President Trump on Monday took the extraordinary step of removing Lisa Cook from the board of governors of the Federal Reserve, in a legally dubious maneuver that could undermine the independence of the nation’s central bank.
Mr. Trump justified the firing, which he said was effective immediately, by pointing to allegations that Ms. Cook, the first Black woman to serve on the board, may have falsified records in order to obtain favorable terms on a mortgage.
But the president previously has made no secret of the true source of his anger with the Fed, which he has savaged for months for keeping interest rates higher than he would like.
The allegations against Ms. Cook came from Bill Pulte, the director of the Federal Housing Finance Agency, who has spent weeks fanning Mr. Trump’s ire against the central bank. Together, Mr. Pulte and Mr. Trump have drummed up a steady stream of accusations in a bid to install a set of political loyalists at the Federal Reserve.
Mr. Pulte had specifically accused Ms. Cook of committing mortgage fraud on social media and called on her to resign. He also referred the case to the Justice Department, which opened a criminal investigation at his request, and urged Mr. Trump to fire Ms. Cook, which the president later said he would do if she did not resign.
Ms. Cook has not been charged with any wrongdoing or convicted in court of a crime. Her dismissal threatened to touch off a landmark legal battle over the president’s authority to fire members of the independent board. The Federal Reserve Act, the law that charters the central bank, would allow Mr. Trump to dismiss a governor if he could demonstrate cause, typically defined as professional neglect or malfeasance.
“I have determined that there is sufficient cause to remove you from your position,” Mr. Trump said in a letter posted to Truth Social.
“The Federal Reserve has tremendous responsibility for setting interest rates and regulating reserve and member banks,” Mr. Trump continued. “The American people must be able to have full confidence in the honesty of the members entrusted with setting policy and overseeing the Federal Reserve. In light of your deceitful and potentially criminal conduct in a financial matter, they cannot and I do not have such confidence in your integrity.”
For the financial system, the consequences threatened to be far greater, given the unique and defining role the Fed plays as an apolitical arbiter of monetary policy. With Ms. Cook’s departure, Mr. Trump could appoint another loyalist to the critical board, which sets the nation’s benchmark interest rates. The president believes these borrowing costs should be dramatically lower, even if economists fear that a premature reduction could cause severe damage.
In firing Ms. Cook, whose term was supposed to run through 2038, Mr. Trump repeated Mr. Pulte’s allegations that she had falsified bank records and other documents in order to obtain favorable terms on a mortgage.
While Mr. Pulte insisted that he sought only to combat fraud, he and Mr. Trump still appeared to target Ms. Cook with a clear political objective in mind. The two men have sought to weaponize the instruments of government against the Fed and its members, including Mr. Powell, at a moment when they have kept interest rates steady out of concern that the president’s policies could cause inflation.
By focusing on Ms. Cook’s mortgages, in particular, their tactics also fit an emerging pattern of political retribution. Both Mr. Trump and Mr. Pulte have trotted out similar allegations of fraud against the president’s perceived enemies, including Senator Adam B. Schiff of California, who as a Democratic representative led congressional inquiries into Mr. Trump during his first term, and Letitia James, the New York State attorney general, who won a civil fraud trial against Mr. Trump before he returned to office.
In her sole comments, issued in a statement earlier this week, Ms. Cook said she had “no intention of being bullied to step down from my position,” but pledged to “answer any legitimate questions and provide the facts.”
Her departure nonetheless would create a second vacancy for Mr. Trump to fill on the seven-member Federal Reserve Board, after another governor, Adriana Kugler, resigned unexpectedly earlier in August. The president has nominated Stephen Miran, currently the chairman of the White House Council of Economic Advisers, to fulfill Ms. Kugler’s term, which concludes in January. Both posts require Senate confirmation.
Tony Romm is a reporter covering economic policy and the Trump administration for The Times, based in Washington.
Colby Smith covers the Federal Reserve and the U.S. economy for The Times.
Ben Casselman is the chief economics correspondent for The Times. He has reported on the economy for nearly 20 years.
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