For the first time in history! Trump "fires" the current members of the Federal Reserve Board of Governors, taking another step in the "controlling the Fed" plan.

Original author: Zhu Xueying

Source: Wall Street News

Reposted: White55, Mars Finance

Just now, Trump made a significant move! He announced loudly on social media that he has removed Federal Reserve Governor Lisa Cook from her position "effective immediately."

This unprecedented move has shaken the financial markets, raising doubts and questions. U.S. stock index futures fell in response, with the Nasdaq 100 index contract down 0.2%. Safe-haven sentiment has pushed the yen up against the dollar, and gold has recovered some of its earlier losses.

If Trump's move succeeds, it will bring him one step closer to "controlling the Federal Reserve." If Cook resigns, it will allow Trump to potentially gain four seats, giving him a majority on the seven-member board. During his first term, Trump appointed two of the current board members and recently nominated his economic advisory council chair Stephen Miran to fill the third seat vacated by Adriana Kugler, who was appointed by Biden.

In a recent article, Wall Street Journal reporter Nick Timiraos, known as the "New Federal Reserve News Agency," analyzed that Trump has currently appointed two members to the seven-member board of the Federal Reserve. If he gains two more nomination seats, he will achieve a majority, potentially fundamentally reshaping the entire Federal Reserve system.

According to Timiraos' analysis, if Trump gains a majority on the Federal Reserve Board before March next year, they may refuse to reappoint the regional Fed chair, thereby taking control of the FOMC meetings.

Dismissal "Unprecedented" Shakes Wall Street

In the letter, Trump accused Cook of "fraudulent and potentially criminal behavior" in financial matters, stating that such actions have undermined his credibility as a regulator.

The letter cites relevant provisions of the second article of the U.S. Constitution and the Federal Reserve Act enacted in 1913. Trump stated that there is sufficient reason to dismiss Cook from her position. The letter mentions a criminal referral submitted by the Federal Housing Finance Agency on August 15, which alleges that Cook made false statements in mortgage documents. For example, she first declared the property as her primary residence on a document in Michigan, and then made the same declaration on another document in Georgia. Trump called this "unimaginable" and questioned her integrity and competence as a financial regulator.

Trump's threat to dismiss Cook marks a significant escalation in the White House's pressure on the Federal Reserve. If Trump successfully removes Cook, it would set a historical precedent in the United States—never before has a sitting Federal Reserve governor been dismissed by a president. The market is concerned that this could trigger a constitutional crisis and exacerbate market turmoil.

In previous political conflicts, even the intense confrontation between President Johnson and Federal Reserve Chairman William McChesney Martin, or President Nixon's pressure on Arthur Burns, did not result in any actual dismissal actions.

Claudia Sahm, chief economist at New Century Advisors and former economist at the Federal Reserve, has stated that

"This is the new means by which the current government is trying to control the Federal Reserve, and they are utilizing all available methods to achieve this control."

Does the president have the power to dismiss a Federal Reserve board member? Yes, but there are conditions.

Legal experts emphasize that the Federal Reserve Act clearly states that a governor "may be removed by the President for cause," but this requires conclusive evidence of misconduct, such as dereliction of duty, malfeasance, or inability to perform duties, rather than political motives.

Although Bill Pulte, the director of the Federal Housing Finance Agency (FHFA), previously accused Cook of lying on a loan application to obtain better terms, which could constitute mortgage fraud, the allegations against Cook have not yet been confirmed by the court, and the Department of Justice has only stated that it will investigate the related accusations.

Previously, Trump posted a photo of Cook marked with a red cross on his social platform Truth Social, calling her a "fraudster." Cook is the first Black woman on the Federal Reserve Board, having joined in 2022. Massachusetts Senator Elizabeth Warren condemned Trump's actions on social media as "illegal and politically motivated."

Trump's "three-step method" to control the Federal Reserve is being gradually implemented.

Some analyses suggest that if Cook were to leave, Trump would have the opportunity to appoint a fourth Federal Reserve governor, gaining a majority on the seven-member board. Trump has already appointed two of the current governors during his first term and recently nominated his economic advisory council chair Stephen Miran to fill the third seat vacated early by Biden appointee Adriana Kugler.

On August 24, Nick Timiraos, a Wall Street Journal reporter known as the "New Federal Reserve Correspondent," analyzed in his latest article that Trump has currently appointed two members to the seven-member board of the Federal Reserve. If he gains two more nominations, he will hold a majority, which could fundamentally reshape the entire Federal Reserve system.

In addition, Timiraos' analysis suggests that if Trump gains a majority on the Federal Reserve Board before March next year, they may refuse to reappoint regional Fed presidents. Dismissing those who have performed their duties responsibly would break decades of precedent and breach a key firewall protecting its independence since the Federal Reserve's establishment in 1913.