the past week. After Cook filed her lawsuit Thursday, Pulte posted: “No one is above the law.” He also posted a graphic that he said shows matching signatures on mortgage documents for the properties in Michigan and Atlanta.

Cook said in a court filing that Trump attempted to fire her without giving her a chance to respond to Pulte’s allegations, denying her the constitutional right to due process. She also said she was entitled to a hearing under the Federal Reserve Act.

The lawsuit is a major escalation of the growing clash between the White House and the Fed, which has resisted Trump’s demands to lower interest rates even as Trump has repeatedly attacked Jerome Powell. The Fed chair has also resisted the president’s demands to resign. In her suit, Cook suggested the attempts to remove both her and Powell are part of Trump’s effort to seize control of the Fed.

“It is clear from the circumstances surrounding Governor Cook’s purported removal from the Federal Reserve Board that the mortgage allegations against her are pretextual, in order to effectuate her prompt removal and vacate a seat for President Trump to fill and forward his agenda to undermine the independence of the Federal Reserve,” according to the complaint.

US District Judge Jia Cobb, who was nominated by former President Joe Biden, has set a hearing for Friday in Washington federal court on Cook’s request for a restraining order. The hearing is set for 10 a.m. local time.

The administration has also made mortgage fraud claims against two high-profile critics of the president, California Senator Adam Schiff and New York Attorney General Letitia James. Both have denied wrongdoing, while Democrats have accused the president of weaponizing federal law enforcement against his perceived enemies.

(Updates in 10th paragraph with details of complaint)

To contact the reporters on this story:
David Voreacos in New York at dvoreacos@bloomberg.net;
Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story:
Misyrlena Egkolfopoulou at megkolfopoul@bloomberg.net

Anthony Aarons, Peter Blumberg

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