Cook Firing Might Be A Warning To Powell

You’re fired!

The drama at the Federal Reserve is continuing after President Trump fired Governor Lisa Cook, who promptly responded that she will remain in the position and not resign. At issue are allegations of mortgage fraud, with Cook listing two properties she bought in 2021 (in Georgia and Michigan) as both her primary residences. That declaration generally results in lower mortgage rates, but Cook said she is still “gathering the accurate information to answer any legitimate questions and provide the facts.”

What the law says: Things are legally murky, and there is a lack of precedent, as no president has ever sought to remove a Federal Reserve governor. The Federal Reserve Act of 1913 only permits removal for “cause,” which Cook maintains doesn’t exist in this case. However, Trump has pointed to the alleged charges of “negligence” and “deceitful and potentially criminal conduct in a financial matter,” which challenge her “competence and trustworthiness as a financial regulator.”

What happens next will soon be seen, but the case could end up at the Supreme Court. The dollar and U.S. Treasuries have not responded significantly after the latest step to remake the Fed board, which follows Governor Adriana Kugler’s resignation and Trump’s nomination of Council of Economic Advisors Chair Stephen Miran. Much pressure has also been put on Fed Chair Jay Powell, who recently hinted at rate cuts in Jackson Hole. The latest targeting of Lisa Cook for criminal acts might be another message to Powell to get out of the way or risk being taken to task over renovations at the Fed.

Fine print: While Powell’s term as board chairman expires in May 2026, he could stay on as Fed governor for another two years, which is the real worry of the Trump administration. In that role, Powell could be somewhat of a shadow Fed chair, especially with around 3 out of the remaining 5 Fed board governors subscribing to his policy views (Miran is in the middle of a confirmation process). The reason why Trump is upping the pressure is that he wants Powell to be uncomfortable – or legally worried – about continuing in a governor spot past next year, which would give Trump another nomination and a majority of his appointees on the board (even without Cook). Making sense of Federal Reserve member math