Federal Reserve Governor Lisa Cook is standing firm against an "illegal" attempt by President Donald Trump to fire her as economists warn his latest attack will only further undermine the independence of an institution designed to be insulated from the personal whims of the executive branch due to the instability, even the optics of such efforts could have.
After Trump posted a letter on social media Monday night that he claimed to have sent to Cook, stating she was fired "effective immediately," critics pointed out that the president does not have such authority, despite his claim that the statute allows him the power if "cause" is determined.
Trump cited alleged "mortgage fraud" by Cook, but those charges have come from Trump's own political allies and have not been substantiated or adjudicated in any formal or legal process.
In a Monday statement responding to Trump's letter, Cook insisted Trump could not fire her under these circumstances and would not willingly step aside.
"President Trump purported to fire me 'for cause' when no cause exists under the law, and he has no authority to do so," Cook said. "I will not resign."
Cook, alongside Fed Chairman Jerome Powell, is among those on the board who have resisted Trump's continued harassment when it comes to lowering federal interest rates.
Critics of Trump's move against Cook—including Democratic lawmakers, economists, progressive advocates, and financial experts—said what the president is attempting has serious and far-reaching implications, both for the rule of law and the economy.
"Trump is desperately looking for a scapegoat to cover for his own failure to lower costs for Americans and firing Lisa Cook is his latest move," said Sen. Elizabeth Warren (D-Mass.) in response to the development. "It's an authoritarian power grab that blatantly violates the Federal Reserve Act, and any court that follows the law will overturn it."
Alvaro Bedoya, a former member of the Federal Trade Commission and now a senior advisor at the American Economic Liberties Project, warned journalists covering the story to make sure they get the language correct when reporting.
"The President has not fired Lisa Cook," Bedoya noted. "The President is *trying* to illegally fire her."
Jeff Hauser, founder and executive director of the Revolving Door Project, a watchdog and advocacy group, placed the blame for Trump's latest unlawful scheme squarely at the feet of institutions—namely, the US Supreme Court, the media, and the Federal Reserve itself—which have allowed the president to act beyond the law time after time.
"Failing institutions and their weak leaders have emboldened Trump to pursue control of the Federal Reserve," said Hauser. "Attacking Board Governor Lisa Cook is part of this larger strategy. If the country, and its economy is to survive, these players must find a spine and stop enabling Trump’s authoritarian behavior."
Nigel Green, CEO of global financial advisory giant deVere Group, warned Tuesday that the combination of Trump's incessant intervention, calls for the Federal Reserve's chairman Jerome Powell to lower rates or be fired, Powell's own refusal to more loudly defend the body's independence—including at this month's summit in Jackson Hole, Wyoming—and now the attempted ouster of Cook are all leading to dangerous ripples in the world economy that could be difficult to fix.
"Trump's decision to remove a sitting Fed governor has shaken confidence in the institution that underpins the world's financial system," Green said in a statement. "Investors are reacting because the independence of the central bank is critical to market stability, and any sign of political capture raises alarm bells everywhere."
Green rebuked Powell for missing the chance to speak out in Jackson Hole and assure global markets that economic fundamentals, and not the personal desires and political interests of Trump, were being used to set fiscal policy in the world's largest economy. "Instead, he chose to focus narrowly on the near-term policy path," said Green. "The silence on independence has left markets exposed, and investors are filling the vacuum with speculation. This speculation is highly damaging."
CNBC reports that stock futures slipped on Tuesday morning in the wake of Trump's attacks, as short-term Treasury yields fell, but trade analysts worried more about the long-term impacts.
"In the immediate term, markets will probably get over the Cook news fairly quickly (assuming this is a discrete event and Trump doesn't attempt to fire Powell), turning its attention back [to other fundamentals], but the Fed's independence is undeniably being undermined, a process with negative long-term consequences," said Adam Crisafulli, founder of Vital Knowledge, a financial industry podcast.
Rohit Chopra, former director of the Consumer Financial Protection Bureau (CFPB) under Joe Biden, accused Trump and his administration of seeking to "transform the financial regulators from independent watchdogs into obedient lapdogs that do as they're told."
Skanda Amarnath, the executive director of Employ America and a former Fed economist, told The Guardian that "wrecking institutions with unlawful behavior and pathetic power grabs come with costs to Americans. The dollar continues to weaken as American governance continues to erode. That means higher prices for all commodities. Chair Powell must ensure that Lisa Cook is not removed as a result of these arbitrary and capricious actions from the president."
Meanwhile, economist Dean Baker couldn't help reference Trump's own troubled past with financial documents related to the value of real estate holdings:
Economist and former labor secretary Robert Reich warned that Trump's continued chaotic economic policies—including a tariff regime that is hurting investors, small business owners, and regular US consumers all at once; huge taxgiveaways to the rich while ripping healthcare and other safety net programs away from working people; and destroying regulatory systems that bring safety and stability to the economy—will ultimately lead to Trump's demise.
What Reich chose to label "fascism capitalism," he wrote in a blog post Tuesday morning, "will be Trump’s downfall because his arbitrary and mercurial decisions are making the private sector nervous about investing in the US economy, causing global lenders to demand a higher risk premium for lending to the US, and pushing the economy toward both inflation and recession—so-called 'stagflation.'"
"If nothing else brings him down, the economy surely will," predicted Reich.
