(Federal Reserve photo)
Pressure on the Fed from the Trump administration has now taken the form of an attempt to oust Fed Governor Lisa Cook on charges of occupancy fraud. Does this attack on the Fed’s independence impact interest rates and financial markets? Yes. It already has.
The international measure of creditworthiness of the United States Treasury is traded every day in the credit default swap market. That metric is international, and the size of the market is measured in the trillions. Since the Lisa Cook affair broke into the headlines, the pricing of CDS on the United States has risen in all tenors from 1 year to 10 years. (CDS tenors do not extend beyond 10 years.) In addition, the yield curve of US Treasury debt has steepened when you extend it out to the longest maturity (30 years).
Lisa Cook Affair Impact
(Chart Courtesy of Cumberland Advisors.)
Each single basis-point upward shift in the yield curve of US Treasury debt implies a running cost of about $2.9 billion annually to the public financing of US Treasury debt. Thus, as of the first week following the Trump administration’s campaign to oust a Fed Governor, CDS data indicates that the Lisa Cook Affair will cost America something close to an additional $10 billion a year.*
I have no idea if occupancy fraud was committed by Lisa Cook or any of the other high-profile public officials who have had allegations brought against them. Occupancy fraud is extremely difficult to prove. The debate now rages about weaponizing an allegation, not a conviction, and doing so for political purposes regardless of truth in the allegation. The Fed is clearly a target — Trump wants to shape interest-rate policy at the expense of Fed independence. The market is responding by repricing the creditworthiness of the United States.
Has occupancy fraud taken place? Are charges of occupancy fraud criminal (or civil) charges or just political allegations? There have been no trials or convictions. Here’s the high-profile list of those facing occupancy fraud allegations: two states’ attorneys general (TX and NY), two US Senators, one Fed Governor. The list is bipartisan and includes a spouse.
Officials Accused of Dual Primary Residence Claims
Lisa Cook
Federal Reserve Governor
Allegation: Claimed two properties—Ann Arbor, MI and Atlanta, GA—as primary residences
Adam Schiff
U.S. Senator (D-CA)
Allegation: Allegedly misrepresented a Maryland home as primary residence while serving CA
Letitia James
NY Attorney General
Allegation: Accused of falsifying loan documents for multiple properties
Ken Paxton & Angela Paxton
TX Attorney General & State Senator
Allegation: Claimed three separate homes as primary residences
Angela Alsobrooks
U.S. Senator (D-MD)
Faced $47K tax penalty for wrongly claiming rental property as primary residence.
So, is the allegation of occupancy fraud a new thing? No.
Occupancy fraud has become a catchphrase since President Donald Trump raised allegations against Democratic Senator Adam Schiff of California, New York Attorney General Letitia James, and Federal Reserve Governor Lisa Cook. But beyond the political noise, how much of a problem is it in today’s mortgage industry?
Industry experts say the scheme is far from new. The practice — when a borrower pretends they’ll live in a home to secure lower rates meant for primary residences — was common during the housing bubble of the 2000s. It still exists today but represents only a small share of applications. (“Occupancy fraud draws more attention as Trump’s political battles heat up” | HousingWire, https://www.housingwire.com/articles/mortgage-occupancy-fraud-trump-politics-investors-lenders-housing-market/.)
Is the charge a political weaponization? That is a debate. After all, Republican Texas Attorney General Ken Paxton and his wife are also on the list above with allegations involving three properties. We remember, however, that Ken Paxton has already been impeached by his own party in his own state back in 2023 on 20 charges and was suspended from duty from May 27, 2023 – September 16, 2023. Paxton is not running for reelection as State Attorney General in Texas this year but against incumbent John Cornyn for the US Senate in a high-stakes race.
Is there a history of allegations like this? Yes — and it is substantial. But establishing intent to defraud is difficult. Here’s an example of fraud: I purposely lie about my residence on two separate mortgage applications so I can get the benefits of a lower interest rate for a second mortgage versus what might be a higher interest rate for the second property if it was to be my “vacation” or “second” home.
And here’s an example of an instance that is not fraud: I buy a place with intent to make it my residence, and I apply for the mortgage. I later change my mind and select a different place for my primary residence instead. My first purchase becomes my second home. Did I commit an intentional fraud? Or did I change my mind? Millions of people move from one residence to another every year. Are they all fraudsters? If they make all their mortgage payments on time, did they commit any fraud? Bottom line? Allegations are not convictions.
Why does this matter? As a matter of business principles, we don’t want fraud. That is why we have laws against fraud and a court system to determine if fraud has taken place. But we also don’t want to injure or malign people if there turns out to be no fraud — no intention to deceive for personal gain. Allegations are not convictions. In the cases of high-profile persons with public positions, allegations have an impact even if they are later proven false. The headline does the damage.
Is the Lisa Cook case unique? Not at all when we look at the list above and at the history of occupancy fraud charges or allegations. But it is unique if you look at the attempt of the US president to use any tool he can find to undermine the independence of the Federal Reserve, which happens to be the most important central bank in the world. That has no precedent. That is why the Lisa Cook Affair has taken on such significance. It has become a symbol for an attack on central bank independence.
