Trump intensified his battle against the Federal Reserve with an unprecedented measure:, endangering the institution’s independence and paving the way for a dispute that should unfold in courts and financial markets.
S&P 500 futures retreated 0.14%, while the 10-year treasuries yield rose 2 base points to 2.95%amid the sale of securities. The dollar fell 0.09% compared to the euro and 0.06% compared to yen.
As the fear grows that the Fed will make political decisions instead of economic, investors will require higher income to buy Treasury titles and will again question the status of the dollar as the main global reserve coin.
Continues after advertising
“Based on my authority under Article II of the United States Constitution and the Federal Reserve Law of 1913, as amended, you are deprived of your position on the Federal Reserve Council of Governors, with immediate effect,” Trump wrote in his socially -published letter.
Cook replied in a note: “President Trump claimed to fire me ‘for just cause’, when there is no cause for law, and he has no authority to do so.”
She added that she will not renounce and continue to perform her functions “to help the American economy, as I have done since 2022”.
Continues after advertising
Since returning to the White House, Trump has required interest cuts and publicly attacked Fed President Jerome Powell for not giving in. He even considered dismissing Powell, but retreated, although he criticized excessive expenses in the renovation of the Fed’s headquarters.
Last week, Trump threatened to dismiss Cook if she did not resign after a housing authority of her administration accuses her of mortgage fraud. Cook said he would not be intimidated and promised to defend herself.
The impasse about the possibility of a president removing a Fed Director must end up to the Supreme Court.
Continues after advertising
Earlier this year, the court ruled that Fed leaders have special status that protects them from dismissal, except in case of “just cause” – an interpretation that historically means bad conduct or serious neglect.
Meanwhile, Fed officials should come together to protect the institution, considered not only a pillar of US financial markets, but also from the global system.
Powell’s mandate as president ends in May, but his seat as governor goes until 2028. Traditionally, former Fed presidents leave the advice at the end of their term, but analysts believe Powell may feel obliged to defend the institution’s independence. This can lead other governors to only leave their positions when a president of his party is in power, making the Fed more like the Supreme Court in this regard.
Continues after advertising
The weight of the majority
Trump has already appointed Stephen Miran, current chairman of the White House Economic Advisers, for the vacancy left by Adriana Kugler, who came out before the end of her term in January.
Miran supports the interest cuts defended by Trump and was co -author in 2024 of an article that proposed a renovation in the Fed to reduce its independence.
JPMorgan Analysts warned that Miran’s appointment represents a “existential threat” to the Fed, signaling the intention to change the law of the Federal Reserve and limit the autonomy of the institution.
Continues after advertising
It is still unclear whether Miran will be reappointed to the Council, as the White House seeks a Powell replacement in the presidency. But anyway, the Fed would have three governors appointed by Trump.
If he could name a room, Trump would form a majority on the seven -member council. This would not guarantee the control of interest decisions, which are voted by the Federal Open Market Committee (FOMC), made up of 12 members. But it would give their nominees power over the Fed Budget, their staff and even the choice of regional banks – who need to be approved by the Board.
In February, the five -year terms of all regional presidents expire, which expands the scope of Trump’s influence.
The political reaction
With Trump advancing on unexplored territory in his offensive against the Fed, any attempt to confirm new Senate nominees will become a total battle.
“The illegal attempt to fire Lisa Cook is the latest example of a desperate president in search of a scapegoat to cover up his failure to reduce costs for Americans,” Senator Elizabeth Warren, the Senate Bank Committee, said in a statement.
“It is an authoritarian power that violates the federal law of the federal reserve and needs to be reversed in the courts.”
c.2025 Fortune Media IP Limited
Distributed by The New York Times Licensing Group
