Trump Seeks to Reshape Federal Reserve: Cook Ouster Attempt and Allied Replacements

Trump Pushes to Reshape the Federal Reserve

Sources familiar with the matter have revealed that former U.S. President Donald Trump is actively seeking a replacement for Federal Reserve (the U.S. central bank) Board member Lisa Cook. Trump told reporters at the White House, "We have some very talented people that would like to be in that position." Trump indicated he might appoint his close economic advisor Stephen Miran to replace Cook. The President had nominated Miran earlier this month to fill another seat on the Fed board, but that seat's term expires next January, while Cook's term extends until 2038. Trump commented on this, saying: "We might move him over to the other seat, which is a much longer term." Sources also suggest that Trump discussed other potential candidates, including former World Bank President David Malpass, with whom he has a close relationship. Malpass has repeatedly criticized the Federal Reserve for not cutting interest rates. If Miran is nominated to replace Cook, Malpass could be selected to fill the other vacant seat on the Board. These behind-the-scenes discussions about who will succeed Cook reflect Trump's determination to proceed with his plan to reshape the Federal Reserve, despite objections raised by economists, legal analysts, and Democrats. Trump announced earlier that he was seeking to remove Cook from the Federal Reserve Board, arguing that she submitted fraudulent information in mortgage applications. Cook, nominated by former President Joe Biden, responded that Trump does not have the right to remove her, that she will not resign, and that she will take legal action. Trump affirmed his readiness to engage in a legal battle and that he would respect any court decision. Speaking about Cook, he said: "We need people that are 100% straight, and it seems that she is not."

Legal Challenges and Central Bank Independence

Before deciding to try to remove Cook, Trump consulted with a small group of advisors, including White House Chief of Staff Susie Wiles and Treasury Secretary Bicent. In a statement, the Federal Reserve affirmed that it would comply with any court ruling on Cook and reiterated its independence. A Federal Reserve spokesperson said Cook had returned to Washington after completing a business trip and that the Board would postpone any decision on whether she would continue in her post until clarification from the court. Trump based his attempt to remove Cook on accusations from Federal Housing Finance Agency Director Bill Pulte, who claimed that Cook had filed applications for mortgage loans in 2021 for two properties in Michigan and Atlanta, describing both as her primary residence in documents submitted 14 days apart.

Potential Impact on Monetary Policy

Trump's efforts to remove Cook reflect his and his allies' quest to expand control over the independent central bank. Since returning to the White House, Trump has repeatedly criticized Federal Reserve Chairman Jerome Powell for refusing to cut interest rates, demanded his resignation, and threatened to try to remove him. He also accused him of mismanaging a costly renovation project at the Federal Reserve headquarters in Washington, D.C. If the President succeeds in replacing Cook with an ally, a majority of Federal Reserve Board seats would be held by people appointed by Trump. He has already nominated Miran to fill the vacant seat left by Kugler's resignation and is currently awaiting Senate approval. Currently, two other members of the Federal Reserve Board, Waller and Bowman, are Trump appointees from his first term. Trump said, "We will soon have a majority of the seats." In an opinion piece published in the Wall Street Journal, Malpass stated that Trump's criticism of Powell for not cutting interest rates was correct. He added that "a bigger rate cut and a fundamental reform of the Federal Reserve would be a major pro-growth innovation in American economic policy." Under the Federal Reserve's founding legislation, Board members can only be removed "for cause." Supreme Court rulings in recent years have weakened job protections for independent federal agencies, but this has not occurred at the Federal Reserve. The U.S. Supreme Court indicated last May that Federal Reserve employees have stronger protections than employees of other institutions.