Trump Is Trying To Control The Fed

Why did Trump fire a member of the FED? And while this may sound like a simple political move, in reality it might be one of the most dangerous developments in recent years for the stability and independence of the institutions that safeguard the U.S. economy.

WHAT EXACTLY HAPPENED

On Monday, Donald Trump announced that he had fired Lisa Cook, a member of the Board of Governors of the U.S. Federal Reserve.

Cook is the first Black woman ever appointed to this position, nominated by Joe Biden in 2022. She has a long career in academia and is considered by many to be one of the most balanced voices in monetary policy.

Trump, without any court order or precedent, decided to remove her, citing allegations of fraud in mortgage applications. According to him, Cook signed two contracts within two weeks, declaring in each case a different primary residence for the following year.

Cook herself responded that there is no legal basis for her dismissal and that the president does not even have the authority to fire her. In fact, she hired the famous lawyer Abbe Lowell, who has defended well-known political figures, and stated that she will remain in her post and continue to carry out her duties.

Senator Elizabeth Warren quickly took a stand, calling the move “illegal and authoritarian,” saying it was the act of a desperate president looking for scapegoats to cover up his failure to bring down the cost of living for Americans.

THE BIG PICTURE

This move by Trump is not random. It’s not even just aggressive. It is part of a broader strategy that has been unfolding for months.

Trump has been pressuring the FED, and specifically its chairman, Jerome Powell, to cut interest rates. He has asked for it openly, publicly, many times. And he is even reported to have told Republican lawmakers that he is seriously considering firing Powell himself. The next day, of course, he denied it… but also left room with a “I’m not ruling anything out.”

What does this mean? That Trump doesn’t just want to influence monetary policy. He wants to control it. And to achieve this, he is trying to change the composition of the FED’s Board of Governors—to place his own people there. In this way, he could gain a majority.

If he succeeds, then the independence of the FED, the key institution of stability for the international financial system, will be called into question.

Because if the White House gains direct control over the FED, decisions about interest rates will no longer be made based on macroeconomic data, but on political calculations. And that is the most dangerous thing that could happen to monetary policy.

It is therefore no coincidence that markets reacted immediately.

And all this, just from the announcement. Imagine what could happen if he proceeds with the removal of other members—or even Powell himself.

Posted Using INLEO