President Trump has fired Federal Reserve Governor Lisa Cook, citing alleged improprieties in her mortgage applications, in a stunning escalation of his campaign against the independence of the U.S. central bank.
In a letter posted late Monday, Trump told Cook she was being removed “effective immediately,” arguing there was “sufficient reason” to believe she had falsified mortgage documents when purchasing homes in Michigan and Georgia in 2021. Trump invoked both the U.S. Constitution and the Federal Reserve Act, which allows removal of a governor “for cause,” though that provision has never before been tested against the Fed’s leadership.
The move immediately rattled markets, with the U.S. dollar slipping 0.3% against a basket of peers. Treasury yields also reacted sharply, with short-term yields falling and longer-dated yields climbing, reflecting expectations of political pressure for near-term rate cuts.
Cook, appointed by President Biden in 2022, is the first Black woman to serve on the Fed’s Board of Governors. She had been serving a 14-year term scheduled to end in 2038 and had publicly resisted calls to resign. “I have no intention of being bullied to step down,” she said last week.
Her removal marks the most direct confrontation yet between Trump and the central bank. The president has already lashed out repeatedly at Fed Chair Jerome Powell and fired the head of the Bureau of Labor Statistics after a weak jobs report. Analysts warn that the scale and intensity of Trump’s campaign against the Fed is without precedent in modern U.S. history and could undermine confidence in critical economic data.
“This is an extraordinary act of aggression that violates the Fed’s independence,” said Eswar Prasad, a professor at Cornell University. “Trump has now declared open war on the U.S. institutional framework, which underpins the dollar’s dominance in global finance.”
Whether Trump’s firing of Cook will hold is highly uncertain. The Supreme Court earlier this year reaffirmed that presidents do not have unilateral authority to remove Fed governors, and any attempt to do so would likely face an immediate legal challenge.
Senator Elizabeth Warren (D-Mass.), the top Democrat on the Senate Banking Committee, called Trump’s intervention “an authoritarian power grab that blatantly violates the Federal Reserve Act, and must be overturned in court.”
Legal scholars say the administration would have to prove Cook committed fraud or “gross malfeasance” to justify removal. If Cook contests her firing, the dispute could set off a constitutional showdown between the White House and the central bank at a moment when the Fed is weighing an interest rate cut as early as next month.
Cook’s removal also opens another seat on the seven-member board, just weeks after Governor Adriana Kugler announced her departure. Trump has already nominated Stephen Miran, a close ally, to replace Kugler, and elevated Michelle Bowman to lead banking supervision. Analysts believe Trump could soon reshape the board with loyalists, potentially paving the way for more aggressive rate cuts.
Tim Duy of SGH Macro Advisors emphasized that this latest move “speaks to the determination of this administration to remake the Federal Reserve and serves as a warning to the other Biden appointees”.
Oil prices fell in early Asian trade on the news, with WTI trading at $64.46 and Brent down to $68.48.
By Charles Kennedy for Oilprice.com
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