In a cometary curveball, U.S. President Donald Trump just went and did that. He has made it clear that if confirmed, he would seek to promptly remove Lisa Cook from her seat as a Federal Reserve Board governor. Cook, the first African American woman to serve in this post, sparked history with her success. Now she is on the hot seat for alleged mortgage fraud by none other than the director of the Federal Housing Finance Agency. Tension continues to grow between the Trump administration and Federal Reserve. Specifically, they are at odds over the direction of monetary policy and interest rates.
Lisa Cook became the first Black woman on the Federal Reserve’s board of governors in 2022. She now takes her expertise to one of the largest and most powerful financial institutions in the world. Trump’s impulse to fire Cook would appear to be just the tip of a larger trend. He’s been very engaged in pressuring the Fed, and especially going after its chair, Jerome Powell. In recent weeks, no surprise here, Trump has complained to anyone within earshot of his frustration with the central bank’s reluctance to follow suit. He considers this measure to be critical to jumpstarting economic recovery.
The political firestorm around Cook exploded when she signed a letter. That application claimed that a house in Michigan would be her primary residence over the coming 12 months. Critics have seized on this detail as a jumping off point for their allegations against her. Cook has firmly denied any wrongdoing. In her defense, she stated, “I have no intention of being bullied to step down from my position because of some questions raised in a tweet.” She emphasized her commitment to transparency, noting that she is “gathering the accurate information to answer any legitimate questions and provide the facts.”
In the case of Cook’s removal, Trump’s claim came with sharply worded attacks on her dedication to the Federal Reserve. He stated, “It is inconceivable that you were not aware of your first commitment when making the second.” First and foremost, this comment signals that the President believes Cook is guilty of malfeasance. It implies that she has derelicted her responsibilities while at the Fed due to her approaching nuptials.
As the battle continues to unfold, both Cook and the Federal Reserve have so far declined to publicly address Trump’s move. This belated or absent response calls into question the dynamics — especially the accountability — of our central bank. This is shocking especially given the context of Trump’s previous threats to fire Powell. Analysts suggest that this situation reflects a growing chasm between the administration and the Federal Reserve, as Trump increasingly criticizes the bank’s monetary policy decisions.
Cook’s removal from office, effective immediately, adds to the already heated and partisan mood pervading the Federal Reserve. This decision has potentially nationwide implications. It will help determine how current and future political leaders and markets see future appointments to the board.