Trump escalates war on Fed independence by removing a governor from its board

Donald Trump ignored all precautions and stepped up his all-out war against the Federal Reserve (Fed). The US president announced Monday night the immediate dismissal of Lisa Cook, a Fed board governor, for alleged mortgage fraud for which he has provided no evidence.

His maneuver, of dubious legality, has every indication of undermining the independence of the US central bank and wreaking havoc on the stock market. His unprecedented decision escalates his attack on the Fed, which has been resisting his demand for interest rate cuts for months.

Trump, who last week posted the message "Resign Now!" on social media dedicated to the governor, warned on Friday that if she didn't resign, he would fire her. Cook maintained that she would resist the harassment and was not willing to resign her position. All to no avail. For now.

“Pursuant to my authority under Article II of the United States Constitution and the Federal Reserve Act of 1913, as amended, you are hereby removed from your position on the Board of Governors of the Federal Reserve, effective immediately,” the president wrote in a letter, which he also shared on his social media platform.

The president cited a complaint allegedly filed by Bill Pulte, director of the Federal Housing Finance Agency (FHFA). Cook, nominated by Joe Biden and slated to serve until 2038, is the first Black woman to serve on the Fed's board of governors.

His accusation stems from Pulte's statement, which alleged that Cook may have falsified records to obtain favorable terms on a mortgage. The case has not yet reached court, but Trump issued a ruling.

According to the FHFA director, Cook owns two homes, one in Ann Arbor, Michigan, and a condominium in Atlanta as her primary residence. She made the purchases within a two-week period, both with financing. Pulte accused her of "falsifying bank documents and property records." It has never been verified or known what led Cook to this decision, or whether she did so intentionally.

The Justice Department said it was preparing an investigation into these allegations, but had not formally announced any charges as of Monday night.

Trump maintains that this situation compromises Cook's performance at the Fed and her effective capacity as a regulator. Cook may seek to litigate against his resignation, which could be a historic battle over the president's power over the Federal Reserve.

This resignation illustrates, like few others, how far Trump is willing to go with his power in any area, and in this case, to reshape the Fed's board, which is responsible for setting the price of money in the U.S., to his liking.

In addition to five Rotary seats, designated for heads of regional banks, the Federal Reserve Board is composed of seven governors.

Two of these, Christopher Waller and Michelle Bowman, were appointed by Trump. They were the two who broke the consensus at the July meeting and argued that interest rates should be lowered, as demanded by the White House leader.

Adriana Kruger, another governor, unexpectedly resigned last month, as her term was set to expire next January. This decision gave Trump the opportunity to nominate one of his own, Stephen Miran, who must be confirmed by the Senate. Cook's dismissal would give him another seat and the majority.

Trump has also made no secret of his animosity toward Fed Chairman Jerome Powell, against whom he has been launching relentless attacks for months. He is threatening Powell with another lawsuit over alleged misappropriation of renovations at the central bank's headquarters.

If he hasn't fired him yet, it's because his staff and numerous economists are recommending he abstain, fearing a stock market cataclysm in light of what would be the total loss of the institution's independence. Trump seems to be accepting the wait, given that Powell's term expires next May.