Does the President of the United States have the power to dismiss a Federal Reserve Board member?

At 8:02 AM Beijing time on August 26, Trump signed the document to dismiss Federal Reserve Board member Cook. Some friends said the drop was due to this reason. From the timing, although there was indeed a maximum fluctuation of $2,000 in $BTC during this period in the morning, it should not be the main reason for the drop. The main decline occurred when the U.S. stock market intensified its drop early this morning, starting around 3:30 AM.

Of course, the analysis from friends is correct. Trump's direct action against a Federal Reserve Board member would raise questions about his authority. If the president could arbitrarily dismiss Federal Reserve Board members, it would mean that anyone who does not follow Trump's orders could be dismissed, raising concerns about the independence of the Federal Reserve. However, there is no need to worry about that.

About three hours later, the dismissed Federal Reserve Board member Cook issued a statement saying that Trump did not have the power to dismiss him, and he would not resign. So, does the President of the United States have the power to dismiss a Federal Reserve Board member?

The answer is yes; the president does have the power to dismiss, but there must be sufficient reason.

In the dismissal document signed this time, Trump's reason was the claim that Cook was involved in "mortgage document fraud," which is consistent with the Federal Reserve Act. However, this requires judicial review and confirmation before a dismissal can occur. In other words, Trump currently does not have the power to remove Cook from his position.

Only after a court investigation confirms that Cook indeed committed "mortgage document fraud" can Trump exercise presidential power to remove Cook from his position. Does Trump know this? I believe he must know. But if Trump clearly knows he cannot do this, then why does he still proceed?

The truth is simple: Trump has little time left. The support he has within the Federal Reserve is still not enough, so he needs to use such executive orders to exert pressure internally. If the Federal Reserve cannot enter a phase of continuous interest rate cuts, all board members who do not support rate cuts may be investigated by Trump. Once they are found to have issues, they could be dismissed by Trump.

Indeed, Trump is interfering with the independence of the Federal Reserve. However, this interference with independence, if it were in the past, might have been a significant drawback, but now, it may not be so clear-cut.

This article is sponsored by #Bitget ｜ @Bitget_zh

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