The question of fraud is complicated by Cook’s claim, through her lawyer, that a “clerical error,” not fraudulent intention, was the origin of the dual primary occupancy claims on two mortgages. Yahoo! Finance reported, “Lowell indirectly described Cook’s mortgage representations as a ‘clerical error’ and said the White House failed to explain how the representations benefited Cook.”
Is it occupancy fraud or a clerical error? That’s the debate.
According to the Wall St. Journal, Cook’s mortgages had interest rates above the national averages for the type and duration at the time they were made. For details see “The Properties at the Heart of the Allegations Against Lisa Cook” | WSJ, https://www.wsj.com/economy/central-banking/isa-cook-fed-governor-house-mortgage-5e94e0b7.
On Friday, August 29, after a two-hour hearing, US District Judge Jia Cobb indicated that she would seek to expedite Cook’s case. Now we wait.
The Lisa Cook accusation follows a continuous stream of vitriol aimed at the Federal Reserve and Chair Jay Powell.
Has Powell done anything wrong? There is no evidence whatsoever that Powell has committed any crime. People can and do debate Fed policy decisions. But there is not a shred of evidence that Powell has been involved in any civil or criminal fraud.
The Lisa Cook Affair bears scrutiny by financial market agents and investors because it impacts everyone’s pocketbook, including yours and mine. Here’s a list of additional sources referenced for the discussion of occupancy fraud and related allegations.
Sources and Further Reading
News & Investigative Reporting
“Fed’s Lisa Cook sues Trump after attempted ouster, lawyer suggests ‘clerical error’ behind mortgage flap” | Yahoo! Finance,
https://finance.yahoo.com/news/feds-lisa-cook-sues-trump-after-attempted-ouster-lawyer-suggests-clerical-error-behind-mortgage-flap-141708078.html.
“Lisa Cook hints ‘clerical error’ to blame for any mortgage application discrepancy” | CNBC,
https://www.cnbc.com/2025/08/28/lisa-cooks-lawsuit-against-trump-skirts-mortgage-fraud-allegation.html
“The Properties at the Heart of the Allegations Against Lisa Cook” | WSJ,
https://www.wsj.com/economy/central-banking/isa-cook-fed-governor-house-mortgage-5e94e0b7?st=fTv475&reflink=article_email_share
“Judge Weighs Fed Governor Lisa Cook’s Bid to Stop Trump From Firing Her” | WSJ,
https://www.wsj.com/politics/policy/judge-weighs-fed-governor-lisa-cooks-bid-to-stop-trump-from-firing-her-95c6a733
“The Trump administration’s new weapon against foes: Mortgage filings” | Washington Post,
https://www.washingtonpost.com/business/2025/08/25/trump-mortgage-filings-lisa-cook/
Reporting on Letitia James’s property declarations from the New York Times and Adam Schiff’s property declarations from the LA Times and Fox News.
“Meet the Trump housing official leading probes into the president’s foes” | Politico,
https://www.politico.com/news/2025/08/21/bill-pulte-trump-housing-mortgage-00518558
“Trump’s effort to weaponize mortgage fraud claims could ensnare his allies” | CNN
https://www.cnn.com/2025/08/29/politics/mortgage-fraud-weaponization-trump-analysis
“Mortgage fraud claims become ammunition against Trump’s foes” | The Hill
https://thehill.com/homenews/administration/5478125-mortgage-fraud-trump-retribution/
“Angela Alsobrooks improperly claimed tax deductions on DC, Maryland properties, records show” | CNN,
https://www.cnn.com/2024/09/22/politics/angela-alsobrooks-improper-tax-deductions
Special Prosecutor Ed Martin appointed to oversee investigations into alleged mortgage fraud by public officials. “Pardon attorney Ed Martin to oversee Schiff, New York AG fraud probes” | The Hill,
https://thehill.com/regulation/court-battles/5444547-doj-ed-martin-letitia-james-adam-schiff-probe/
Research Study
A Federal Reserve Bank of Philadelphia study (2023) found that 2–3% of loans showed signs of occupancy fraud post-2008, peaking at almost 7% in 2006:
“From Deceit to Default: Dishonest Borrowers and Their Effect on Mortgage Markets” | Federal Reserve Bank of Philadelphia (2023),
https://www.philadelphiafed.org/consumer-finance/mortgage-markets/from-deceit-to-default-dishonest-borrowers-and-their-effect-on-mortgage-markets
Legal Proceedings & Grand Jury Investigations
Lisa Cook’s court filing for declaratory and injunctive relief,
https://www.washingtonpost.com/documents/f172a97d-6e14-4030-8a00-8d4a9a4b0dbe.pdf?itid=sr_7_7fc9a5db-402e-4c0c-8f14-947fbb525df0
Congressional Ethics Complaint Filed by Christine Bish against Adam Schiff, citing conflicting residence declarations
DOJ & FHFA Statements Public disclosures from the Department of Justice and Federal Housing Finance Agency regarding referrals and investigations. (We will not link to these individually.)
*A math error in the original version of this commentary has been corrected.
