Trump tightens his grip on the Fed by removing Biden-appointed governor

Donald Trump has dismissed Lisa Cook, governor of the Federal Reserve, as the U.S. president himself announced on social media. Cook’s dismissal — the economist had been accused by a Trump ally of making fraudulent statements on mortgage applications — is legally dubious and calls into question the future of the Fed’s independence. If the move goes ahead, it could give the Republican new leverage to gain control of the institution responsible for monetary policy, one of his ambitions for this term that has eluded him until now. But it could also cause repercussions in the markets.

In a statement from her lawyer reported by The New York Times, Cook said that “no cause exists under the law” for Trump to fire her. “I will not resign,” she added. “I will continue to carry out my duties to help the American economy as I have been doing since 2022.” Cook, appointed by former president Joe Biden, whose term was not due to expire until 2038, is the first African American woman to serve as governor of the Fed.

In the dismissal letter, which Trump published on his social network, Truth, the president, who maintains that the dismissal is justified, refers to the complaint filed by a senior Housing Department official and staunch Trump supporter, Bill Pulte, who claimed that Cook had declared two homes in two different states as her primary residence in order to apply for mortgages on both on favorable terms.

“You are hereby removed from your position on the Board of Governors of the Federal Reserve, effective immediately,” reads the letter, bearing the White House letterhead and the presidential signature.

Trump also states that “the Federal Reserve has an enormous responsibility in setting interest rates and regulating reserve and member banks.” Therefore, the letter continues, “the American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.”

Cook’s dismissal is the most aggressive step taken so far by Trump in his attempts to gain control of the Fed, an independent body. The dismissal comes just weeks after economist Adriana Kugler resigned from her position as a member of the board of governors on August 1.

Since then, Trump, who has made a habit of attacking Federal Reserve Chairman Jerome Powell, has appointed his economic adviser, Stephen Miran, as Kugler’s replacement. Cook’s vacancy opens up another opportunity for the Republican to appoint a replacement who is closer to his economic views and more likely to heed his calls for interest rate cuts.

In his speech at the annual meeting of central bankers in Jackson Hole last Friday, Powell gave clear indications that the Fed will cut interest rates at its September meeting. The Fed chairman had so far resisted intense pressure from Trump, believing that cheaper money would fuel inflation that is not yet fully under control.

“With policy in restrictive territory, the baseline outlook and the shifting balance of risks may warrant adjusting our policy stance,” Powell said. The chairman’s words sparked euphoria in the markets. But the speech did not convince Trump. “Too late,” he said.

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