So, what gives?
Now, a president can remove a Fed governor from his/her position but only "for cause". This has never been an issue considering that no president has ever been a threat to Fed independence, that is until Trump now. The situation is rather unprecedented as Trump is trying to shape a central bank to his liking and to do his bidding.
Circling back to Cook's predicament though, she is facing allegations of mortgage fraud but it is not legally proven just yet. I'm not entirely sure if Trump's action above would sideline Cook but from her remarks here, it doesn't seem like it. That being said, it will surely go down to a legal challenge to prove the "for cause" requirement to officially remove Cook from her position.
If such a situation happens, surely Trump would look to overrule that through the Supreme Court. This has been his go to over the past few months in firing Democratic members of labour boards since he took over. If you recall, the Supreme Court stepped in earlier this year to overrule the Court of Appeals and allowed Trump to fire Cathy Harris from the MSPB and Gwynne Wilcox from the NLRB (both were Biden appointments as well).
It's a tricky one as there is a certain line of thinking that the Fed warrants special protection to preserve institutional norms and to retain investor confidence. The way to look at it is that the Fed exists in a bubble of its own, unique and not engulfed by the same legal structures that rule other institutions in the country. And the Supreme Court may yet uphold that side of the bargain, as they have said before that the central bank occupies a distinctive place in the government.
In short, Trump doesn't quite have the legal authority (not outright at least) to fire Cook. However, he could incapacitate her from her position as Fed governor while the legal challenge is drawn out and until the courts make a decision on the matter.
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