Trump Becomes First President In History To Fire A Federal Reserve Governor, Resolving Long-Standing Concern That American Interest Rates Were Being Set By Officials He Was Not Legally Permitted To Remove

WASHINGTON. President Donald J. Trump moved Monday to dismiss Federal Reserve Governor Lisa Cook, becoming the first president in the central bank's 111-year history to attempt the removal of a sitting governor and resolving a long-standing structural concern that the people setting American interest rates were protected by federal statute from being fired by the person who wanted those rates lowered.

The Federal Reserve Act provides that governors serve staggered fourteen-year terms and may be removed only "for cause," a phrase that legal scholars have historically understood to mean misconduct rather than a disagreement over the timing of rate cuts. The cause cited Monday arrived in the form of mortgage fraud allegations, referred by Federal Housing Finance Agency Director Bill Pulte, concerning two home loans Cook obtained weeks apart in 2021 in Michigan and Georgia, each of which listed the property as a primary residence. Cook, the first Black woman to serve on the Board of Governors, has not been charged with any crime, a detail administration officials characterized as a formality yet to be observed.

The removal followed a year in which the President had publicly demanded that the Fed lower interest rates on his preferred schedule, repeatedly attacked Chair Jerome Powell, and posted on social media that Cook "must resign, now!!!" In a letter released the same evening, the President wrote that he had determined there was "sufficient cause" to remove her, thereby establishing that sufficient cause is whatever the President has determined it to be.

Cook responded that the President lacks the authority to fire her and announced that she would sue, setting in motion the precise constitutional question the fourteen-year term was designed to keep from ever arising. Lower courts blocked the removal, the administration asked the Supreme Court to set those rulings aside while the case proceeded, and the matter advanced toward a ruling on whether the independence of the Federal Reserve is a load-bearing feature of the American economy or a suggestion.

"The thing about an independent central bank is that its independence is the entire product," said one former Fed economist, who requested anonymity to describe a structure that until recently had not required describing. "Once the President can remove a governor for producing an outcome he dislikes, you no longer have a central bank. You have a very large office that issues currency on request."

At press time, global markets were attempting to price in the value of a dollar whose interest rate could now be adjusted by letter.