President Trump is going to start the US Federal Reserve once again. The goal this time is FED -Gouverneur Lisa Cook – whom he wants to release. What is this unprecedented attack on currency keepers?
What happened?
US President Donald Trump has announced the immediate dismissal of Lisa Cook from the Board of Governors of the US Federal Reserve on his platform Truth. He relies on a law clause in the “Federal Reserve Act”. Such a step is unprecedented in the history of the US Federal Reserve-a president has never tried to dismiss a Fed member. Trump had already said that he would “fire Cook if she didn’t go back”.
What accuses Trump Cook?
Trump accuses Cook that she made false information when recording loans for real estate. According to the head of the US Authority for Housing Liefing (FHFA), Bill Pulte, Cook, among other things, has given two main residences-and thus secured cheaper mortgage conditions. Trump accuses Cook of “fraudulent and potentially criminal behavior” as well as a lack of competence and trustworthiness.
Does Trump’s procedure have a legal basis?
The president is only limited to dismiss the central bank officials. The “Federal Reserve Act” stipulates that governors fundamentally have a tenure of 14 years – unless they become “for an important reason” (“For Cause”). So far, the Supreme Court has not determined a clear definition, which could be such a “important reason”.
Experts like Peter Conti -Brown from the University of Pennsylvania emphasize, however, that a discharge “for an important reason” must refer to an official – and not to private affairs. The legal situation is therefore unclear, but a lot speaks against Trump.
How reacts that Fed governor?
Lisa Cook has made it clear that she wants to fight for her post. According to FED, her term of office is actually going to be legally in office until January 31, 2038.
“The President stated that it was ‘with reasons’, while legally there are no reasons – and he has no powers to do this,” says a statement by her law firm. “We will take all the necessary steps to prevent this tried to prevent illegal measure,” said Cook’s lawyer Abbe David Lowell.
Lisa Denell Cook is an economist and has been a member of the Board of Governors of the US Federal Reserve since 2022. She is the first African American on the Governor Council of the Federal Reserve (FED). Before her appointment, she was a professor of economy and international relationships at the Michigan State University, had research stays at the elite universities Harvard and Stanford and was under President Barack Obama as a senior economist in the “Council of Economic Advisers”.
What’s next?
A legal contestation of Cook’s discharge could end in front of the Supreme Court. Until then, Cook could actually remain in office. It is unclear how Cook could actually be removed from office should she defend itself. The Federal Reserve has its own security forces.
What is the history of this case?
Most recently, the US President had repeatedly publicly insulted FED boss Jerome Powell and questioned his skills as President of the US Federal Reserve. The background is the interest rate policy of the US Federal Reserve, which does not correspond to the wishes of the self-proclaimed “low interest rate” Trump.
Since Trump took office in January 2025, the currency keepers shy away from interest in interest – not despite, but because of Trump. After all, according to economists, the customs policy has the potential to drive consumer prices upwards in the United States. Keeping the FED still stirs up the US president’s anger.
Experts therefore assume that Trump will further increase the pressure on the Fed to reduce interest. In addition, Trump should also saw on Powell’s chair. According to Kevin Hassett’s economic advisor, it could still take until the end of the year for the US President to decide who will be the next chairman of the FED. Powell’s term of office runs until May 2026.
Why does Trump even want the FED to reduce interest?
Lower interest rates make loans to companies and consumers cheaper. Companies can therefore invest more cheaply, private households are more likely to finance mortgage loans or the purchase of consumer goods such as cars. This supports the growth of the US economy – an effect that Trump would like to complain to themselves for campaign tactical reasons, for example at Midterms next year.
Lower interest rates also usually ensure increasing share prices, as they make shares compared to bonds more attractive – and Trump is a president who likes to see the stock markets as a mood barometer for his policy. Last but not least, lower interest rates make it easier to refinance the US state debt and thus give Trump more financial policy scope.
Does Trump damage the call of the US Federal Reserve?
Yes, is the clear answer of experts. Trump’s attempt to “politicize” the US Federal Reserve is an attack on the independence of the Fed. This has been almost inviolable since President Richard Nixon’s devastating influence in the 1970s on the interest decisions of the central bank. The independence of the Fed is the basis for the status of the dollar as a world reserve currency and for the attractiveness of US state bonds as a “safe haven”.
What are the risks of Trump?
With his repeated attacks against the FED, Trump risks that investors at the financial markets lose trust in the credibility and independence of the central bank. This has the potential to lead to massive faults on the global stock exchanges – and the USA of the opportunity to deprive its gigantically high public debt of currently over $ 37 trillion through the capital markets. No less than the stability of the global financial system is at stake.
How do the stock exchanges react?
The intensifying power struggle for the staffing of the US Federal Reserve ensures uncertainty and nervousness on the stock exchanges. The returns of US state bonds are increasing that falls. At the stock markets in Asia and Europe, the courses fall – the speculation on US interest rate reductions, which is increased by Trump’s rabid procedure, is actually positive for shares, which are more attractive compared to bonds. However, the investors seem to be more important to the investors.
