Original Title: "A Historic First! Trump 'Fires' Current Federal Reserve Governor, Taking Another Step Towards 'Controlling the Federal Reserve'"
Original Author: Zhu Xueying, Wall Street Journal
Trump has just made a significant move! He announced on social media that he has removed Federal Reserve Governor Lisa Cook from her position "effective immediately."
This unprecedented action has shaken the financial markets, raising many questions. U.S. stock index futures fell in response, with the Nasdaq 100 index contract down 0.2%, and risk-averse sentiment pushed the yen up against the dollar, while gold recovered some earlier losses.
If Trump succeeds in this move, he will be one step closer to "controlling the Federal Reserve." If Cook leaves, it would allow Trump to potentially gain four seats, giving him a majority on the seven-member board. Trump has already appointed two of the current governors during his first term and recently nominated his economic advisor Stephen Miran to fill the third seat vacated by Biden's appointee Adriana Kugler.
In a recent article, Wall Street Journal reporter Nick Timiraos, known as the "New Federal Reserve News Agency," analyzed that Trump has already appointed two members to the Federal Reserve's seven-member board. If he gains two more nomination seats, he will have a majority, which could fundamentally reshape the entire Federal Reserve system.
According to Timiraos' analysis, if Trump secures a majority on the Federal Reserve Board before March next year, they may refuse to reappoint regional Federal Reserve presidents, thereby gaining control over the FOMC meetings.
Unprecedented Dismissal Shakes Wall Street
In his letter, Trump accused Cook of "fraudulent and potentially criminal behavior" in financial matters, claiming such actions have undermined her credibility as a regulator.
The letter cites Article II of the U.S. Constitution and relevant provisions of the Federal Reserve Act enacted in 1913, stating that Trump has determined there is sufficient reason to remove Cook from her position. The letter mentions a criminal referral submitted by the Federal Housing Finance Agency on August 15, alleging that Cook made false statements in mortgage documents. For instance, she first declared a property as her primary residence in a Michigan document and then made the same declaration in another document in Georgia. Trump called this "unimaginable," questioning her integrity and competence as a financial regulator.
Trump's threat to dismiss Cook marks a significant escalation in the White House's pressure on the Federal Reserve. If Trump successfully removes Cook, it would set a historical precedent in the U.S.—no sitting Federal Reserve governor has ever been dismissed by a president, raising market concerns about a potential constitutional crisis and increased market turmoil.
In previous political conflicts, even the intense confrontations between President Johnson and Federal Reserve Chairman William McChesney Martin, or President Nixon's pressure on Arthur Burns, did not result in actual dismissal actions.
Claudia Sahm, chief economist at New Century Advisors and former Federal Reserve economist, stated,
"This is a new tactic by this administration to control the Federal Reserve; they are using every means available to achieve this control."
Does the president have the power to dismiss a Federal Reserve governor? Yes, but with conditions
Legal experts emphasize that the Federal Reserve Act clearly states that governors "may be removed by the president for cause," but this requires solid evidence of misconduct, such as dereliction of duty, malfeasance, or inability to perform their duties, rather than political motives.
Although the director of the Federal Housing Finance Agency (FHFA), Bill Pulte, previously accused Cook of lying in loan applications to obtain better terms, allegedly committing mortgage fraud, the allegations against Cook have not yet been confirmed by a court, and the Department of Justice has only stated that it will investigate the relevant claims.
Previously, Trump posted a photo of Cook marked with a red X on his social media platform Truth Social, calling her a "fraud." Cook is the first Black woman on the Federal Reserve Board, having joined in 2022. Massachusetts Senator Elizabeth Warren condemned Trump's actions on social media as "illegal and politically motivated."
Trump's "Three-Step Plan" to Control the Federal Reserve is Gradually Being Implemented
Some analysts believe that if Cook leaves, Trump will have the opportunity to appoint a fourth Federal Reserve governor, gaining a majority on the seven-member board. Trump has already appointed two of the current governors during his first term and recently nominated his economic advisor Stephen Miran to fill the third seat vacated by Biden's appointee Adriana Kugler.
On August 24, Wall Street Journal reporter Nick Timiraos, known as the "New Federal Reserve News Agency," analyzed that Trump has already appointed two members to the Federal Reserve's seven-member board. If he gains two more nomination seats, he will have a majority, which could fundamentally reshape the entire Federal Reserve system.
Additionally, Timiraos analyzed that if Trump secures a majority on the Federal Reserve Board before March next year, they may refuse to reappoint regional Federal Reserve presidents. Dismissing those who are performing their duties would break decades of precedent and breach the critical firewall that has protected its independence since the Federal Reserve's establishment in 1913.
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