President Donald Trump says that he has fired Federal Reserve Governor Lisa Cook, per a letter posted on his Truth Social account. The move represents an escalation of the President's attack against the central bank and its independence.
Cook has been attacked by the President and his Cabinet after Federal Housing Finance Agency Director Bill Pulte claimed that Cook indicated that both of her homes — one in Michigan and another in Georgia — were primary residences.
Under these grounds, the President has exercised a right to remove the Fed Governor “for cause”, citing “false statements on one or more mortgage agreements.”
In the letter, Trump wrote:
“Pursuant to my authority under Article II of the Constitution of the Untied States 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.”
Trump had previously committed that he would fire Cook if she did not resign, amid the accusations. Cook quipped back that she would not resign. She attended the Federal Reserve Symposium in Jackson Hole, Wyo. on Friday.
However, “for cause” is vague in the context of the Federal Reserve Act. It has been seldom used by a President; even less so to influence or coerce central bank policy.
Outside of a criminal referral, no other details are known about the specifics of the accusations.
Trump figures he has a considerable incentive in removing Cook. Trump has nominated two Fed Governors and would pick up a third, who could help him corral interest rates lower.
However, such a move puts into question the independence of the central bank. Former Treasury Secretary Larry Summers warned Monday that the attacks are “chilling” and “should alarm anyone” concerned about the state of the Fed.
Today, the Fed Funds Rate (FFR) is 4.25% to 4.50%. Trump has repeatedly indicated his desire to see rates reduced, calling them too high in repeated attacks on Fed chair Jerome Powell, as well as other Fed leaders.
U.S. equity futures fell on the news. Gold and the Cboe Volatility Index spiked.
