President Trump’s battle with the Federal Reserve is likely to continue, as he continues to challenge the Fed’s independence and seek a judicial green light to continue in her Senate-confirmed position until the end of her term in 2038. Cook, the first Black woman on the board, has been accused of mortgage fraud before joining the Fed in 2022. The president has spent months testing his policies in the courts, and his move to challenge the Fed’s independence is likely to land before the Supreme Court.
The president’s job approval hovers near 40 percent, considered history’s warning threshold for candidates headed into midterm elections representing the party in power. As Americans grapple with rising grocery prices, high borrowing costs, and shrinking paychecks, Trump chafes at his poll numbers. He blamed Fed Chair Jerome Powell for holding interest rates steady instead of lowering borrowing costs to try to tame inflation and called on the chair to resign.
Powell sidestepped the president and GOP critics in Congress, defending the importance of the central bank’s independence and saying he and Fed governors remain focused on supporting the goals of price stability and full employment. Many investors and Wall Street analysts are betting the Fed board at its next meeting in mid-September will vote to trim benchmark interest rates by a quarter point.
Firing Powell or Cook would trigger negative market reactions, as an unprecedented presidential firing requires “cause,” which is legally vague but generally understood to cover gross misconduct. It’s unclear if Trump’s allegations against Cook, which are tied to the terms of mortgage documents before she joined the Fed and have not been adjudicated, would meet such a threshold. The Supreme Court in May volunteered that the Fed may warrant special protection for independence. Democrats have criticized Trump’s attempt at firing Cook, with former Treasury Secretary Larry Summers calling the move “chilling.” Senate Minority Leader Chuck Schumer (D-N.Y.) said Trump’s “brazen power grab must be stopped by the courts.”
The White House could be creating another vacancy on the Federal Reserve, as President Trump announced the firing of Fed board member Lisa Cook for alleged mortgage fraud. Cook vowed to fight the move and hired a big-name attorney. The Federal Reserve said it will follow the court’s decision.
