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Author: Zhu Xueying, Wall Street News
Trump just made a big move!He announced in a high profile on social media that the dismissal of Federal Reserve Board Governor Lisa Cook “effective immediately.”
This unprecedented move shocked financial markets and raised questions.U.S. stock index futures fell in response, with the Nasdaq 100 index contract falling 0.2%. Risk aversion drove the yen to rise against the dollar, and gold recovered its earlier losses.
Once Trump’s move is successful, he will be one step closer to “controlling the Federal Reserve.”Cook’s departure would leave Trump with the potential to gain four seats, giving him a majority on the seven-member council.Trump has appointed two of the current trustees during his first term and recently nominated Stephen Miran, chairman of his Council of Economic Advisers, to fill the third seat recently vacated by Biden appointee Adriana Kugler.
Wall Street Journal reporter Nick Timiraos, known as the “New Federal Reserve News Agency”, analyzed in his latest article that Trump has currently appointed two members to the seven-member Board of Governors of the Federal Reserve.Two more nominations would give him a majority,This could fundamentally reshape the entire Federal Reserve system..
And according to Timiraos analysis, if Trump wins a majority on the Federal Reserve Board of Governors before March next year,They may refuse to re-appoint regional Fed chairs, thereby taking control of FOMC meetings.
“Unprecedented” dismissal shocks Wall Street
In the letter, Trump accused Cook of “fraudulent and potentially criminal conduct” in financial matters and said such conduct had shaken his credibility as a regulator.
In the letter, citing Article 2 of the U.S. Constitution and relevant provisions of the Federal Reserve Act promulgated in 1913, Trump stated that he had determined that there were sufficient grounds to remove Cook from his position.The letter refers to an August 15 criminal referral filed by the Federal Housing Finance Agency alleging that Cook made false statements in mortgage loan documents.For example, she first declared the property as her principal residence on a document in Michigan and then made the same declaration on another document in Georgia.Trump called the move “unthinkable” and questioned his integrity and competency as a financial regulator.
Trump’s threat to fire Cook marks a major escalation in the White House’s pressure on the Fed.If Trump successfully removes Cook, it will set a precedent in U.S. history—never before has a sitting Fed governor been fired by a president., market concerns about this may trigger a constitutional crisis and intensify market turmoil.
In previous political conflicts, even President Johnson’s fierce confrontation with Federal Reserve Chairman William McChesney Martin, or President Nixon’s pressure on Arthur Burns, there was no actual dismissal.
Claudia Sahm, chief economist at New Century Advisors and former Federal Reserve economist, once said,
“This is a new way for this administration to try to control the Fed, and they’re using every tool they can find to achieve that control.”
Does the president have the power to remove Fed governors?Yes, but there are preconditions
Legal experts emphasize that the Federal Reserve Act clearly stipulates that directors “may be dismissed by the President for cause”, but this requires conclusive evidence of misconduct, such as dereliction of duty, dereliction of duty, or inability to perform their duties, rather than political motivations.
Federal Housing Finance Agency (FHFA) Administrator Bill Pulte previously accused Cook of mortgage fraud by lying on loan applications to obtain better terms.However, the allegations against Cook have not yet been proven in court, and the Department of Justice has only stated that it will investigate the relevant allegations..
Trump previously posted a photo of Cook marked with a red cross on his social platform Truth Social, calling him a “fraudster.”Cook is the first black woman on the Federal Reserve Board of Governors and will join the Fed in 2022.Massachusetts Senator Elizabeth Warren condemned Trump’s actions on social media as “illegal and politically motivated.”
Trump’s “three-step method” 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 Fed governor and gain a majority on the seven-member board of governors..Trump has appointed two of the current trustees during his first term and recently nominated Stephen Miran, chairman of his Council of Economic Advisers, to fill the third seat recently vacated by Biden appointee Adriana Kugler.
On August 24, Wall Street Journal reporter Nick Timiraos, known as the “New Fed News Agency,” analyzed in his latest article that Trump has currently appointed two members to the seven-member Board of Governors of the Federal Reserve.Two more nominations would give him a majority that could fundamentally reshape the entire Fed system.
In addition, Timiraos analysis believes that if Trump obtains a majority on the Federal Reserve Board of Governors before March next year, they may refuse to re-appoint regional Fed chairs.Firing chairs who have done their job would break with decades of precedent and break through a key firewall that has protected the Fed’s independence since it was founded in 1913.
