CNBC's Sara Eisen shares details from a Department of Justice letter addressed to Federal Reserve Chair Jerome Powell signaling further scrutiny of Fed Governor Lisa Cook.

Washington

A Department of Justice official, Edward Martin, has sent a letter to Federal Reserve Chair Jerome Powell urging the removal of Fed Governor Lisa Cook. The letter cites ongoing allegations of mortgage fraud involving Cook and states that the DOJ is actively investigating the matter. Martin's letter encourages Powell to act quickly, arguing that Cook should not serve under a cloud of suspicion. However, it is noted that the authority to remove a Fed governor typically rests with the president, not the Fed chair, and no formal charges have been filed against Cook at this stage. The situation raises questions about the legal process and the potential impact on the composition of the Federal Reserve Board.

DOJ official calls on Fed Chair Powell to remove Fed Gov. Lisa Cook

I just want to bring you some news. I have received a letter from what appears to be the Department of Justice Edward Martin, who is the special attorney for mortgage fraud, associate deputy attorney general, to Fed Chair Jerome Powell. This is in relation to the saga and the accusations around Lisa Cook around mortgage fraud. The letter from the Department of Justice's Ed Martin that I'm looking at addressed to Chair Powell says that he's received referrals and must examine publicly available facts before proceeding. But over the past 24 hours, the DOJ says they've examined a recent referral and reviewed the public comments by one of your Federal Reserve Board members. What I'm seeing requires further examination, but I write to encourage you to aid efforts and to fight public corruption and the appearance as such. The letter goes farther and actually calls on Fed Chair Powell to remove Ms. Cook from your board. Martin says, do it today before it is too late. After all, no American thinks it is appropriate that she served this time with a cloud hanging over her. So explicitly calling for Fed Chair Powell to remove her and then says, as we begin any investigation of the conduct like that by Ms. Cook and the referral, I will likely be required for confidentiality purposes to remain silent about our investigations. However, I will answer any questions you have to help make you make a timely decision to remove her. We've reached out to the Department of Justice to confirm. They've reached out to the Federal Reserve to confirm as well. But this does appear to show, Carl, a step further here in this drama that the Department of Justice is on it and will investigate and is calling on the Fed chair to remove her. It's not clear that the Fed, it is the Fed chair's job or has the authority even to remove her, even if he were to do so. And by the way, I don't think he would do so without any charges filed or anything like that. However, it's really the president that can remove a Fed governor for cause. And I think there's going to be a lot of legal questions into what cause looks like and what the Department of Justice finds here in their investigation. What she surfaces, I mean, she have to give her the benefit of the doubt to be able to speak and defend herself and go through her paperwork and share with the public what has happened here. But this just this is becoming more serious and it's taken up a notch. Department of Justice is on it. Yeah. Ed Martin, obviously a firebrand, certainly on social media. But that is an interesting letter. And we'll talk more tomorrow. I imagine about how this collides with Jackson Hole and whether it's supersedes sort of the overall message and framework that Powell is expected to deliver. One hundred percent, because what is at stake here is another potential Fed board governor position for the president. I mean, Cook's term doesn't end until the 2030s. So he already has a few potential governor picks to make here. He has Kugler's, which is up in January. Bowman and Waller are in his camp. Right. In his camp. And if you look at Powell, if he steps off as governor, when he steps down as Fed chair, that's another opening. It would be five or seven. And then if this is a potential opening as well, again, we don't want to jump that far, but that's where the market goes. Right. And is wondering what that's going to look like. A lot more dovish outlook on policy if the more the president gets picks on the Federal Reserve Board. Yes. Although Schmidt did say cutting short term might impact inflation expectations, which would be the next discussion after that. But we're getting way ahead of ourselves.

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