Former US President Donald Trump demanded the removal of Lisa Cook from the Board of Governors of the Federal Reserve, escalating his long-standing confrontation with the institution. On Monday evening, through a post on Truth Social platform, Trump published a letter to Cook, announcing her dismissal due to allegations of mortgage fraud.
Who is Lisa Cook
The move sparked intense backlash from Democrats, who are calling it unprecedented political interference. Cook was appointed in 2022 by Joe Biden, becoming the first African American woman to assume the role. Her term was set to be completed in 2038. Previously, she served on Barack Obama’s Council of Economic Advisers and worked at the US Department of Treasury.
The Fed has seven governors who play a crucial role in shaping US monetary policy, as they constitute the majority of the committee that decides on interest rates and seeks price stability and maintaining low unemployment. In recent months, Cook had voted in favor of maintaining steady interest rates.
Why Lisa Cook was fired from the Fed after Trump’s order
In his post, Trump claimed that Cook may have submitted false information to secure mortgage loans. Specifically, she allegedly signed two different documents, two weeks apart, declaring that two different homes, in different states, were both her “primary residence.”
“It’s inconceivable that you were unaware of your commitment to the first home when you signed for the second. It’s impossible that you intended to honor both,” Trump stated. CNN examined the relevant documents and confirmed that Cook declared two primary residences. However, it remains unclear whether she informed lenders about this. Cook has not been officially charged with any crime and in her statement said she would challenge the dismissal, emphasizing that Trump lacks sufficient grounds for her firing.
What is the Federal Reserve
The Fed is the central bank of the United States and is responsible for monetary policy, financial system stability, and regulation of banking institutions.
One of its main responsibilities is setting interest rates, which directly affect borrowing capacity for citizens and businesses.
The Fed operates as a federal service but is considered independent from the government. Its decisions do not require presidential approval, although they are subject to Congressional oversight.
Can Trump actually fire Cook?
This question may develop into an intense legal battle.
The Federal Reserve Act does not allow the president to arbitrarily fire any member of the Board of Governors, but provides the possibility of removal “for cause.”
Trump invoked a related criminal referral of Cook following a request from his ally who heads the regulatory authority for mortgage loans. However, it remains unclear whether an official investigation has begun, while there are no formal charges.
Legal experts, such as former federal prosecutor San Wu, express skepticism: “For now, the existence of cause is questionable. It’s clear that Trump is relying on this, but it’s expected that Cook will fight it.”
Markets so far remain calm, waiting to see if the firing will be implemented.
Why does Trump want lower interest rates?
During his second presidential term, Trump has pressured the Fed to lower interest rates in order to enhance access to cheaper borrowing for businesses and consumers. The reference rate currently ranges between 4.25% and 4.5%.
Central banks lower interest rates to boost economic growth. However, interest rate increases are used to combat inflation, which is also a priority for Trump.
Additionally, lower interest rates help US exports, which is a key element of Trump’s economic policy.
So far, Fed Chairman Jerome Powell has refused to lower interest rates since Trump took power, although he recently hinted that there might be a reduction in September.
