^{Photo: NBC News}

A Clash Over Authority

President Donald Trump escalated his feud with the Federal Reserve this week, announcing that he had dismissed Fed Governor Lisa Cook — a claim Cook immediately rejected, declaring that the president has “no authority” to remove her.

In a letter posted on Truth Social, Trump accused Cook of making false statements on multiple mortgage applications, citing allegations from Federal Housing Finance Agency Director Bill Pulte. The move came just days after the Department of Justice confirmed it would review Pulte’s claims.

Cook, however, made clear she would not step down. “I will not resign,” she said in a statement, adding that she remains committed to her duties since her appointment in 2022. Cook, the first Black woman to serve on the Federal Reserve Board, has hired high-profile attorney Abbe Lowell to fight the action in court.

Legal and Institutional Stakes

Under the Federal Reserve Act of 1913, presidents can only remove Fed governors “for cause.” Historically, that phrase has been interpreted to mean misconduct or negligence, not political disagreements. Trump, however, tied Cook’s alleged mortgage misstatements directly to her credibility as a regulator, arguing that her actions represented “gross negligence in financial transactions.”

If Cook challenges the termination in federal court, the case could eventually reach the Supreme Court. A ruling in Trump’s favor would allow him to reshape the Fed board more aggressively, potentially stacking it with his allies at a time when the White House is pressuring the central bank to cut interest rates.

Currently, the Fed’s Board of Governors has six sitting members with one vacancy following Adriana Kugler’s resignation earlier this month. If Trump successfully removes Cook and fills both seats, he would secure a 4-to-3 majority of appointees. That would give him unprecedented sway over not only the board but also the powerful Federal Open Market Committee, which sets U.S. interest rates.

Political Reactions and Market Fallout

The attempted firing quickly drew condemnation from Democrats. Senator Elizabeth Warren called it “an authoritarian power grab” that blatantly violates the Federal Reserve Act. She accused Trump of using Cook as a scapegoat for his own inability to lower costs for Americans.

Financial analysts also warned of broader consequences. Edward Mills of Raymond James said Trump’s move is “an unprecedented attack on Fed independence,” adding that markets are likely to react with greater uncertainty over monetary policy.

Indeed, financial markets showed immediate signs of unease. The ICE U.S. Dollar Index slipped 0.3% overnight following Trump’s announcement. The 2-year Treasury yield — closely tied to Fed policy expectations — dipped by 4 basis points, while gold futures climbed 0.3% as investors sought safer assets. Stock futures also edged lower in after-hours trading.

Trump’s Long-Running Fight with the Fed

Trump has been publicly frustrated with Fed Chair Jerome Powell for not cutting interest rates, a policy shift he argues would stimulate growth and ease pressure on American households. In July, Trump reportedly asked Republican lawmakers whether he should fire Powell, though he later walked back those remarks.

Cook’s case marks a dramatic escalation of this conflict. By targeting an individual governor, Trump is directly testing the limits of presidential power over the central bank. If successful, his move could open the door to greater White House influence over monetary policy, breaking with over a century of precedent that has protected the Fed’s independence.

What’s Next for the Fed

Cook’s attorney, Abbe Lowell, vowed to challenge the action aggressively, saying Trump’s attempt was legally baseless and procedurally flawed. “We will take whatever actions are needed to prevent his attempted illegal action,” Lowell said.

The outcome of this battle could shape the future of the Federal Reserve for years to come. With two vacant or contested seats and rising political pressure to slash interest rates, the stakes could not be higher for U.S. economic stability.

Markets, lawmakers, and global investors are now watching closely — not just to see whether Cook keeps her seat, but to gauge how much influence the White House may ultimately wield over America’s most powerful financial institution.

‍