President Donald Trump on Monday said he has fired Federal Reserve Governor Lisa Cook, according to a letter addressed to her posted on his social media — the first instance of a president firing a central bank governor in the central bank’s 111-year history.
The unprecedented move represents a significant escalation of the president’s battle against the Fed, which he has blamed for taking too long to lower interest rates.
Cook has recently come under fire by Trump and members of his administration for allegedly committing mortgage fraud. The Justice Department has said it plans to investigate those allegations first raised by Federal Housing Finance Director Bill Pulte.
Cook has not been charged with any wrongdoing.
The Fed declined to comment on the news.
It’s unclear whether Trump has the legal authority to fire Cook over these allegations. The law specifies that a president may only remove members of the Fed’s board “for cause” – though what merits a for-cause firing has not been explicity defined.
Trump, in his letter to Cook wrote, “I have determined that there is sufficient cause to remove you from your position.”
(A CNN review of mortgage documents shows that Cook did take out mortgages for two properties, both of which were listed as her principal residence. However, it’s not known why she did so or if she did so intentionally.)
“In light of your deceitful and potentially criminal conduct in a financial matter … I do not have such confidence in your integrity. At a minimum, the conduct at issue exhibits the sort of gross negligence in financial transactions that calls into question your competence and trustworthiness as a financial regulator,” Trump added in his letter.
While the firing may be challenged in courts, even going up to the Supreme Court, Trump’s firing of Cook puts the central bank of the world’s largest economy in uncharted waters.
For example, it’s unknown whether Cook would have to leave the Fed’s board immediately, and if so, will Trump have the opportunity to nominate someone else to fill her seat.
The Fed’s next monetary policy meeting is less than a month away, over September 16 and 17.
Last week Cook released a statement saying she would not be “bullied” into resigning.
“I have no intention of being bullied to step down from my position because of some questions raised in a tweet. I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts,” she said in that statement.
The Fed is designed to be independent from politicians specifically so it can focus on economic data – and not political considerations – in achieving its dual mandate to keep price increases in check while supporting the job market.
Politicians often prefer lower interest rates, aiming to boost stock prices and make it cheaper for people to borrow money, both popular moves among voters. But lower interest rates risk igniting price pressures. On the other hand, leaving rates too high couldoverly restrict spending and hiring, hurting the economy.
No central bank gets it right all the time. However, studies strongly suggest that economies with independent central banks (where officials cannot be easily fired by elected officials) experience better outcomes, including lower inflation.
If the move costs the US its economic credibility, American assets, such as stocks and the dollar, could get hammered. That in turn could leave investors to demand higher premiums to lend money to the US.
Immediately following Trump’s announcement on Monday, the US dollar index dropped by 0.3%. The index measures the strength of the dollar against a basket of international currencies.
This is a developing story and will be updated.
